Comparing Nordic and Dutch Green Bond Investors

    Stockholm (NordSIP) – A report on green bonds in the Nordic countries and the Netherlands published by NN Investment Partners and Kirstein A/S sheds some light on the similarities and differences in investors’ approach from across those jurisdictions. The study reviews the different investment preferences, greenium and greenwashing experiences, among other factors.

    Bram Bos, Lead Portfolio Manager Green Bond, at NN Investor Partners

    “It is great to see the broad-based and still rapidly growing interest in green bonds in these markets. These countries are ahead of the pack when it comes to green bond investing,” Bram Bos (Pictured), Lead Portfolio Manager Green Bond, and Douglas Farquhar, Client Portfolio Manager Green Bond “They have already made a clear shift towards making their fixed income portfolios more sustainable and green bonds play an important role in this. The opinions and numbers in the study confirm our own experience – strong interest followed by steady inflow into our green bond strategies.”

    The insights are based on interviews and quantitative data from a broad-based sample of 38 investors based in five European countries (Denmark, Sweden, Norway, Finland, and the Netherlands). The research panel is a representative sample of the retail and institutional markets in both the Nordic region and the Netherlands and covers both the pension and non-pension segments. Half of the participants are fixed-income investors and a further third work exclusively with impact/ESG investing. The combined assets of those participating are  €786 billion.

    Different Approaches

    45% of the investors regard green bonds as their preferred impact bond option. More than two-thirds of the panel already have an established allocation to green bonds, with a striking 81% of pension funds in the Netherlands and the Nordics investing in green bonds. 

    Although both Dutch and Nordic investors express significant interest in green bonds, the Nordics region tends to be focused on sovereign bonds and manage green bond investments in-house while the Dutch participants favour corporates and turn to external managers to run their green bond allocations.

    Premium or Greeninum?

    On aggregate, the panel results are divided when it comes to the existence of a greenium. 26% of the panel anticipates a small premium (0 to +5 bps), while 41% expect bonds to be issued with a greenium (0 to -10bps), where investors pay more for a green bond than a regular bond.

    Dutch investors are more positive about Green Bonds premia (38%) compared to Nordic investors (23%). Half of the Nordic investors anticipate green bonds to be issued at a greenium, whereas only 13% of Dutch investors felt the same way. However, the report warns that the Greenium environment is not exactly the same across the Nordics.

    “Some investors mentioned that Swedish Green Bonds are often issued at a greenium, whereas Norwegian Green Bonds tend to trade close to par with that of the conventional bonds market. The Netherlands appear to be a market with high expectations of a Green Bonds premium, which is why both Nordic and Dutch investors pursue at Green Bonds issued in the Netherlands.”

    Greenwashing Fears

    The report found that greenwashing continued to be perceived as the main barrier to investing in green bonds. According to the report, this fear of greenwashing is one of the main drivers for maintaining a high degree of internal management to control the asset selection in the Nordics. To manage this risk, Dutch investors in corporate green bonds use external managers with specific knowledge and expertise.

    The second barrier is the perceived risk of investing in a market with limited capacity although participants are positive about the growth potential of the global green bond market.

    More Growth Ahead 

    Beyond the market momentum behind green bonds, recent improvements in regulatory oversight from the implementation of the EU Taxonomy and EU Green Bond Standard are expected to contribute to the growth of the market. 87% of the research panel predicting that these developments will stimulate growth.

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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