Stockholm (NordSIP) – Despite the battering that global green bond markets have taken so far this year, Nordic issuers are still finding enough demand to keep the market afloat. On Friday, April 22nd, SpareBank 1 Østlandet (SPOL), Norway’s fourth-largest savings bank, issued a €500 million five-year green bond, its second such transaction since February 2021.
The bond pays a 1.75% annual coupon and was priced at a 55 basis points (bps) mid-swaps, 10bps below the initial price thoughts. The relative value of the new issue appealed to ESG-motivated investors who dominated the order book, whilst offering SPOL an estimated Greenium of approximately 3bps, according to sources close to the transaction.
54 investors swelled order books to over €650 million. Geographically, investors from Germany, Austria and Switzerland represented 52% of the demand, leaving the rest to Nordic (15%), UK and Ireland (12%), Benelux (7%), French (7%), southern European (5%) and central and eastern European (2%) investors. Sectorally, asset managers were dominant, representing 46% of the demand. Banks (30%), central banks and official institutions (4%), and insurance and pension companies (10%) purchased the rest of the securities.
SPOL Green Bond Framework focuses on Green buildings, agriculture, forestry, renewable energy (hydro power) and clean transportation (electric only). The Framework is in line with the ICMA Green Bond Principles amid ongoing consideration and commitment to align with the EU Taxonomy on a best efforts basis. It received a rating of “Medium Green” from CICERO Shades of Green, which also described the issuer’s governance structure as “Excellent”.
Nevertheless, while noting the weaknesses in the Framework, the Second Opinion provider warned that “risks exist that environmental benefits of eligible building projects are clearly overestimated in impact reporting under the framework. The issuer intends to use average energy demand for the existing residential building stock as reference for calculating impacts of funded buildings under the framework. There is no clear evidence that newer buildings directly replace older ones. In those cases where they do, emissions from demolition and construction should preferably be included in the impact calculations.”
