Stockholm (NordSIP) – On October 14th, Landshypotek issued a SEK6 billion five year covered green bond tageting forestry and, for the first time for this issuer, agriculture. Although it is not the first green bond in Sweden bond whose use of proceeds include agriculture activities, on the occasion of the publication of Landshypotek’s updated Green Bond Framework NordSIP noted that it is the one whose funds appear to be most easily available to borrowers.
LandshypotekBank specialises in borrowing and saving, providing competitive financing solutions for businesses within Sweden’s agriculture and forestry sectors. Serving 124,000 customers, the bank is among the largest in Sweden, with a lending portfolio of SEK 115.7bn to agriculture, forestry and mortgage borrowers.
Green Bond Terms
On 6 October, LandshypotekBank announced its intention to issue a SEK 6 billion (WNG) long 5-year green covered bond. The bank hosted a week of investor meetings, attracting a diverse range of participants who responded positively to the updated Green Bond Framework. In light of strong investor feedback and improved market conditions, the transaction launched with initial guidance of a spread over mid-swaps of between 31 and 33 basis points (bps). By midday, the order book was well covered, allowing the spread to be set at the top of the original range. The bond pays a 2.590% coupon.
The transaction attracted high-quality accounts, ensuring a solid and ESG dedicated investor base. Geographically, investor demand was dominated by domestic Swedish investors, who represented 93% of the demand for this bond. The remaing 7% came from Norway. Sectorally, asset managers were dominant, purchasing 74% of Landshypotek Green bonds, leaving the rest to insurance and pension companies (17%), central banks (7%) and banks (2%).
Financing the Agricultural Green Transition and Food Security
As NordSIP noted, the bank had recently updated its Green Bond Framework, expanding its scope to include not only forestry but also the agricultural sector, supporting the transition to a low-carbon economy. The updated Green Bond Framework received a Medium Green shading from S&P.
“This innovative framework creates the conditions for financing sustainable and local agriculture, which Sweden needs more of,” Lars Mac Key, Head of Sustainable Products at Danske Bank said on the occasion of the publication of Landshypotek’s Green Bond Framework. Danske Bank assisted Landshypotek in the update of its Green Bond Framework and acted as Sole Structuring advisor on the Green Bond.
However, using the proceeds from this green bond for farming addresses more than just the need to include agriculture in the green transition. Danske Bank’s discussion of the updated Green Bond Framework was also accompanied by strong references to food security, including references to Lantbrukarnas Riksförbund (LRF) estimates that Sweden faces serious challenges including a self-sufficiency rate of only 50% for food and an investment gap worth tens of billions of kronor.
“We are very happy to see Landshypotek being a frontrunner with their new extended green bond framework, which now also includes agriculture. Agriculture is central in so many aspects and we have to do everything possible to diminish greenhouse gas emissions, strengthen environmental resilience and biodiversity while at the same time ensuring food security in a sustainable way,” says Marianne Gut, Fixed Income Portfolio Manager and manager of SEB Green Bond Fund, SEB Asset Management.
