The Nasdaq Nordic Sustainable Bond Market is flourishing due to our continued commitment to the environment, society and a more responsible future. With over one hundred green and sustainable bonds listed, it is a testament to the extensive integration of sustainable practices amongst Nordic companies.
Nasdaq takes tremendous pride in its sustainable bond listings. The high transparency that characterizes these products 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 newly launched series called Green Voices of Nasdaq Nordic, we are providing a platform that allows our green bond issuers and investors to share their stories. This inaugural story shines a bright light on the positive environmental work of Landshypotek Bank. In May 2018 they issued the first green covered bond financing sustainable forestry, delving even further into its niche and strategy.
As a financier to the Swedish farming and forestry industry since 1836, Landshypotek Bank recently launched its Green Bond Framework. Its key focuses are sustainable forestry, renewable energy and green buildings. Considering its rich tradition of financing investments in agriculture and forestry, Nasdaq’s Sustainable Bond Market was a natural fit and next step for the company.
“We put a lot of effort into this project and were very happy to see that our pioneering green covered bond were exceptionally well received by the market” remarked Malin Svedberg, representing Landshypotek Bank’s CEO office, where she plays a vital role in driving the company’s green bond strategy.
A differentiator that’s setting new standards
“We have been financing forestry and agriculture for close to 200 years. So when we started discussing the possibility to issue a green bond, we felt confident that the pool of assets in the forests we finance would lay a robust foundation to our framework” Svedberg continues. “This project gave us an opportunity to promote and talk about our customers and the important work they are doing to mitigate climate change.”
“The forests managed by our customers absorb large quantities of CO2 each year. So, in a way, the success of our green bond is really thanks to the hard work of our customers. We just put the pieces together, and brought it to market so that investors could invest in the same thing as our customers are doing everyday” Svedberg says.
“Swedish companies have contributed with a lot of “firsts” in the green bond market” says Ann-Charlotte Eliasson, Head of Fixed Income Listings at Nasdaq. “Landshypotek Bank’s green bond is an excellent example of the innovation and dedication to sustainability we see in the Nordics.”
Forests essential in reducing climate change
The motives behind why it is crucial to do forestry in a sustainable way become crystal clear after hearing some of the staggering statistics, according to Landshypotek Bank.
The forest financed by the proceeds from the green bond absorbs approximately 2 million tons of carbon dioxide from the Earth's atmosphere each year, a truly eye-opening number.Martin Kihlberg, Landshypotek Bank's Chief Sustainability Officer
"When the trees are growing, they bind carbon dioxide from the air, and it remains in the wood products throughout their life. The forest financed by the proceeds from the green bond absorbs approximately 2 million tons of carbon dioxide from the Earth's atmosphere each year, a truly eye-opening number. This is one of the clear climate benefits of the forest" says Martin Kihlberg, Landshypotek Bank's Chief Sustainability Officer.
An evolutionary time for lenders
The future of the financial industry as a whole is looking a lot greener these days, as more and more sectors and instrument types finance sustainable assets and projects in a transparent way.
“It is clear that green financing is going to be a more integrated and natural part of the funding process,” says Kihlberg. "We are seeing a lot of green loans in Sweden, both for corporates and private individuals, and banks are paying higher attention to what they are actually financing. If the business they are financing is not sustainable they will, in the end, have a higher perceived credit risk" he continues.
Investors are increasingly paying more attention to sustainability aspects when assessing investments. Companies that lack credible strategies to mitigate climate change will likely find themselves less and less attractive in the capital markets in the future.
Political landscape could play a crucial role
European green bond markets currently rely on unofficial standards such as the Green Bond Principles. This could however change as the market becomes more regulated.
“Future political decisions will surely influence the process of issuing sustainable bonds, for better or for worse”, according to Kihlberg, who continues: “The classification and taxonomy that is currently being developed in the European Union will play a crucial role in improving the possibilities for issuers to issue green bonds, if it is done the right way.”
“The success and widespread use of the Green Bond Principles is often ascribed to the fact that it has been developed with input from all stakeholders in the debt markets. Therefore, we are glad to see that the European Union’s project of developing a taxonomy for sustainable investments have taken a similar approach”, says Eliasson.
Green bonds likely just the start
The green bond markets have been growing dramatically over the last couple of years, but green is likely just the start. Landshypotek Bank´s green covered bond financing sustainable forestry was pioneering, but there are still a number of areas in need of sustainable investments if the sustainable development goals by the UN are going to be achieved.
We will undoubtedly see more investors and issuers targeting other sustainable development goals, resulting in bonds in a variety of colors covering the full spectrum of sustainability.Martin Kihlberg
“We will undoubtedly see more investors and issuers targeting other sustainable development goals, resulting in bonds in a variety of colors covering the full spectrum of sustainability," Kihlberg concludes.
Nasdaq’s role in ESG
The Nasdaq Sustainable Bond Market was launched in July of 2015 with a total volume of 740 million euro. Last year €1.7bn ($1.9bn) was raised on the Nasdaq Nordic Sustainable Bond Market, up 81% from 2016. 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 are fulfilled. The respective criteria are based on the green and social bond principles (the GBP and SBP), for which ICMA acts as secretariat, and have been developed in cooperation with Sustainalytics, a global leader in environmental, social and corporate governance (ESG) research. Issuers that wish to list green, social or sustainable bonds on our sustainable bond market goes 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.