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Green Voices of Nasdaq: How Nordic Investment Bank’s Response Bond Is Helping Estonia During the Pandemic

In this iteration of Green Voices of @Nasdaq, we shine a light on how Nordic Investment Bank’s Response Bond and its investors are helping Estonia during this unprecedented time.

Even amid the coronavirus pandemic, the Nasdaq’s Nordic & Baltic Sustainable Bond Market is flourishing due to our continued commitment to the environment, society and a more responsible future. With over 250 green, social and sustainability bonds listed, it is a testament to the extensive integration of sustainable practices amongst Nordic & Baltic companies.

Nasdaq’s sustainable bond markets enforce transparency in alignment with internationally accepted standards that makes it easier for investors to invest and manage risk, which goes hand in hand with our overall mission to provide fair, transparent and efficient markets.

In this series, called Green Voices of Nasdaq, we are providing a platform that allows our sustainable bond issuers and investors to share their stories. This story shines a light on how Nordic Investment Bank’s Response Bond and its investors are helping Estonia during this unprecedented time.

As countries around the world grapple with the impact of the COVID-19 pandemic, companies are stepping up in a variety of ways to combat the novel coronavirus. Some firms have shifted their manufacturing lines to produce essential equipment, such as masks and ventilators; other businesses are devoting millions of dollars to relief efforts. To combat the ongoing crises, the Estonian Government turned to the Nordic Investment Bank (NIB) for assistance. The Helsinki-based financial institution, which is known for its environmental bond framework, created a Response Bond, enabling investors to support member countries, including Estonia, during this health crisis.

“Extraordinary times call for extraordinary measures,” said Angela Brusas, Director at Nordic Investment Bank. “NIB’s Response Bond is a way to directly channel investments toward alleviating the social and economic consequences of the pandemic.”

The Estonian government, which has historically had very low levels of government borrowing, looked to NIB for a loan as it anticipates that significant additional funding will be required to mitigate the impact of the coronavirus pandemic, according to Märten Ross, Deputy Secretary-General of the Ministry of Finance of the Republic of Estonia.

“Beyond the obvious healthcare crisis, large parts of the economy have shut down,” said Ross. “The twin challenge is to tide over employees and businesses – especially the small- and medium-sized businesses that are the backbone of the Estonian economy – until the economy restarts and then to do everything possible to ensure that the economy gets back up to speed as quickly as possible. To this end, the Estonian government’s crisis response includes over 1 billion euros – or just over 4% of GDP – of supportive measures for businesses.”

In the short term, Ross expects reduced tax revenues, increased direct expenditure on healthcare, and the need for relief measures to compensate employees and businesses. For the longer term, Ross believes there will be a need for a substantial economic stimulus package.

“To give you an idea of the scale, we estimate that the general government nominal budget deficit will be 2.6 billion euros, or about 10% of GDP, this year,” said Ross.

“The capital markets will play a very important role going forward as our response to these shocks continues,” Ross continued. “NIB was able to provide us with a loan far faster than we could arrange a bond issue to secure funding – this was very valuable as we took our first steps to mitigate the crisis.”

Märten Ross

Märten Ross, Deputy Secretary-General of the Ministry of Finance of the Republic of Estonia

The NIB Response Bond

On Friday, March 27, the Nordic-Baltic Ministers, governors of NIB, requested NIB to take swift action to help alleviate the effects of the health crisis. Within days, on March 30, NIB issued its inaugural 1 billion euros NIB Response Bond, under its new Response Bond Framework. The bond, which is listed on Nasdaq Helsinki, aims to support member states’ economies to the broadest extent possible to overcome the crisis, allocating proceeds to three categories, including the public sector, the financial sector and the real economy sector.

NIB Response Bond

The demand for the NIB Response Bond was intense. In just 3 hours, the order book reached above EUR 3.2 billion with more than 80 investors, enabling the transaction to price 3bps tighter than initial guidance. NIB noted that central banks and official institutions accounted for 58% of the investor base, while banks made up 25%, fund managers 12%, and pension funds, insurance and corporates 6%.

The Folksam Group, one of the largest insurance companies in Sweden, is one of the institutional investors. While it may still be too early to conclude how the pandemic will affect the firm’s long-term investment strategy, the firm always seeks to invest with its customers’ interests at heart while generating the best possible return, according to Karolina Håkansson, Deputy Head of Asset Management and Sustainability at Folksam.

“The COVID-19 bonds aim to address the enormous challenges now facing the world, and it is natural for us to be part of enabling a swift response to pressing health and economic issues,” said Håkansson. “We expect that our investments contribute towards a swift and decisive response to the crisis where targeted support makes a difference for the global health crisis and recovery from the pandemic.”

Karolina Håkansson

Karolina Håkansson, Deputy Head of Asset Management and Sustainability at Folksam.

Measuring the Impact and Moving Forward


NIB’s Response Bond framework supports NIB in not only providing transparency, but also communicating a clear strategy. Furthermore, upon the completion of financed projects, NIB has committed to following up on the allocation of funds and assessing the results of the COVID-19 mitigation efforts, and will make an annual report publicly available on its website.

According to Brusas, NIB may include a variety of performance indicators, including capacity in healthcare services, loans to micro-enterprises as well as small- and medium- enterprises, number of employments maintained, units of medical equipment, and the number of important infrastructure operations maintained and people served.

Angela Brusas

Angela Brusas, Director at Nordic Investment Bank

“Experiencing this type of widespread pandemic will likely impact ESG investments going forward,” said Håkansson. “It’s possible that we see an accelerated focus on the S (Social) part of ESG going forward.”

Greater attention to ESG bonds, and in particular social bonds, was evident throughout April. In a May 5 research note, Morgan Stanley analysts said April 2020 issuance of ESG Bonds increased by 272% year over year and about 2x over March, to $48.5 billion. Notably, sustainability bond issuance ($19.4 billion) eclipsed green bond issuance ($16.8 billion) for the first time in a single calendar month. 

Ann-Charlotte Eliasson, Vice President and Head of European Debt Listings and Sustainable Bonds at Nasdaq, has also seen this development reflected at Nasdaq.

“The sustainable bond market has seen an enormous growth during recent years,” said Eliasson. “So far, the focus has been on green bonds addressing our collective climate challenge. However, there has been a progression toward wider coverage of the UN Sustainable Development Goals, and I believe the pandemic will help shine a light on the need for investments in projects targeting job creation and access to essential services.”

“Although the sustainable bond market is still in need of development, it has been fantastic to see that the concept has become such a natural part of the market that issuers were quickly able to build on existing frameworks to combat the pandemic. It showcases the strength of the sustainable bond model and its acceptance amongst institutional investors,” Eliasson concluded. “We are naturally happy to support initiatives like this by adding a level of transparency through our market infrastructure. As part of that, we decided to waive the listing fees for all bonds explicitly issued to alleviate the effects of the COVID-19 crisis.”

Nasdaq’s Role in Sustainability

Nasdaq recently launched the Nasdaq Sustainable Bond Network (NSBN), a global platform that aims to increase transparency, comparability and accessibility to environmental, social and sustainability bonds. NSBN displays all documents, data and qualitative information submitted by issuers on an open-to-all website and disseminates the same information in a machine-readable format through proprietary market data feeds, free of charge.

NSBN builds upon the Nasdaq Sustainable Bond Market, which was launched in July of 2015 with a total volume of 740 million euros.  In 2017, €1.7bn ($1.9bn) was raised on the Nasdaq Nordic Sustainable Bond Market, up 81% from 2016. In November of 2019, Nasdaq’s Nordic and Baltic sustainable debt segments list a total volume of about 13 billion euros. We facilitate infrastructure, monitor issuers and foster dialogue to ensure the continued growth of the markets. 

Bonds can be listed on Nasdaq Sustainable Bond Market if a set of criteria is fulfilled. The respective criteria are based on the green and social bond principles (the GBP and SBP), for which ICMA acts as secretariat, and has been developed in cooperation with Sustainalytics, a global leader in ESG research. Issuers that wish to list green, social or sustainable bonds on our sustainable bond market go through the same process as traditional bond issuers. However, the issuer must supply Nasdaq with information regarding the bond or bond framework as well as the third party’s review when applying to list.  

To learn more about the listing process, visit our website.


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