Stockholm (NordSIP) – Social bonds, securities that aim to fund projects addressing social issues or achieving positive social outcomes, remain a relatively small part of the sustainable fixed income market. According to the Climate Bonds Initiative, US$56.6 billion in social bonds was issued globally during the first quarter of 2025. During the first half of 2025, social bonds represented a mere 2% of sustainable bonds issued in the Nordics.
Despite recent efforts by financial institutions to issue social bonds, public entities, such as supranational institutions or municipalities, remain dominant in this sector, on account of their social responsibilities. One such recent example includes a SEK600 million social bond issued by the city of Malmö, the first Swedish municipality to issue a social bond. The bond was issued under Malmö’s Social Bond Framework from 2023 and follows the International Capital Market Association’s (ICMA) Social Bond Principles. The framework has been developed together with SEB. Sweden’s public pension fund, AP7, reportedly invested SEK200 million.
“The investment marks an important step in AP7’s work to integrate sustainability and social factors into asset management and is part of our ongoing thematic work on Sustainable Construction. It is a way to develop the work and at the same time direct capital where it can make a difference,” says Marika Hilldoff from AP7’s asset management and responsible for the theme Sustainable Construction (translated).
Malmö’s Inaugural Social Bond
The bond is earmarked for projects that contribute to preventing, counteracting and solving social challenges for vulnerable target groups within four themes: sustainable living environments; health, culture and leisure; work and education; and inclusion, trust and integration.
“The fact that the City of Malmö can now issue a social bond shows that we are an attractive and responsible borrower. It confirms the city’s sustainability work and broadens our base of lenders,” says Claes Ramel, Chief Financial Officer of the City of Malmö (translated).
The bond will finance projects in the city, a large part of which is being carried out by MKB Fastighets AB, one of Sweden’s largest public housing companies owned by the city of Malmö. Malmö’s social bond framework has a broad coverage so that 80% of households in Malmö, including low-income households, can demand and afford a home. The funds can also be used for new schools with a focus on social inclusion and long-term societal benefit.
“The renovation of the old shopping center, which had several empty premises, was not just about fixing up a building. The security and well-being in the area increased when we got more business in the new premises and a nicer outdoor environment. This is clearly visible, for example, in the police’s security survey in the area and our own customer survey,” says Emma Cedermarker Belec, Administrative Manager at MKB (translated).
Lenders Demand Transparency
The City of Malmö will review the projects annually and report to the lenders how the money is used and what effects have been achieved.
“Lenders are demanding greater transparency about how capital is used and what effects investments have. Through green and social bonds, the City of Malmö can show how investments contribute to Agenda 2030, which strengthens both sustainability work and the city’s financial position,” says Nina Hellström Narancic, Controller at the city of Malmö (translated).
