Stockholm (NordSIP) – At a time when green-hushing is expected to increase due to the election of an anti-ESG political majority in the USA, NordSIP reached out to Nordic sustainable bond market dealers to get a sense of the evolution of the market so far this year. According to the data we were able to glimpse, Nordic markets appear to have slowed down during the first nine months of 2024. Corporates appear to have been the dominant sector in the market, with real estate companies playing an important role. Among global issuers, sovereigns, supranationals and agencies appear to continue to be dominant.
Nordic Issuance Decreases by Q3
Nordic sustainable bond issuance during the third quarter of 2024 was down 1% from last year according to data Danske Bank shared with NordSIP. According to the Danish bank, Nordic Sustainable bond issuance was worth €43.05 billion during the year to 30 September 2024. For the first nine months of the year, most sustainable bond issuance came from corporates, which were followed by financial institutions and SSAs. 
According to data disclosed by Swedbank, issuance between July and September was worth approximately US$12 billion, with green bonds being the dominant format. On the same quarterly basis, financial institutions dominated in the third quarter of 2024, representing close to 47% of ESG bond issuance, Swedbank data shows.
Real Estate Fuels Nordic Growth
Corporates dominated Nordic sustainable bond issuance with €20.85 billion equivalent issued by the end of September, according to data provided by Danske Bank. Tghis represented a 27% increase in issuance vis-à-vis the first nine months of 2023. The first three quarters of 2024 saw many new Nordic issuers coming to the sustainable bond market.
These include DSB, an independent public railway company 100% owned by the Danish state and Kesko, a Finnish/based trading sector operator, with grocery trade, building and technical trade, and car trade as core business areas. Both DSB and Kesko issued their inaugural green bonds in the third quarter. Other significant issuers in the market included UPM-Kymmene Oyj from Finland, Loomis AB from Swedenand Norway’s Hafslund AS.
Sectorally, both Real Estate and Utilities issuers have contributed close to two-thirds of the total market activity. Real Estate issuers in particular have more than doubled their share of the market from last year. Sustainable bond issuance represented 40% of the total market by the end of Q3.
“Given the strong post-summer activity, we view it likely that the Nordic sustainable bond market is poised to set a new record this year, with corporates contributing nearly 50% of the total activity and being the drivers of the growth,” says Janne Koivula, DCM Sustainable Bonds at Danske Bank. “In contrast to 2022 and especially 2023 when many real estate issuers suffered in the higher yield environment and were pretty much in the sidelines from the bond market, this year we have seen real estate issuers re-entering the market and doubling their market share from last year to over 30%,” Koivula adds.
SSAs Continue to Support Nordic Market
Nordic SSAs (which led the market during the first half of the year) reached €9.29 billion equivalent by the end of the third quarter, corresponding to a 29% growth vis-à-vis the same period for 2023. The top five issuers according to Danske Bank were The Nordic Investment Bank (NIB), the Swedish Export Credit Corporation (SEK), Kintarahoitus Oyj, Linköpings Kommun and Kommunalbanken Norway, all of them in Green format.
Danske Bank highlights Iceland entry into the sustainable bond market first in March with a €750 million green bond and in June with a €50 million gender bond. In addition, many of the frequent Nordic SSA issuers have updated their Green Bond Frameworks this year. These issuers include Kommunalbanken (April 2024), Kommuninvest (June 2024) and NIB (August 2024 with the name “NIB Environmental Bond Framework”).
Will Nordic Financial Institutions Pick Up Soon?
Financial institutions represented the main drag on Nordic sustainable bond issuance, reaching only €12.90 billion equivalent by the end of the third quarter, representing a 36% decrease in issuance for the first nine months of the year vis-à-vis the same period last year. Danske Bank notes that this €12.90 billion figure is also considerably below the three-year annualized average sustainable bond issuance of €20 billion in the Nordic FIG market.
Swedbank Hypotek AB and Handelsbanken from Sweden, Norway’s DNB Boligkredit, Denmark’s Nykredit Realkredit and Iceland’s Landsbankin HF were the top five Nordic financial sector issuers of sustainable bonds during this period, all of them in green format. Swedbank’s SEK10 billion green bond was the largest green covered bond from a Swedish bank in the SEK market.
Despite the muted issuance from financial institutions, Danske Bank notes that there have been “some signs of issuance picking up as both August and September were active months. We also note that the upcoming sustainable bond ‘maturity wall’ which will have an impact on Global, Euro and Nordic markets”. The evolution of banks’ redemption schedule may suggest an increase is on its way. Although only €8.5 billion of Nordic FIG sustainable bonds matured/will mature in 2023 and 2024, Danske Bank notes expects “over €30 billion equivalent of sustainable bonds to mature in 2025 and 2026. Hence, the market is likely to see heightened issuance volumes from existing issuers looking to refinance as well as from new issuers approaching the market for the first time as investors are eager to find new investments to replace their maturing sustainable bond holdings.”
This trend might be global. “One interesting development affecting the sustainable bond market is the fact that the first large generations of sustainable bonds are approaching maturity in recent years. For example, between January 2025 and December 2026, €855 billion of sustainable bonds globally will mature. This presents a tremendous opportunity for both existing and new sustainable bond issuers across the markets as investors will be actively seeking new investments to replace the maturing bonds,” Koivula continues.
SSAs Continue to Fuel Euro Sustainable Issuance
The first three quarters of 2024 also saw issuance in Euro increase by 10% to reach €296.21 billion. From this perspective, SSAs were the dominant issuers, which is not surprising since Euro-denominated issuance will include several large and very committed sovereigns and supranational institutions. Indeed, sustainable bond issuance by SSAs in Euro during the first nine months of the year reached €131.0 billion representing a 9% increase from 2023. The EIB (Green), KfW (Green), IBRD (Sustainability), Government of Chile (Green), BNG Banks (Green) and NRW Bank (Green) were the top five issuers during this period.
Issuance by global corporates in Euro was up by 21% to €97.2 billion by the end of September 2024, led by Green bond transactions from National Grith NorthAmerica Inc, Unibail-Rpda,cp-Westfield SE, EnBw International Finance BV, Electricite de France SA, and Amprion GmbH.
The trend for Financial institutions to decrease issuance witnessed in the Nordics was also present across Euro-denominated issuance which fell by 3% in the year to September to reach €68.0 billion. According to Danske Bank, Natwest Group (Green and Social), Credit Agricole (Green and Social), Cooperatieve Rabobank UA (Green), National Australia Bank (Green) and Caixabank SA (Social) were the main financial institutions issuing in the European currency. Swedbank also highlights Sanoma’s issuance of a €150 million Social bond, Finland’s first-ever corporate social bond.
Is Global Issuance Down?
Consistent global sustainable bond issuance figures were harder to come by. According to figures provided by Swedbank, global issuance of ESG bonds (green, social, sustainable, sustainability-linked and transition) amounted to approximately US$257 billion in 2024Q3.
However, Moody’s Ratings puts the same figure at US$216 billion and claims it represents a 14% decline for the quarter, noting also that global issuance for the first nine months of 2024 was down by 3%.
According to figures provided by Swedbank, SSAs dominated globally in 2024Q3, representing approximately 41% of ESG bond issuance.
Blue Bonds and Transition Bond From Asia
Swedbank also chose to highlight the issuance of a SEK1 billion green (blue) bond by the Asian Development Bank (ADB), for which it acted as the sole arranger. Meanwhile Danske Bank noted that this bond was part of a broader trend from Asia, where Japanese and Chinese issuers (as well as the ADB) issued five blue bonds in total being issued. another interesting transaction highlighted by Danske Bank includedwhile the JPY349.60 billion 5-year climate transition bond issued by the Government of Japan.
This transaction from Japan is consistent with a broader trend. “Currently we see transition finance being a hot topic in the bond market and specifically how investors can support the transition from “brown” to green. Investors are more eager to explore real world climate impact. We expect this to continue into next year,” says Lucas Lindström Investment Banking Analyst – Sustainable Capital Markets at Swedbank.
