Sponsored by Danske Bank

Prepared by the Climate Bonds Initiative

Nordic Sustainable Debt
State of the Market 2020

About this report

Contents

This report describes and analyses the latest developments in theNordic sustainable debt finance landscape. Following from theinaugural Nordic Green Bond State of the Market report published in2018, this paper provides an updated and extended overview of the
shape and size of the green, social and sustainability (GSS) themed debt
market in all five regional countries: Sweden, Norway, Denmark, Finland,
and Iceland. The analysis also covers the growth potential of GSS bonds
and climate finance, including through unlabelled investments into
climate change solutions. Finally, the report includes an in-depth look
into the policy landscape and other drivers of the Nordic sustainablefinance agenda. All data in the report is up to the end of 2020, as ofFebruary 28th, 2021, unless otherwise specified.

Introduction 1
Methodology 3
Nordic sustainable bond market
highlights 4
Green bond market analysis 5Country overviews 10
Sweden 10
Norway 12
Denmark 14
Finland 15
Iceland 16
Beyond the labelled debt universe 17

Overview of Nordic GSS market
at the end of 2020

Policy update 18
Conclusion 19
Endnotes 20

Iceland
USD1.2bn issued
7 issuers

NorwayUSD16.8bn
issued34 issuers

SwedenUSD43.4bn
issued87 issuers

Finland
USD8.4bn issued
12 issuers

Denmark
USD11.3bn issued
9 issuers

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative1

Overview of Nordic GSS market at the end of 2020
Country
GREEN

SwedenUSD issued
Number of issuers

NorwayUSD issued
Number of issuers

Denmark

USD issued
Number of issuers

Finland

USD issued
Number of issuers

Iceland

USD issued
Number of issuers

SOCIALSUSTAINABILITY

42.1bn

273m

956m

82

2

2

16.8bn

N/A

N/A

34

N/A

N/A

11.3bn

N/A

N/A

9

N/A

N/A

7.7bn

N/A

709m

11

N/A

1

0.8bn

356m

53m

5

1

1

NIB

USD issued

5.6bn

N/A

1.5bn

Total

USD issued

84.3bn

629m

3.3bn

142

3

6

Number of issuers

About Climate Bonds Initiative
The Climate Bonds Initiative is an international organisation working
solely to mobilise the largest capital market of all, the USD100tn bondmarket, for climate change solutions.
We promote investment in projects and assets necessary for a rapidtransition to a low carbon and climate-resilient economy.
The strategy is to develop a large and liquid Green and Climate Bonds
Market that will help drive down the cost of capital for climate projects
in developed and emerging markets; to grow aggregation mechanisms
for fragmented sectors; and to support governments seeking to tap
debt capital markets. We do this via three main workstreams: market
intelligence provision, policy and advocacy work, and standard-setting.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative2

Methodology
Scope of analysis
This report includes analysis of all three mainsustainable debt themes – Green, Social, andSustainable. The identification of these themesis based on the projects, assets, activities, andexpenditures financed by each instrument.
The themes can be described as follows:
Green: dedicated environmental benefits(captured since 2012)
Social: dedicated social benefits (captured
since 2020)
Sustainability: green and social benefits are
combined into one instrument (captured
since 2020).*

Methodology overview
All analysis in this report is based on data derived
from the Climate Bonds Green, and Social andSustainability Bond Databases. To qualify forinclusion, debt instruments must a) have beenlabelled by the issuer and b) finance sustainableprojects, activities, or expenditures.
Debt labels are set/chosen by the issuer todescribe the types of projects, activities, or
expenditures financed, and/or their benefits.
‘Green’, ‘social’, and ‘sustainability’ labels are themost common in each theme, but a broad rangeof labels is used.

Green
All deals in the green theme have been screened
for inclusion in the relevant database. Screening
is based on a set of process rules stipulated
in the Climate Bonds Green Bond Database
Methodology, including the following two
overarching criteria:1

Only bonds with 100% of net proceeds dedicatedto green projects are eligible for inclusion in theGreen Bond Database. If proceeds are partiallyallocated to non-eligible categories, or there isinsufficient information, instruments may also beclassified as one of the following:
Pending bonds are deals in the process of being
evaluated, namely due to missing information
which prevents inclusion or exclusion of a bond.
A decision on inclusion or exclusion is madewithin a maximum 90 days from the date ofdiscovery for each instrument to allow time for
information exchange between Climate Bonds
and the issuer, underwriter(s), external review
provider(s) or equivalent. The typical duration forthe bond review process is between one weekand 30 days.
Excluded bonds are those deals whose net
proceeds are partly or fully allocated to noneligible categories, or where there is insufficient
information to determine their alignment with
the Climate Bonds Taxonomy. Exclusion can thus
occur at any point between settlement and theend of the 90-day review period.

Social and sustainability
A comprehensive “social taxonomy” orequivalent classification and screening systemdoes not yet exist in the market, though workon this is underway in the EU and elsewhere.3
Social and sustainability bonds’ use of proceeds
are therefore not screened against performancethresholds. Instead, they are classified inaccordance with the respective labels andcategorised as follows:

Not included in this report
Performance-linked instruments
Performance or KPI-linked debt instruments are
excluded from this analysis. These instruments
raise general purpose finance and involve
penalties (e.g. coupon step-ups) if the issuer does
not meet pre-defined, time-bound sustainability
performance improvements. The two maintypes of instrument are commonly referred
to as Sustainability-Linked Bonds (SLBs) andSustainability-Linked Loans (SLLs).
Climate Bonds does not yet track the global
market sizes of SLBs or SLLs, preventing inclusionof these debt categories in this analysis. However,
coverage of and standards for performancelinked instruments are currently in development
and the theme is discussed in the context ofcountry-specific growth prospects on pages 10
to 16.
Transition labels
Transition finance describes instruments
financing activities that are not low- or zeroemission (i.e. not eligible under existing green
definitions), but have a short- or long-term roleto play in decarbonising an activity or supporting
an issuer in its transition to Paris Agreementalignment. No transition-labelled bonds havebeen issued in the Nordic countries. Further, theeligibility definitions and performance thresholds(distinct from process guidelines, including the
ICMA Climate Transition Finance Handbook) for
transition-related assets, projects, and activities
are still being developed. Transition bonds arethus excluded from the analysis in this report.

Sustainability: label describes a combinationof green and social projects, activities, or
expenditures e.g., sustainable, SDG, SRI, ESG, etc.

1. Deals must carry a variant of the greenlabel (e.g. green, blue, climate awareness,climate resilience)

Social: label is exclusively related to social
projects e.g., housing, gender, women, health,education, etc.

2. Net proceeds must verifiably (based on
public disclosure) meet Climate Bonds’
green definitions based on the Climate
Bonds Taxonomy2

Pandemic: a COVID-19 related label, such as
pandemic, response, COVID-19 response, etc.
Pandemic bonds are considered a sub-set ofsocial-themed bonds as outlined above.

Climate Bonds review all green debt instruments
and their use of proceeds to ensure their green
credentials, and then classify them accordingly.

*The coverage of all of the three themes and their constituent deals dates back to market inception of each theme, e.g. 2007 for green bonds.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative3

Nordic sustainable bond market highlights
Introduction

Nordic GSS bond issuance grew steadily in 2020

The Nordic region is made up of a group of
five relatively wealthy welfare states: Finland,
Denmark, Iceland, Norway and Sweden. Mostof these countries are sparsely populated andcharacterised by their natural surroundings, on
which they draw to drive both economic gain as
well as general happiness. Along with a strong
societal support system, these are some of the key
traits shared by these countries – ranked among
the world’s happiest for close to a decade.4

From green to GSS
Since NIB’s and KBN’s inaugural issuances,
the region’s thematic bond market has grownbeyond the public sector into all issuer types,
and expanded from green into other labels,
encompassing the entire GSS (Green, Social andSustainability) trio: as of end 2020, the total
cumulative volume of Nordic GSS labelledbonds stood at 88.2bn. This amounted to
23% growth since 2019.

30
25

Green

SocialPending

Excluded

Sustainability

20
15
10
USD Billions

Against this backdrop, the region’s early
adoption of sustainable finance compared to
the rest of Europe and the world came as no
surprise. The Nordic social model was extremely
conducive to especially public sector entities
embracing sustainable finance mechanisms,
beginning with green bonds. Indeed, theregion’s sole multilateral finance institution
Nordic Investment Bank (NIB) and Norway’s
dedicated Local Government Funding Agency(LGFA)i KommunalBanken Norway (KBN)
were the first to issue labelled green bonds in
February and May of 2010, respectively. The
public sector dominance is a feature of themarket that Climate Bonds analysed extensively
in the inaugural Nordic Green Bond State of theMarket report published in 2018.5

35

5
0
2016

2017

2018

2019

2020

Source: Climate Bonds Initiative, 2021

Beyond labelled bonds
Climate Bonds analysis finds that in addition
to labelled GSS bonds, the Nordic region is
also home to 24 issuers of unlabelled climatealigned bonds, or vanilla instruments issued
by entities whose revenues arise mostly from
activities related to climate change solutions. As
these companies expand their operations andrefinance existing debt, a further USD21.6bn
of outstanding debt volume spread across 156
active securities has the potential to be labelledgreen. Nordic climate-aligned bonds and issuers
are discussed further on page 17.

Overall, Nordic countries make up 5% of
global GSS issuance – a striking number for asmall group of countries whose corresponding
shares of the world’s population and GDP are
only about 0.3% and 0.2%, respectively.6 Most of
this (96%) is comprised of green bonds, followedby minor but growing shares of sustainability andsocial-themed bonds. Due to the dominance ofgreen-themed debt, the analysis in the below
sections is focused on green bonds with remarks
on each of the other labelled deals in the relevantCountry overview sections.

Policy landscape: Net zeropledges and regional leadership
The Nordic region’s climate neutrality ambitions
rely on regional collaboration and state level
action. All of the countries have set net zerotargets with the time frames ranging from
Finland’s 2035 to Sweden’s 2045.
Key financial system actors are also hopping on
the bandwagon of setting net neutrality target,with some of the Nordic banks being among thefirst financial institutions in the world to do so.
The region has, like the rest of the world, been hit
by the COVID-19 pandemic, and reacted quickly
with regional collaboration as well as countryspecific measures. Looking forward, the impactof the EU Taxonomy will be significant for theregion. Points of contention remain, especially as
they relate to the real estate sector and buildings
overall, which make up a hefty chunk of existing
GSS issuance in the Nordic countries.

i. The five Nordic LGFAs that have issued green bonds so far are Kommuninvest (SE), KBN (NO), KommuneKredit (DK), MuniFin (FI) and Municipality Credit Iceland.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative4

Green Bond Market Analysis
Overview of Nordic Green Bond Market as of 31/12/2020*
Country

Globalranking

Size ofmarket(USD issued)

Numberof issuers

Number of
instruments

Averagesize ofinstrument

Number ofcurrencies

Sweden7th

42.1bn

82

416

103m

6

Norway12th

16.8bn

34

97

172m

9

Denmark

16th

11.3bn

9

28

405m

7

Finland

21st

7.7bn

11

20

340m

5

Iceland

45th

0.8bn

5

22

35m

2

NIB

N/A

5.6bn

N/A

22

255m

7

84.3bn

183

605

143m

14

Total
*All figures are rounded to the nearest million.

Nordic market shows healthy
growth rates
A vast majority (96%, or USD84.3bn) of the Nordic
GSS cumulative total is contributed by labelledgreen bonds. The average year-on-year growth ratesince inception in 2010 has been a healthy 158%,
with the largest jump (12x) visible between 2012
and 2013, while the market was still in its infancy.
COVID-19 clearly dampened growth last year, with
only a 7% rise versus 2019, corresponding to a
total of USD25.1bn and 17 new issuers. Issuancewas slower for the first half of the year, only
picking up in September when the monthly total
reached a record USD6.9bn thanks to the region’s
debut sovereign green bond from Sweden. The
remainder of the year was more active withmonthly issuance ranging from USD2.4bn to
USD3.9bn. For comparison, the average monthly
green bond issuance in 2020 was USD2.2bn, andin 2019 the corresponding figure was USD2bn –amounting to an 8% increase.
The modest annual growth rate is broadly inline with developments in green bond markets
worldwide, which Climate Bonds has covered

extensively for some time and will extend in an
upcoming Global Sustainable Debt State of theMarket report due at the end of April 2021.
The maintenance of modest growth and the first
Nordic sovereign bond in 2020 were positive
signs of both issuer and investor confidence
in the region’s green bonds. This stability
was almost certainly also aided by the strong
continuing presence of public sector andcorporate issuers (see Issuer Types below).

Sweden continues asregional leader
Half of the Nordic green bond volume comesfrom Sweden. The largest Nordic country by
area and population, Sweden has maintained its
early leadership position in green bonds vis-à-vis
its Nordic neighbours, also leading the pack by
number of issuers (82) and instruments (416).
With these numbers Sweden is the sole Nordic
representative in the cumulative top 10 of global
green bond country rankings. The country also
contributed the largest share of 2020 Nordic
green bond volume (51%).

Sweden leads the region in green bonds

20

SwedenFinland

NIB

Iceland15
10
USD Billions

Finland and Iceland contribute a further 9%
and 1% respectively to cumulative shares, with
USD7.7bn and USD800m of volume and a totalof 16 issuers (FI: 11, IS: 5). In 2020, both markets
grew their corresponding shares of green issuanceto 13% and 2%. The remaining 7% (or USD5.6bn)
comes from Helsinki-headquartered supranational
development bank NIB, whose 2020 issuanceamounted to 3% of the total (USD715m).ii

Issuer types
Public sector as a cornerstone
The Nordic model and the strong presence of
public sector entities continues to be reflectedin the green bond space. About a third of the
cumulative volume has been contributed bygovernment-backed entities (32%), while local
governments have contributed a further 7%. The
largest issuers in both categories hail from Sweden:
Kommuninvest, Swedish LGFA, joined the green
bond market in 2016 and has printed a total of
12 deals worth a combined USD6.2bn. For direct
local government funding, Sweden’s capital region
Stockholm (Stockholms Läns Landsting) takes the
top spot with USD1.7bn and 11 deals. A total of 14
Nordic local governments have issued green bonds,
with Sweden home to all but the capital cities of
Norway (Oslo) and Iceland (Reykjavik).

Sweden’s inaugural sovereign

Norway502014

Denmark also exceeds the 10bn mark, with a total
volume of USD11.3bn (13%) but only nine issuers,translating into a significantly larger average deal
size than its peers. Denmark’s share dipped to 9% in
2020, but the country made waves throughout theyear with the early announcement and subsequentdiscussions around a possible sovereign greenbond, to be issued in line with a novel green
certificate model (see Country Overview section).

National and supranational development banks bringa further 8% or USD6.8bn of Nordic green issuance.
NIB has printed the majority (83%, USD5.6bn, 22
deals) of this volume, with the remaining USD1.2bn
issued by Swedish Export Credit (12 deals).

25
Denmark

Norway takes second place with a fifth of
cumulative volume, adding a further 34 issuersand 97 deals. Similar to Sweden, Norway’s 2020
share (USD6bn, 23%) was slightly higher than its
cumulative one of 20% (USD16.8bn).

2015

2016

2017

2018

2019

2020

Source: Climate Bonds Initiative, 2021
ii. NIB is financed jointly by the Nordic and Baltic countries and finances projects exclusively in these regions.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

Sweden is not only the largest Nordic green bondmarket, but also the only country in the region so
far to have issued a labelled sovereign bond: its
inaugural green bond (SEK2bn/USD2.3bn) cameout in September 2020, immediately taking the top
spot as the largest Nordic green bond, both in 2020
and to date. This sole bond brings the sovereign
category to a modest 3% share of the cumulative
total. Further potential for sovereign issuance is
explored in the Country overview sections.

5Corporate issuance surges

Public sector issuers strong, corporates gaining ground

Corporates combined constitute the mostprevalent issuer type in the Nordics. Their sharehas surged over time, now reaching a cumulative
USD41.8bn or 50% of the total, split between
financial (FI) and non-financial corporates (nonFI), respectively at 23% and 27%.

Corporate issuers helped to keep the market
afloat in 2020, especially from a real economy
perspective – the proportion of non-FI issuancegrew to 35%. This category is also the one withthe most deals (323 cumulative), and a diverse
group of issuers with several smaller deals (seeDeal size below). Financial corporates remained
relatively steady in 2020 at 22%.

Green loans have a minor share
At the end of 2020, the market had seen two
Nordic green loans amounting to USD608m orabout 1% of total volume. The first borrower
was Swedish real estate company Fabege AB –also a green bond issuer – signing a SEK1.6bn(USD177m) loan with a debt fund from Brunswick
Real Estate in January 2019 to finance a green
office building in Stockholm. In addition,
Danish specialised fund manager Copenhagen
Infrastructure Partners (CIP) borrowed EUR380m(USD431m) in July 2020 to continue its financingof the 487MW ‘Monegros’ wind portfolio in Spain.

Almost half of issuance in SEK
As of end 2020, Nordic green bonds had been
issued in a total of 14 currencies. Hard currencies
made up 43% of the running total, and 39% of2020 issuance.iii
SEK prevails as the most popular currency,
representing 46% (USD38.4bn equivalent) of
cumulative volume and an equal share in 2020.
The largest issuers of SEK-denominated green
bonds are Kommuninvest (SEK37.5bn/USD4.1bn– nine deals) and Vasakronan (SEK32.9bn/
USD3.8bn – 76 deals). SEK is also the 4th largest
currency for green bonds globally in cumulative
terms and annually in 2020.
EUR is the second most popular currency,
responsible for approximately a further third(34% or USD28.5bn) of issuance on a cumulativebasis, and a slightly greater slice (36%) of 2020
figures. The largest issuers in this currency are
NIB (EUR3bn/USD3.4bn,, seven deals) and
Denmark’s LGFA KommuneKredit (EUR2.3bn/
USD2.6b, 6bn6b, four deals). Norway’s mortgage

Development Bank
Financial Corporate

20

Government-Backed Entity
Loan

15

Local Government
Non-Financial Corporate

10

Sovereign
USD Billions

The largest corporate issuer is property company
Vasakronan (Sweden, USD4.9bn cumulative),
which continues to hold the top spot after
being one of the first companies globally toissue green bonds, in November 2013. On the
FI side, Norway’s mortgage lending institution
SpareBank 1 Boligkreditt leads, with USD3.3bn
issued in four deals.

25

5

0
2014

2015

2016

2017

2018

2020

2019

Source: Climate Bonds Initiative, 2021

Nearly half of Nordic green bonds issued in SEK, hard currency
100%

75%

50%

25%

0%
2014
SEK

EUR

2015

2016

2017

USD

NOK

DKK

2018
GBP

2019
TWD

2020
AUD

Other

Source: Climate Bonds Initiative, 2021

lender SpareBank 1 Boligkreditt and Danish
energy company Ørsted both also exceed
EUR2bn (USD2.4bn and USD2.1bn, respectively)
with two deals each.
USD and other Nordic currencies have smaller
shares of the running total (USD – 7%, NOK – 6%
and DKK – 3%). In 2020, however, NOK was slightly
more popular with 9% of issuance, whereas USDdenominated volume dropped to 2%.
GBP-denominated bonds contribute 1.4% of
cumulative volume and TWD 1.1%,%, with theremainder comprised of minor (<1%) sharesof a mix of hard and soft currencies. These aremainly contributed by the region’s developmentbanks, including KBN and NIB. Icelandic
issuers are the only ones to have issued in theirdomestic currency. Public utility Reykjavik
Energy (Orkuveita Reykjavíkur) is in the leadwith three deals tapped 12 times for a total of
ISK32.1bn (USD240m).

iii. Hard currencies: USD, EUR, GBP, CHF, JPY, CAD and AUD. Of these, only CHF and AUD do not appear in the Nordic market.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

6

Half of volume from benchmark-sized deals, averages remain small

Nearly half of Nordic green bond issuance comesfrom larger-sized instruments, with 49% of
cumulative volume printed as benchmark-sizedbonds (USD500m or larger). The USD500m1bn category is the most prevalent with a 37%
share. This share, which remained nearly static
in 2020 (USD500m-1bn: 36%; USD1bn+: 13%) isroughly in line with the cumulative contributionsof government-backed entities and financial
corporate issuers, which tend to print larger
deals. However, the largest deal of 2020 andto date is the Swedish sovereign (SEK20bn/
USD2.3bn).

100%

180

80%

144

60%

108

40%

72

20%

36

The USD100m-500m size range is also popularwith nearly a third (32%) of cumulative issuance,
the remaining 20% comprised by bonds up
to USD100m. Non-financial corporates, local
governments and the two Nordic developmentbanks (Swedish Export Credit and NIB) arefrequent issuers of deals in these ranges. The
share of the smallest size bucket increased slightly
to 26% in 2020, in tandem with the proportional
growth of non-financial corporate issuance.
Particularly on the corporate side, the relatively
high share of small deals versus other countries(especially European) is in part a reflection of
the absolute sizes of the Nordic economies
and thus the investment needs of companies
operating in the real economy – domestically oreven regionally. The debt capital markets in theNordics are well-developed and fairly accessible
to smaller corporates. Norwegian power utility
Glitre Energi (NOK300m/USD31.6m, September2020) as well as Sweden-based public transportcompany Nobina (SEK500m/USD50m, February2019) offer pertinent examples. The recent
growth of high-yield and non-rated green bonds
has also likely contributed to a larger share of<USD100m deals.7
The mean (average) and median sizes of Nordic
green bonds have remained relatively stablesince 2014/2015, currently standing at USD139m
and USD59m, respectively. This is a little over halfof the global averages of USD260m (mean) andUSD95m (median).
The mean size took a slight dip to USD122m
in 2020, which was to be expected given theincrease in non-financial corporate issuance. The
median remained relatively stable at USD56m.

0%

0
2014
Up to 100m

2015

2016

100-500m

2017

2018

500m-1bn

1bn or more

2019

(Average & Median) USD Millions

Larger sizes are common

2020
Mean

MedianSource: Climate Bonds Initiative, 2021

Shorter tenors prevail
Nordic green bond tenors lean heavily toward theshorter side: tenors up to 10 years represent 91%
or USD79bn of cumulative issuance.
The ≤5-year tenor bucket is the most popularwith 48% of volume, and a slightly smaller
yet substantial 36% share of 2020 issuance.
As expected, short-dated green bonds areespecially common among corporates, which
comprise more than half (62%) of the ‘up to
5 years’ category. Perhaps more surprisingly,
government-backed entities also feature heavily
in this category, representing nearly a third (29%)– government-backed entities’ green bonds havethe most varied maturity profile overall.
The 5-10 -year bracket makes up 43% of
cumulative issuance, and was the most popularin 2020, accounting for 54%.
Most of this (53%) consists of corporate issuance,
mainly financial corporates which lead with justunder a third (32%). Over 70% of NIB’s issuancealso falls in this category. Government-backed
entities represent a further 30%, and local

governments 10%. Though the share is small,this is their tenor range of choice; altogether local
government green bonds with tenors of up to 10
years constitute almost all (96%) of this issuer
type’s green bonds. This may be a reflection of
local government funding priorities and election
and budget cycles – in contrast with governmentbacked entities, whose operations may beguaranteed and support larger and longer
lifecycle projects, such as power generation/transmission and public transport.
Longer tenor brackets – i.e. between 10-20 years
and ≥20 years – contribute minor shares, withthe former constituting 3% (2020: 2%) and thelatter 4% (2020: 3%) of cumulative issuance.
Government-backed entities are the only ones tohave issued green bonds with ≥20-year tenors.
The longest-dated three deals, all maturing in
2055, come from Reykjavik Energy (ISK8.4bn/
USD69m total).
Swedish residential real estate developer K2A
Knaust & Andersson Fastigheter and Ørsted are
the only Nordic issuers with perpetual green
notes outstanding.

Short and medium tenors are most popular
N/A*
Up to 5Y
5-10Y
10-20Y>20Y
Perpetual

Development Bank

Loan

Financial Corporate

Local Government

Government-Backed Entity

Non-Financial Corporate
Sovereign0

USD Billions

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

10

20

30

40

Source: Climate Bonds Initiative, 2021

7

Real estate features heavily in UoP
The prevalence of real estate issuers in the Nordic
green bond market is a widely understoodand reported phenomenon8,9 – and one that isreflected in the Use of proceeds (UoP) mix: Lowcarbon buildings represent the largest category
with 38% of the cumulative volume. This includes
the obvious candidates, such as real estate andconstruction companies including Finland’s Satoand Sweden’s Bonava, and specialised mortgage
lenders like Norway’s SSB Boligkreditt – all 2020
market debutants. However, commercial banks
also contribute steadily to this UoP category.
Financing for buildings comprised 35% of 2020
volumes, remaining close to the cumulative share.

Financing for Buildings still
most common
Industry 1%
Land Use 7%

Waste
6%
Water
7%

ICT 1%
Unallocated A&R 2%

Energy24%

Transport
14%
Buildings
38%

Source: Climate Bonds Initiative, 2021

Public sector financing is equally common on thetransport side: all five LGFAs have included public
transport-related allocations in their green bondproceeds, including financing for the Helsinkiarea metro system expansion (MuniFin), a new
hybrid ferry for crossing between two localities in
the Jylland region in Denmark (KommuneKredit),and the procurement of electric vehicles andconstruction of charging stations in several
Norwegian municipalities (KBN).10 Specialist
entities are also featured: in addition to private
sector bus company Nobina (SE), Norway’s stateowned train and toll road operators also joined
the market in 2019 and 2020, respectively. The
deals from Norske Tog (NOK1.3bn/USD143m, twodeals in December 2019) and Ferde (NOK2bn/
USD222m, January 2020) were earmarked for the
expansion of rail networks, as well as light rail,
tram, and bicycle and pedestrian infrastructure.
Sweden’s car manufacturing legacy is also visible
in this UoP category: automotive producer Volvo
Cars issued a EUR500m/USD589m green bondin October 2020 to finance Volvo’s expansion ofBattery Electric Vehicle (BEV) production. The
dedicated “mobility bank” owned by Swedish
Volvo and Renault retailers, Volvofinans Bank
has issued thrice between 2017 and 2020, for a
total of SEK22bn (USD2.5bn), to finance loans
and leases for BEVs and full hybrid vehicles.
There are signs that this will continue: in early
2021, Swedish truck manufacturer Scania
debuted in the green market, financing BEV
truck development.iv Climate Bonds has recently
published further analysis of the automotive
green bond boom as part of the Green Bond
Pricing in the Primary Market report series.11

Diverse funding mix
Overall, Nordic green bond UoP is more evenly
spread across categories than in the global
market. Water, Waste and Land use are close
to one another in allocations with respective
shares of 7.4%, 6.6% and 6.2% (2020: 5%, 5% and10%). Much of this diversity is again thanks tothe prevalence of the public sector, particularly
local governments and LGFAs, as well as NIB. In
particular, NIB’s Blue Bond – the region’s first –from January 2019 featured a number of relevant
project categories with a focus on protecting theBaltic Sea.12
Commercial banks also help to promote an
uptick in the less prevalent UoP categories: all
the major commercial banks in the region haveissued at least one green bond. The banks havebeen instrumental in catalysing the market in theearly days with DNB ASA (NO) kicking things off
in 2015, and the other majors including Nordea,
SEB and Swedbank following two years later. All
the frameworks have encompassed a large mixof different UoP: as an example, Danske Bank’sframework covers eight categories.13 Altogether,
the ten largest banks have issued a total of
USD10bn in 29 green bonds.v

Commercial banks’ UoP slightly morediversified than overall Nordic market
Unallocated A&R 1%

Land Use
10%
Waste
13%

Energy38%

Land use highly relevant in some countries
Land use allocations obviously benefit from theforestry and pulp and paper sectors, which are anatural fit for countries like Sweden and Finland
where more than half of the land mass is coveredin trees.14 After SCA’s debut in 2014, Södra
Skogsägarna, Sveaskog, Stora Enso, Tornatorand UPM have issued green bonds. UPM, a new
entrant in November 2020 (EUR750m/USD887m),
financed the substitution of petrochemical
inputs for renewable wood-based biomass in thechemical industry and various biofuels throughits Biofore product series, among other activities.
Nordic green bonds exhibit minor allocations
toward the ICT sector, which is a relatively
recent addition to the mix. Most recently,
Swedish telecommunications company
Telia Co joined the market in February 2020
(EUR500m/USD545m) to fund the expansionof high-speed fiber connectivity in Sweden, as
well as IoT solutions directly to customers inthe built environment and in public transport.
This follows earlier issuances from Millicom tofinance the expansion of broadband networks,
and cloud service provider Ficolo to upgrade its
data centre in Helsinki.

Implications of KPIlinked funding
It remains to be seen how the UoP mix develops
in the Nordics. A large chunk of companies thatare not active in the green bond market are
seeking sustainability-related funding via theloan market, in the form of ESG- or SustainabilityLinked Loans. This is likely due to a combinationof the required amounts of funding (sizes of
instruments) being smaller, and the perceived
flexibility of this funding model for thoseborrowers and issuers that struggle to identify
a pipeline of assets, projects and/or activities
eligible for the conventional green UoP model.
If these companies begin issuing under one of
the main themes in the UoP format, this has
the potential to bring about significant further
diversification of the funding mix of GSS bonds.
Further, as discussed in the section on page17, there is still latent potential from so-called
climate-aligned issuers to label their debt as
green – and this list is likely to grow as market
actors continue the work on setting standards
and agreeing on green / sustainability definitions
for a wider variety of sectors.

Transport
11%
Buildings
23%
Water 4%

Source: Climate Bonds Initiative, 2021

iv. Scania’s green bond is not part of the data and analysis in this report due to the end of 2020 cut-off date.
v. In alphabetical order: Banco Santander (NO), Danske Bank (DK, regional), DNB ASA (NO), Handelsbanken (SE, regional), Nordea Bank (FI, regional), Nykredit (DK), OP Corporate Bank (FI), SEB (SE), Sparebank 1 SMN(NO), and Swedbank (SE). The inaugural bond from Íslandsbanki issued in November 2020 is currently under further review and classified as Pending.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative8

Other types of external reviews are present
in smaller shares. Certified Climate Bonds(CCB) comprise just under a tenth (9%) of total
issuance, and the same proportion of 2020
volumes.volumes. Only two Approved Verifiers of
CCBs have been used in the region: Sustainalytics
and Multiconsult (a Nordic engineering
consultancy firm), among which the verification
volume is split 58:42.
The 9% CCB share is about half that of the
global market, nodding yet again to added
popularity of the SPO model among Nordic
issuers over other review types. The largest
CCB comes from DNB Boligkreditt (EUR1.5bn/
USD1.7bn, June 2018), whereas peer SpareBank
1 Boligkreditt took last year’s top spot with
EUR1bn/USD1.2bn in September.
Deals with assurance make up only 2% of
cumulative figures, but saw their share surge to
7.5% last year. This may simply be a reflectionof the maturing markets, as many Nordic
issuers also employ limited assurance as partof their process for the annual managementof green bond proceeds. Ratings on the other
hand correspond to 3% of the running total,but only a tenth of that (0.3%) in 2020. Finally,
approximately 1% of Nordic green bonds havemultiple types of external review, both on a
cumulative and 2020 basis, all of which involveat least a SPO.

30
Certified25

RatingAssurance

20

SPO
Multiple

15

None

10
5
0
2014

2015

2016

2017

2018

2020

2019

Source: Climate Bonds Initiative, 2021

Nearly all green bonds coveredby post-issuance reporting

Further detail on the methodology
and comprehensive rankings and bestpractice case studies are included in theupcoming report.

Post-issuance reporting on use of proceeds is acore component of the Green Bond Principles
and the Green Loan Principles. Reporting theenvironmental impacts of projects, assets
and activities financed is also recommended.
Post-issuance disclosure provides transparency,
ensures accountability and underpins thecredibility of the green bond market.
Climate Bonds has developed a methodology
to assess the frequency and quality of green
bond issuers’ post-issuance disclosure.
The results have been published in the‘Post-Issuance Reporting in the Green Bond
Market’ report series – an upcoming third
edition is due out in May 2021. The analysis
highlights best practice examples in reporting
quality, with a prominent Nordic example
being SpareBank 1 Boligkreditt (NO) whichreaches third place in the overall ranking of allof the issuers assessed.vi In the country rankings,
Denmark and Finland both feature in the top 5.

Overall, green bond issuers in the Nordic region
not have excellent external review coverage,
but also post-issuance disclosure: nearly all(93% of volume, 82% of number of deals) haveassociated reporting on both use of proceeds
as well as impact. A minor share (2% in bothvolume and deal count terms) benefit from only
UoP reporting, whereas approximately 1% ofvolume or 2% of deals have impact reporting
only. Government-backed entities perform bestwith 100% coverage of both UoP and impact
reporting. Non-financial corporates are at theother end of the spectrum with 78% having bothtypes of reporting, 2% UoP only, 5% impact
only and 14% with no post-issuance disclosure
available. This, though lower than the otherissuer types, is still above the global average,
further underpinning the advanced nature of theNordic green bond market.

Most Nordic green bonds come with UoP and impact reporting
10
8

USD Billions

6

100
No reporting

UoP reporting only

No reporting

UoP reporting only

Impact reporting only

Both

Impact reporting only

Both

80

80
60

4

40

2

20

0

4
Denmark

4

3

Finland

Iceland

11
3
1
Norway15
2
Sweden0Deal count

The Nordic region leads the global green bondmarkets in external reviews: 99% of cumulative
green bond volume is covered by at least one
type of external review. In 2020 the figure wasalmost exactly the same (98.5%). The Second
Party Opinion (SPO) model continues to be themost common, accounting for 85% of the total
volume and 81% of 2020. This is in large part due
to CICERO Shades of Green, which pioneered andcemented the practice of providing green bond
SPO early in the market’s development. CICERO
Shades of Green now cover 80% of all Nordic
green bond volume (82% in 2020). Additional
providers include other globally known names
Sustainalytics (14% cumulative, 16% 2020), DNV
GL (4%, 2%), and ISS ESG (2.7%, 0.2%).

Almost all Nordic issuance has an external review

USD Billions

External review coverage
is superb

Source: Climate Bonds Initiative, 2021
vi. The upcoming analysis included a review of all green bonds issued between November 2017 and March 2019 included in the Climate Bonds Green Bond Database.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

9

Country overviews
Swedish market continued to grow in 2020

Sweden is by far thelargest Nordic GSS bondmarket, with a total
issuance volume of
USD43.4bn.

16
Green

USD Billions

Sweden’s top 5 are all green
bond issuers

SocialPandemic

12

USD42.1bn (97%) of
Swedish GSS issuancecarries a green-themed label. The country ishome to a total of 84 issuers of GSS bonds. Out ofthese, 80 have issued labelled green bonds, two a
combination of green and social or sustainability
bonds, and two only social bonds.

Sustainability
Deal count

120

8

80

4

40

0

0
2014

2015

2016

2017

2018

2019

2020

Source: Climate Bonds Initiative, 2021

USD
issuedNumber of
instruments

Kommuninvest

6.2bn

13

Vasakronan

4.9bn

114

Kingdom of
Sweden2.3bn

1

Stockholms
Läns Landsting

1.7bn

14

City of
Gothenburg

1.6bn

3

Name

160

Number of issuers

SwedenDespite the turmoil brought on by the COVID-19
pandemic, 2020 was a relatively good year for
Sweden’s labelled bond market: the market
reached USD14.4bn of issuance with a YoY growthrate of 35% (26% for green only), compared to a
67% jump from 2018 to 2019. The market also
saw the entry of 15 new green and two new social
bond issuers, including the Kingdom of Sweden in
the green category and Samhällsbyggnadsbolaget
i Norden (SBB) with a maiden social bond.vii SBB
has also issued in the green format a total of ninetimes (USD268m equivalent).

in 2020, 12 were from the real estate sector.
Additionally, one first-time issuer (SIBS AB)
develops and manufactures building materials
with an emphasis on wood-based, lowerenvironmental impact materials. A total of 38
property-related issuers – i.e. those that mostly
finance low-carbon buildings – hail from Sweden.
These include mortgage lenders and property
banks, real estate and construction companies,
and housing associations. The largest (excluding
Vasakronan which is in the overall top 5) arestate-owned mortgage property bank SBAB
(USD1.3bn, 4 deals), and commercial property
companies Fabege AB (USD1.27bn, 23 deals) andHumlegården Fastigheter (USD1bn, 14 deals).

Public sector issuers are strong
Kommuninvest’s position as the top issuer isreinforced in the share of government-backed
entities at 28% of cumulative green volume.
Sweden’s numerous local government issuers –including the City of Gothenburg which makes

The real estate sector’s prevalence is reflected
in Swedish green bond UoP: 40% of the total
is Buildings. However, the numbers indicate aclear trend toward a welcome diversificationof the actual assets and projects financed by
Swedish green bonds. UoP diversification
increased in 2020 with the inaugural sovereign,
which brought the Buildings share down toa third and boosted a number of the others,
sectors; this is quite common as sovereignissuers tend to fund a wider array of projecttypes than other issuers.15 Transport and Energy
are the second and third-largest categories at
17% and 15%, respectively.

12
Development Bank
10

Financial Corporate
Government-Backed Entity

8

Loan
Local Government

6

Non-Financial Corporate
Sovereign

4
USD Billions

As expected, property and real estate issuers
continue to dominate. Of the 15 debut issuers

UoP diversification is a positive signal

Inaugural sovereign drove Sweden’s green expansion in 2020

Property and real estate issuers continue
to triumph
Sweden’s issuer type mix is fairly balanced.
Financial and non-financial corporates makeup half of cumulative volume (11% FI / 39%
non-FI). The share of non-financials was slightly
more pronounced in 2020 with 42% of the total,
whereas FIs dampened slightly to 6% despite agrowth in the absolute amount issued – in part
thanks to the Swedish sovereign green bond,which individually takes 5% of cumulative and
17% of 2020 volume.

it to the top 5 – boost this issuer type’s share to
14% (2020: 9%). Swedish Export Credit continues
to issue actively as the sole development bank(agency), claiming the remaining 3% (2020: 4%)of green volume with a total USD1.2bn made upof 12 deals.

2
0
2014

2015

2016

2017

2018

2019

2020

Source: Climate Bonds Initiative, 2021
vii. The issuance was completed via SBB’s Finnish arm SBB Treasury Oyj, but guaranteed by SBB – hence the country of risk is Sweden.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative10

Land Use represents 9% which comes mainly
from a mix of forestry issuers, such as Sveaskog,and local governments. Water and Waste –mostly financed by LGFAs and local governments– are close with 6% and 7%, respectively (5%for both in 2020), while ICT and Adaptation &Resilience categories make up the remaining
minor shares. The entry of Telia in 2020 was awelcome signal from this large-cap which is also
the biggest telecommunications and broadband
provider in the Nordic and Baltic region. This
debut issuance paves the way for the rest of
the ICT industry which has a key role to playin reducing emissions not only within but also
across other industries.
Though we expect Buildings to continue as
the top category, it is likely that Sweden’s UoP
will further diversify in the coming years as thecentral government grows its green sovereign
programme, policy support ramps up, andfurther clarity on green definitions is achieved(see Policy update section below) – all of which
will help issuers in more industries embracegreen and sustainable debt.

Other labels are emerging
As of the end of 2020, there were sevensustainability and social-labelled bonds from
Sweden. Hemsö Fastigheter AB was the first in
the market – and indeed the whole Nordic region– with a dual sustainability-labelled issuanceof a total SEK1bn/USD119m in June 2016 aspart of its wider MTN programme. Hemsö’s
approach is a great example of the co-benefitsof green and other labelled bonds: the eligible
project categories all involved buildings thatscored highly in BREEAM, LEED or the Swedish
Miljöbyggnad certification scheme, or achieveda minimum 25% energy efficiency improvement.
The social benefit arose from the financing ofbuildings related to the public education system,
healthcare and/or elderly care (e.g. schools,
hospitals and care homes).16 Hemsö issued afurther two sustainability bonds in February 2020,
reaching a total of USD273m equivalent.
Swedish issuers have printed two social-themed
instruments: the first from medical technology
company Getinge, which issued a SEK1bn/
USD106m COVID-labelled commercial paperin April 2020. The deal referenced ICMA’s Social
Bond Principles and was one of the clearest
displays of the use of an emergent label for
direct relief to the pandemic: the proceeds wereallocated exclusively to financing a production
increase of ICU-ventilators and other life-saving
equipment produced at the company’s plant in
Solna, outside Stockholm.17
The second – and the first Swedish bond with the“conventional” social label, as well as the maiden
Nordic corporate social bond – was issued by
SBB in December 2020. The EUR700m/USD850m
bond’s use of proceeds categories were very
similar to those in Hemsö’s framework, with the

Sweden’s UoP has diversified over time
100%

75%

50%

25%

0%
2014

2015

2016

2017

2018

2019

EnergyBuildings

Transport

Water

Land use

Industry

ICT

Unspecified A&R

2020

Waste

Source: Climate Bonds Initiative, 2021

addition of rent-regulated residential housing
and extending the property types facilitating“access to essential services” from schooling andhealthcare to community and culture facilities.18

at approximately USD734.8bn equivalent at theend of last year, translating to a modest (yet atleast double the global average) 5.5% share for
GSS bonds.

Future outlook

On the sustainability and social side, it is likelythat both themes will witness rapid growthin the near future; not least if Kommuninvest,
other government-backed entities and Swedish
local governments follow MuniFin’s example(see Finland’s Country overview below) on
social bonds, which Kommuninvest has alreadysignalled at the start of 2021.19 Corporates will
likely also embrace the sustainability bond model,
mirroring indications in other parts of the world.20

Future growth in labelled and thematic issuancein Sweden is likely to come from a multitude
of sources. Swedish sovereign green issuanceis likely to grow, which will provide a welcome
boost of liquid and highly-rated supply into thewider Nordic market. Further green bond growth
can also be expected from existing debt issuers in
sectors whose activities are covered by emerging
definitions – whether green or transition – as well
as issuers of unlabelled climate-aligned bonds(see Beyond labelled bonds section below).
Sweden is home to ten climate-aligned issuers,
half of which have already tapped into the green
bond market - Vattenfall AB is the latest (twodeals in early 2021, total EUR1bn/USD1.2bn).
Beyond these issuers, there is massive latentpotential: Sweden’s vanilla bond market stood

Performance-linked instruments andthe low-carbon transition
Performance- or KPI-linked instruments, such as
SLBs and their “sister” model of SustainabilityLinked Loans (SLLs), can be a critical tool in
financing entity-level transition pathways – afocal concept of transition finance. Nevertheless,certain concerns remain regarding the integrityof these instruments in facilitating change thatis ambitious and credible.
In particular, it may be that some of the
KPIs set are entity-specific and difficult to

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

Finally, one should not dismiss the potentialof performance-linked instruments in shaping
the Nordic – and global – sustainable financelandscape. Swedish fashion retail giant H&M was
the first to embrace this funding model, with alinkage to its company-level sustainability targets
of a EUR500m (ca. USD595m) SustainabilityLinked Bond (SLB) in February 2021.21

benchmark against peers or against, forexample, wider global goals such as theParis Agreement. These concerns are notinsurmountable, however, and with someclear guidance to the market, SLBs could bea valuable addition to the sustainable financelandscape – in particular in enabling entitylevel transitions. The Climate Bonds Transition
Principles and associated Whitepaper starts
to iterate guidance around definitions andambition, whereas the ICMA Climate Transition
Finance Handbook lays out useful preliminary
guidance around the issuance process.22, 23

11

Financial sector drives Norwegian market growth

Norway has held onto
its second place in
the Nordic ranking forseveral years, reaching
USD16.8bn issuancevolume at the end of 2020
and USD5.8bn last year.
The Norwegian market is 17% or approximately
USD2.8bn larger than that of Denmark, whichis third. The year-on-year growth rate in 2020
compared to 2019 was 53% - encouraging inlight of the pandemic and despite falling shortof the average 185% yearly growth since market
inception. If forecasts hold, there is potential for
Norway to bounce back to higher growth in 2021.
The country is home to a total 34 issuers, all so
far issuing under the green label. Altogether they
have printed 97 deals. The top five issuers arehousehold names mostly from the financial sector,
with SpareBank 1’s mortgage lending arm taking
first and industry peer DBN Boligkreditt third
place; pioneer LGFA Kommunalbanken in second;the country’s largest FI (DNB ASA) coming in fourthand savings bank for Central Norway SpareBank 1
SMN rounding out the quintet.

Development Bank
5

Financial Corporate
Government-Backed Entity

4

Loan
Local Government3

Non-Financial Corporate
Sovereign

2
1
0
2014

2015

2016

USD
issuedNumber of
instruments

SpareBank 1
Boligkreditt

3.3bn

4

KBN

2.9bn

19

DNB Boligkreditt

1.7bn

1

DNB ASA

1.2bn

6

Sparebank 1
SMN

1.0bn

4

Norway’s full issuer type mix mirrors the top 5:
financials make up 58% of cumulative issuanceand brought nearly two-thirds (62%) of 2020
green bond volume to the market. Governmentbacked entities contribute a further 30% (2020:
24%) with KBN in the lead, followed by energy
companies like Eidsiva Energi (USD462m, four
deals), BKK (USD444m, two deals), and grid
operator Statnett (USD368m, two deals), which
are mostly state-owned. The City of Oslo is the
only local government issuer, constituting 1% of
cumulative volume.
The remaining 11% (2020: 14%) is comprisedof non-FI corporate issuance, led by real estatecompany Entra ASA (USD811m, 11 deals). The
rest are mostly private sector energy companies,
with the exceptions of NorgesGruppen, asupermarket retailer which debuted in February

2017

2018

2019

2020

Source: Climate Bonds Initiative, 2021

2019 and has issued three green bonds(USD164m) to finance clean transportation
and buildings, as well as renewable energy
related to its direct operations and supply chain.
Another new non-FI corporate entrant is seafood
company MOWI, whose debut deal is covered in
more detail below.

Norway tilts towards Buildings,
Energy follows

Financials dominate
Norwegian top 5 and issuer
type mix
Name

6

USD Billions

NorwayAs indicated by the discussion on top issuers,
Norway’s green bond UoP mix is currently
dominated by the Buildings category (61% ofproceeds, 62% in 2020), in large part thanks toSparebank and DNB’s mortgage lending but also
KBN, whose funding mix encompasses all of the
major categories. Energy, which was identified
as the most prevalent category in the previous
Nordic market analysis, comes in second at 21%.
Its share was slightly more pronounced (28%) in
2020, aided for instance by debut issuers Glitre
Energi (NOK300m/USD32m) and Akershus Energi(NOK900m/USD105m, two deals). Much of this ishydropower, which accounts for approximately
90% of the country’s power production.24
Transport (12% cumulative, 8% 2020), Waste (4%cumulative, 1% 2020), and Water (3% cumulative,
1% 2020) comprise the remainder of the UoP mix.

Future outlook
GSS bonds from Norway have the potential togrow significantly under all three main themes.
The country has yet to see any labelled social
or sustainability bonds in the traditional UoP
model, which could potentially be utilised mostby the public sector.
However, the bigger challenge – and opportunity– for Norway lies in its continued reliance onnatural resource exports, including oil andgas. A global energy system transition to lowcarbon alternatives will also mean a massive
shift in Norway’s economy, which is alreadypartly underway. For example: the famous

Buildings most funded in Norway, Energy follows
100%

75%

50%

25%

0%
2014
Energy2015
Buildings

2016
Transport

2017

2018
Water

2019
Waste

2020
Land use

Source: Climate Bonds Initiative, 2021

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative12

Norwegian Sovereign Wealth Fund approved adivestment from oil and gas exploration in 2019and introduced a mandate to invest directly
into renewable energy projects, not just listedcompanies.25 The corporate side is showing signsof embracing the change as well, such as in thecase of state-owned Equinor (former Statoil)changing its name and strategy to tilt heavily
towards low-carbon energy generation andintroducing a net zero 2050 target. All of this canbring All of this brings with it further green canbring debt issuance and labelling opportunities.

Green and the big blue
Norway’s opportunities extend beyond its vast
coastlines and into the sea: it is the world’s
largest producer of farmed salmon, and oceanbased industries comprise nearly 40% of thecountry’s GDP.26 Mowi and Grieg Seafood’s
green bonds are certainly not the last we willhear of the seafood industry’s sustainability
improvement efforts; in fact, Norway has alreadyseen its largest corporate green bond from
SalMar (NOK3.5bn/USD418m) issued in April
2021.27 The definition and standards-setting
work around aquaculture will also continue,
in time making it more straightforward for
issuers to utilise green or blue bonds to financethe protection of marine environments andbiodiversity in numerous ways.

Norwegian aquaculture green bonds
Norwegian seafood producer MOWI ASA
became the first in its industry to issue agreen bond (EUR200m/USD222m) in January
2020. The issuance was followed by peer
Grieg Seafood’s NOK500m (USD56m) deal
in June, and a NOK1bn (ca. USD118m) tap
in November. The two bonds were classified
differently in the Climate Bonds Green Bond
Database, with MOWI being included andGrieg excluded due to non-alignment with the
Climate Bonds Taxonomy.

Database Methodology allows R&D spendingthat can demonstrate a clear climate-related
benefit. The bond was thus eligible forinclusion in the Green Bond Database.
In Grieg’s case, the proceeds included anelement of financing a switch from fossil fuelbased electricity generation to hybrid systems(renewables and diesel). Though this will result in
lower GHG emissions overall, it does not qualify
under Climate Bonds green definitions – which
do not allow fossil fuel components in electricity
generation – nor the equivalent threshold of
100gCO2e/kWh in the EU Taxonomy.

MOWI’s green bond proceeds financed water
efficiency projects as well as a componentof R&D in the aquaculture sector, specificallyfor more sustainable fish feed options withtangible emissions savings. The current
version of the Climate Bonds Green Bond

Climate Bonds reserves the right to reclassify
deals as market definitions and standards
develop and tighten over time, as well as when
new information becomes available at the
post-issuance stage.

Finally, Norway’s vast coast and ocean areas
make it a prime candidate for facilitating thedecarbonisation of shipping. Various Norwegianand other Nordic actors have been involvedin the iteration of green definitions for thisindustry, including the Shipping Criteria of the
Climate Bonds Standard, which were releasedin November 2020. Furthermore, the Norwegian
Government released its Action Plan for Green

Shipping at the end of 2019, and has introduced
a number of supportive policy measures suchas taxation and a dedicated innovation-funding
mechanism to boot.28 January 2021 saw the first
Sustainability-Linked Bond from the Norwegianshipping industry, with Odfjell SE’s debut(NOK850m/USD100m), and we suspect there ismore to come – both in the KPI-linked as well as
use-of-proceeds format.29

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative13

Denmark

Energy leads Danish green bond UoP mix

Cumulatively, Danish
green bonds amounted to
USD11.3bn at the end of
2020, placing the country
on the final podium spotin the Nordic ranking.
There have to date been
no social or sustainability
bonds from Denmark.

100%

75%

50%

In 2020 the market saw USD2.2bn of additional
volume, contracting sharply (-60%) from theprevious year. In contrast, the Danish green bondmarket has on average more than doubled (YoY
growth rate of 167%) each year since 2015, whenwind turbine manufacturer Vestas issued thecountry’s first green bond. Though Vestas has notissued since, its deal still places it in the bottom
spot of the top five issuers.

25%

0%
2017

2015
EnergyBuildings

2018
Transport

Unallocated A&R

Wind power and financials
rule Denmark’s top 5
Name

USD
issuedNumber of
instrumentsØrsted

4.2bn

7

KommuneKredit

2.6bn

5

Nykredit

1.8bn

4Danske Bank

1.4bn

4

Vestas0.5bn

1Wind power and financials rule
Denmark’s top
The country’s largest green bond issuer isØrsted, whose energy transition story fromfossil-focused Dong Energy is among thebest-known globally, with its USD4.2bn
issued in seven deals. It is followed by LGFA
KommuneKredit, a household name in theNordic green bond space and one of the key
participants in the group that created the“Nordic Public Sector Issuers Position Paper on
Green Bond Impact Reporting” – a development
we comment on extensively as part of our
upcoming Post-Issuance Reporting in the Green
Bond Market report.30 Denmark’s largest banks
complete the top five, both bringing deals to
the market regularly and adding diversity to
the issuer base. Danske Bank Group’s issuancevolume in the above table includes threegreen bonds from its property bank subsidiary
Realkredit Danmark. Danske is also the region’slargest GSS bond underwriter.31

The top ranking is representative of the issuer
type mix for Denmark, which only has nine green
bond issuers in total. The government-backed
entity volume (60%, 2020: 51%) is entirely fromØrsted and Kommunekredit, whereas financials(28%, 2020: 26%) include Nordea in addition to
the two aforementioned banks. Vestas is joinedby European Energy (USD311, three deals)and LM Holding Group (USD58m) in the nonfinancials group. The remaining one is the green
loan from CIP discussed on page 6.

Energy and buildings mark Danish UoPDanish green bond UoP reflect discussion above,
featuring Energy at 57% (2020: 60%). Energy has
kept its prevalent position over the past few years,
with only a slight dip in 2018. Buildings represents
the second-largest category with 23% (2020:12%), mostly thanks to large allocations from
KommuneKredit and the banks. These are also
responsible for the smaller shares of Transport(7%, 2020: 10%), Water (7%, 2020: 10%), and Waste(2%, 2020: 3%), as well as small disbursements
to Land Use and projects related to Adaptation &Resilience (both 2% cumulative and 3% in 2020).

Future prospects
As with many other countries, sovereign GSS
bond issuance offers interesting prospects for
Denmark. Widely publicised in the market, theDanish Government made an announcementin 2019 on its consideration of a novel structure
comprising a vanilla bond with an accompanying“green certificate” for its upcoming inaugural

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

2019
Water

Waste

2020
Land use

Source: Climate Bonds Initiative, 2021

green sovereign. The Danish Treasury’s rationale
for this type of issuance is to avoid any loss ofliquidity, and resulting fragmentation and risingcosts of issuance. The fear is that issuing in the
traditional green format could lead to theseeffects due to the limited funding needs andproject pipeline available at any given time,
which could restrict instrument size and thus
make the bond(s) less tradeable.32
The treasury recently reaffirmed its commitment
to issuing the conventional bond and certificate
combination, and signalled that the first such
issuance is planned for later in 2021. Whencompleted, the Danish sovereign will provide
a further boost to the market with highly-rated
sovereign green-labelled debt – undoubtedly awelcome development for many investors acrossthe region and Europe overall. It remains to be
seen how exactly the government will go about
the management of proceeds and reporting
to ensure the integrity of the green label ismaintained under the planned deal.
Further growth is anticipated from other thematicbonds. Denmark’s pension fund ATP, which was
also one of the world’s first investors into green
bonds several years ago, recently made its first
foray into social bonds by investing into the EU
SURE social bonds at the end of 2020.33 The fund,which is Europe’s fourth-largest, now intends toinvest DKK50bn (ca. USD8.1bn) into social andsustainability bonds by the end of 2021.34 If thereever was a signal for domestic issuers to adopt
these labels, this is it.

14

FinlandFinnish green bond funding is most diverse across categories

The Finnish GSS bondmarket has been
comparatively slow totake off. However,2020 showed somepositive signs despite
the pandemic, reaching
USD4bn of new volume –including a first-ever social bond (USD709m) from
top issuer MuniFin in September, the first to expand
the Finnish market beyond green bonds – andtranslating into 33% growth versus 2019. The greenonly share of the market grew by 9%. The averageannual market growth rate between 2016 and 2020
was 638%, thanks to nearly 27x growth between
2018 and 2019 from USD114m to USD3bn.

100%

Finland’s top 5 is a mix of public
and private sector entities
Name

USD
issuedNumber of
instruments

MuniFin

2.3bn

5

Stora Enso

1.6bn

6

UPM

887m

1

Nordea Bank

893m

1

OP Corporate
Bank

570m

1

The country’s largest green bond issuer is Finnish
LGFA MuniFin, with USD2.3bn and five deals. It
became the first Finnish issuer in 2016, and has
continued to blaze the trail with new innovations
such as the recent social bond, which was
enthusiastically received by investors.
Forestry company Stora Enso – the ninth-largest
Finnish listed company by market cap – takes
second place in the issuer ranking with its six deals(two of which are taps) amounting to USD1.6bn
equivalent. Industry peer UPM went straight tonumber three with its EUR750m (USD889m) debut
from November 2020. Finland’s major commercial
banks Nordea and OP follow as fourth and fifth,
likewise with EUR-denominated benchmark-sized
deals, both from 2019.

Corporate issuers most common
Finnish green bonds have come from a totalof 10 issuers falling into only three issuer type
categories so far. Government-backed entities
are in the lead on MuniFin’s account (37%, 2020:24%), though non-financial corporates took
over in 2020 with 59% compared to their 36%
cumulative share. The banks’ share thus works
out at 27% (2020: 17%).
In addition to UPM, last year’s debuts include
residential real estate company Sato Oyj(EUR350m/USD408m, September) and forest
management company Tornator (EUR350m/

75%

50%

25%

0%
2016

2017

2018

2019

EnergyBuildings

Transport

Water

Land use

Industry

ICT

Unallocated A&R

2020

Waste
Source: Climate Bonds Initiative, 2021

USD411m, October). Fingrid and Ficolo (seepage 8), as well as University Properties Finland(EUR100m/USD114m) issued individual deals
between 2017 and 2019.

Despite smaller market, Finland’s
UoP mix is diverse
Finnish green bond use of proceeds display animpressive diversity vis-à-vis the small size of themarket. All major categories are covered, with
Energy in the lead at 26% (2020: 24%), contrastingwith most other Nordic markets. The differences
are even more pronounced in 2020, when Land
Use UoP was by far the largest category with 37%,
mainly thanks to Stora Enso and the debuts from
UPM and Tornator. Land Use is the second-largest
in cumulative terms (21%), followed by Waste(14%, 2020: 13% - the largest share in the Nordics),
Buildings (13%, 2020: 6%), Transport (9%, 2020:6%), Adaptation & Resilience (5%, 2020: 3%), andminor shares for Industry and ICT.

MuniFin’s social bond
The bond’s supporting documentation
included not only a framework but also a
specific background paper wherein MuniFin
outlined its approach to the definitionof target populations – a key concept infinancing for social impact, which is by natureoften more localised than that of green
bonds – and the two types of social bonds
it can issue under the framework.35 These
include “Social Bonds for general social
purposes”, i.e. a mix of the three eligible
project categories (social housing, welfare,and education projects) and “Thematic
Bonds” which aim to promote solutions
to address a specific social challenge in
one of the three main categories. Overall,

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

Future prospects
Finland’s GSS bond growth prospects arelooking bright: 2021 has already seen the entry
of a new issuer in transition from a traditionallyvery polluting industry, as Neste completed
its benchmark-sized green debut (EUR500m/
USD595m) following a prior ESG-linked revolving
credit facility. The OMX25 –the largest companies
listed on NASDAQ Helsinki – include several othercandidates operating in essential industries that
could adopt a similar approach to transition, witha few examples including steel and stainless steel
manufacturer Outokumpu; industrial process
technology and machinery company Valmet; andMetso Outotec, which operates in the minerals
and metals refining business. All of these could,
depending on the funding needs and assets,choose to issue against any of the labels under
the GSS umbrella, and/or an emerging transition
label or the SLB format.

MuniFin’s framework drives home the pointthat Finnish municipalities already have aconsiderable positive social impact on the
lives of residents. The aim of social bondissuance is to enhance and secure the Nordic
welfare society and overcome the challenges
in ensuring a high equality, maintaining
high education and competence levels,and minimising the expanding welfare gap
between social groups.36
Similar to its green bonds, any issuanceunder MuniFin’s social bond will be subject tostringent reporting requirements, including
quantitative and/or qualitative impact
indicators for which MuniFin will seek input
from stakeholders to improve the quality ofreporting on an ongoing basis.

15

entities in the country take the plunge and join
in issuing under social or sustainability labels.
There is less likelihood that such issuance comesfrom the central government any time soon due
to the structure of the government budget, which
prevents the earmarking of funds required forallocating and managing green bond proceedswith adequate transparency – but should thischange, it could be a great mechanism to aid
Finland in its quest for a net neutral economy by
as early as 2035.

Further, issuance from companies operating inand providing services to the forestry, pulp andpaper industries is likely to continue now thatsuccessful examples have been set regionally anddomestically. Observing initially and acting later
when a format has been successfully establishedmatches the generally more conservative natureof the Finnish market compared to that of Norway
and especially Sweden. New issuances fromindustries already active in the green market
across the Nordics could emerge also in Finland,with examples from Telia’s peer Elisa Oyj andNorgesGruppen’s Finnish equivalent Kesko
Oyj. Finland is home to a further two issuers –hydropower producer Kemijoki Oy and nuclear
power company TVO (former Teollisuuden Voima)– already identified as climate-aligned; these have
perhaps the most straightforward route to market
in terms of eligible project definitions.

Iceland

Energy dominates in renewables-rich Iceland

Iceland is the smallestof the Nordic GSS bondmarkets with a total
volume of USD1.2bn, of
which two-thirds were
issued in 2020. The entire
issuer pool comprises
seven entities covering all GSS themes: one eachissuing sustainability and social bonds, and therest issuing green.

100%

Icelandic GSS issuers amount toseven in total so far

75%

50%

25%

0%

USD
issuedNumber of
instrumentsÍslandsbanki HF(sustainability
bond)

356m

1

Landsvirkjun

350m

2

Reykjavik
Energy244m

15Reginn HF

105m

2

City of Reykjavik

63m

2

Reykjavik Social
Housing

53m

1

Municipality
Credit Iceland

9m

1

Name

Finally, now that MuniFin has taken the leapof taking social bonds mainstream, it will befascinating to see if any of the other public sector

The largest Icelandic GSS issuer is Íslandsbanki,
whose EUR300m (USD356m) sustainability bondsettled in November 2020. The bond was issued
under a framework that identifies a whopping
18 environmental and social categories split intogreen, blue and social projects. It is also the largest
individual GSS-labelled instrument from the country.

2018
EnergyBuildings

Land use

Unallocated A&R

2019
Transport

Landsvirkjun and Reykjavik Energy are bothstate-backed energy companies. The former
is the national power company of Iceland andEurope’s largest renewable energy producer, as
well as the inaugural Icelandic green bond issuer
in March 2018. The latter focuses on the country’s
specialty, geothermal energy. Thanks to thisemphasis, 79% of Iceland’s green bond proceeds
are in the Energy category.
The City of Reykjavik and Iceland’s LGFA
Municipality Credit Iceland finance a number ofgreen categories, including Buildings, Transport,
Water, Waste and Adaptation & Resilience.
Municipality Credit Iceland debuted in 2020,
whereas Reykjavik was one of the early issuers inlate 2018. Reginn is the only Icelandic real estatecompany to have issued so far in the private
sector, and was another 2020 new entrant.

Future prospects

Energy most funded in Iceland

Though Icelandic green bonds are alreadyfocusing on renewable energy, there is more
to do. Some additional investments into
geothermal and hydropower, which comprise>99% of the country’s installed energy generation
capacity, will be required to maintain, store anddistribute heat, power and electricity – includingin the built environment.

The remaining five issuers all issue green
bonds, and there is a mix of use of proceeds.

Given the size of Iceland’s economy andits relatively advanced position in climate,

The sole social bond comes from ReykjavikSocial Housing and finances its namesake in theform of rental housing in the Icelandic capital,
with a view to increase the number of rental units
by at least 500 by 2022.

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

2020
Water

Waste
Source: Climate Bonds Initiative, 2021

environmental and societal progress, the GSS(especially green) market is already well underway.
For example, both of Iceland’s climate-aligned
issuers – Reykjavik Energy and Landvirksjun – arealready green bond issuers, too.
It is reasonable that the market will remaina modest size, but opportunities remain.
The Icelandic government’s plan for a net
zero economy encompasses not only emissions
but also minimising the negative impact
on other environmental issues. This, alongwith more social- and sustainability-related
issuance, is likely where most of future growth
will come from.
Essential infrastructure (energy, transport,
buildings) is an obvious focus area for almost
any economy to decarbonise, but for Iceland,
similar to Norway, the seafood and agricultureindustries, as well as aluminium smelting, arecrucial industries and prime candidates fortransition and / or transformation. Finally, thelargest industry sector of the Icelandic economy
is tourism, which will also need to grapple
with the low-carbon transition and its broader
environmental and societal impacts – this
could very well relate to questions around air,land and sea transportation; the protection ofnatural landscapes and biodiversity, and thesustainability of the built environment.

16

Beyond the labelled debt universe
As discussed, the debt capital markets offer
several opportunities for financing climatechange solutions even beyond labelled
GSS bonds. A key way to assess this is theidentification of so-called climate-aligned
issuers. The section below discusses the shapeand size of this segment in the Nordic region.

Most climate-aligned volume
from Energy

64% of issuance in hard currency
ISK 1%

Transport 1%
Water >1%

USD 4%

Land Use
10%

SEK
12%

Methodology
The unlabelled climate-aligned (CA) universe
highlights investment opportunities which are
not explicitly labelled as ‘green’ by the issuer,
but finance climate-aligned assets andactivities. Climate-aligned bonds are identified
at the issuer level:

Energy is the top Nordic climate-aligned theme
With 156 bonds issued by 24 issuers, Nordic
climate-aligned outstanding debt amounts to
USD21.6bn. Energy is the top climate-aligned
theme (USD19.1bn), dominated by Norwegian(36% of climate-aligned outstanding debt in
the Energy theme) and Swedish issuers (26%).
Denmark and Finland account for 18% and 17%
of Energy-related debt, while Iceland contributes
3%. The top issuer is the Swedish power
generation company Vattenfall AB, which is
responsible for a quarter of the sector’s climatealigned debt.
The second-largest climate-aligned theme isLand Use & Agriculture, with USD2.2bnof outstanding bonds. Transport and Water
follow with USD249m and USD67m respectively(1% and <1% of Nordic climate-aligned
outstanding debt).

Source: Climate Bonds Initiative, 2021

As with green bonds, smaller sizes are common
100%
80%
60%
40%
20%
0%
USD issued
Up to 50m

50-250m

Deal count250-500m

500m-1bn

1bn or more
Source: Climate Bonds Initiative, 2021

Most climate-aligned bonds mature by 2029
14
12EnergyWater

10Transport

Land use & agricuture

8
6
USD Billions

Climate Bonds has identified seven climatealignment themes: Energy, Transport, Buildings,
Water, Waste, Land Use & Agriculture, and ICT. We
have been collecting this data since 2012, withthe historical bond-level coverage reaching backto January 1st, 2005 (i.e. the ratification of the
Kyoto Protocol).

NOK
23%

Energy89%• bond issuers whose revenue streams are atleast 75% climate-aligned (“strongly-aligned”),
and• bond issuers whose revenue streams are atleast 95% climate-aligned (“fully-aligned”).

EUR
48%

GBP
12%

4
2
0
20202024

20252029

20302034

20352039

20402044

Beyond2050

Source: Climate Bonds Initiative, 2021

EUR accounts for almost half of climatealigned issuance

Most climate-aligned deals are
smaller in size

Nearly half of volume maturing in the next
three years

EUR is the dominant currency for Nordic climatealigned bonds, representing over half of totalbond issuance (48%). NOK is the second mostcommon currency (23%), followed by the GBP
and SEK, both representing 12% of the market.
USD and ISK account for 4% and 1% of bondissuance. Just under two-thirds (64%) of issuanceis hard currency-denominated.

Despite representing only 8% of Nordic
climate-aligned issuance volume, 41%of total deals are USD50-250m in size.
The largest (USD1bn+) are concentrated
in the energy sector, primarily in Sweden(78% of volume and three out of four ofthe sector’s deals) and the remaining sharein Denmark.

Almost half (45% or USD13.1bn) of Nordic
climate-aligned outstanding debt will matureby 2024. Issuers operating in energy, transport,
water and land use and agriculture can choose
to refinance their operations with labelled green
bonds in the short term. More opportunities toscale up labelled issuance arise from 2025, with
USD7.3bn (25% of outstanding debt) maturing

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative17

in 2029.

Top Nordic climate themes and issuers

Sweden’s Vattenfall AB, the largest issuer of
Nordic climate-aligned debt, has already entered
the labelled green bond market to raise funds
for renewable energy and related infrastructure,energy efficiency, electrification of transportand heating, and industry projects. Ørsted,
another climate-aligned issuer in the energy
sector, has deployed green financing for offshore
wind projects en masse. Other climate-aligned
issuers that have tapped the labelled green bondmarked include BKK AS, Orkuveita Reykjavíkur(Reykjavik Energy), and Stora Enso.

Climate theme

USD issued

Numberof issuers

Top issuers

1. Energy

19.1bn17

Vattenfall AB, Ørsted A/S,
Teollisuuden Voima Oyj

2. Land-use &Agriculture

2.2bn

4

Stora Enso Oyj, Svenska Cellulosa
AB, Holmen AB

3. Transport

<1bn

2

DSB, Fjord 1 ASA

4. Water<1bn

1Kappalaforbundet

Policy update
The Net Zero journey

Regional collaboration

The Nordic region has historically been very
attuned to the wider sustainable development
agenda, with climate as a central part of this.
This ambition is reflected at the level of national
legislation and in regional co-operation.

In January 2019, the Nordic Council of Ministers
published a Declaration on Nordic Carbon
Neutrality or the “Helsingfors Declaration”. In
it, the countries reaffirmed their commitment
to pursuing carbon neutrality in the five Nordic
states, as well as being active in Nordic climate
diplomacy in international arenas to try andeffect global emission reductions in line with theParis Accord target of limiting the global averagetemperature increase to 1.5°C.40

National commitments
In addition to adopting sustainable financemechanisms relatively early, some of the countries
are also among the world’s most ambitious in theireconomy-wide net zero targets.

Nordic net zero targets
Country

TargetTime
frame

Finland

Net zero2035

Denmark-70% from 1990 baseline

2030

Iceland

Net zero

2040

Norway-40% from 1990 baseline

2030

Sweden-85% from 1990 baseline

2045

Norway’s target is the only one not enshrined inlaw (though numerous other pieces of climaterelated legislation exist). It is also contingent
on other countries’ actions and to some degreecarbon trading and other “flexible mechanisms”,
causing some confusion and concern aroundthe adequacy of Norway’s low-carbon transition
ambitions.37 The phasing out (or at least
downsizing) of the fossil fuel exploration andrefining industries will need to play a key role forthe country.
Finland also has some remaining thinking to
do on ways of meeting its target – the mostambitious of the group – including very quickly
winding down transportation emissions, fromprivate vehicles in particular.38, 39

More recently, in a Nordic leadership N8
meeting in October 2020, the Climate
Investment Coalition – a public-private
partnership between the Government ofDenmark, Insurance & Pension Denmark,the Institutional Investors Group on Climate
Change (IIGCC), and World Climate Foundation– announced its intention to solicit further
commitments from Nordic pension funds toramp up their green investments. The Coalition’s
aim is to facilitate the announcements of further
commitments at the upcoming COP26, which
will be held in November 2021 in Glasgow, UK.41
On private sector collaboration, the Nordic
Platform for Mobilising Sustainable Finance wasinitiated in 2019 by consultancy firms South
Pole and Gaia. The Platform hosts 25+ Nordic
companies, investors and other key stakeholders
with the aim of facilitating information exchange
and dialogue to help drive the region’s lowcarbon transition.42

Pension funds
A number of Nordic pension funds havepioneered the expansion of climate-specificmandates and neutrality targets. The Danes were
the first: the ground-breaking announcementfrom Danish pension funds in September 2019
stipulated their conditional commitment tomobilise USD50bn for green energy and climaterelated investments by 2030.43 The commitment

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative

led to the establishment of the Climate
Investment Coalition (see above).
Sweden’s AP4 has set a net zero 2040 goal andbegan decreasing its emission-intensive energy
holdings last year.44 Peer AP7 divested coal fromits portfolio in December 2020 and increased thetotal size of its green impact mandate – managed
by Impax – to EUR135.8m (ca. USD160m).45
Finland’s Varma is committed to an EU-aligned
net zero 2030 target. As part of this, Varma willexit thermal coal exposure by 2025; exclude
oil exploration by 2030; and remove gas from
portfolios by 2050.46

Banks
Nordic banks have been among some of theearly movers in their sector, even on a global
scale, to set net zero targets. Nordea announced
its net zero 2050 commitment in February 2021,
including interim milestones against a 2019baseline. Handelsbanken followed with its
own target a week later, bringing the deadline
forward by a decade.47 Danske Bank’s asset
management arm also affirmed its 2050 net
neutrality target in March 2021.48

Green recovery
The emergence of the pandemic has prompted
countries across the world to consider “buildingback better” via various green recovery
mechanisms, and the Nordics are no exception.
On a regional level, the Nordic Council of Ministers
began examining the region’s green recovery
prospects in April 2020, and the region’s energy
ministers reaffirmed the crucial role of the clean
energy sector in kickstarting the recovery.49, 50
Numerous country-specific actions have also
been taken: for example, Sweden extended
its Fossil-Free Sweden programme to 2024
to facilitate recovery and help the private
sector detangle from fossil fuels and other18

non-renewable resources.51 Another key
example is the attachment of so-called “green
strings” to the public bailout of Sweden-based
Scandinavian Airlines (SAS), demanding theairline – which covers up to two-thirds of intraScandinavian traffic in non-pandemic times – todemonstrate quantifiable emission reductions
and better alignment with the Paris Agreement
1.5°C target.52 In Finland, the government’s
COVID-19 recovery package included a fourth
supplementary budget proposal for 2020,
focusing on “ensuring an economically,
ecologically and socially sustainable emergencefrom the crisis”.53 As part of this, the government
also launched a climate innovation fundunder the State Business Development
Company (VAKE). It will invest in developing
climate solutions, promoting digitalisation,and enhancing low-carbon operations in
manufacturing industries.54

Green definitions: Role of the
EU Taxonomy
Out of the five Nordic countries, three – Finland,
Denmark, and Sweden – are European Union
Member States, while Norway and Iceland are
members of the European Economic Area. The
whole region is therefore heavily influenced by thelegislative outputs of the EU’s Sustainable FinanceAction Plan, including the Taxonomy Regulation.

Concerns around Buildings andDNSH criteria
Though generally welcomed as a further
effort to standardise definitions, some
Nordic issuers and investors are concerned
about the applicability of the Taxonomy
and the proposed EU Green Bond Standard,
especially as these relate to the financing of
low-carbon buildings.
A key component of the green bond market
in the Nordics, there are concerns that
imposing a blanket EPC-based requirement
as a measure of energy efficiency will makemany existing green bond issuer frameworks
ineligible, thereby disproportionately
disadvantaging many Nordic issuers. The
roots of this are in the fact that the overall
efficiency and regulatory requirements forbuildings vary significantly across Europe –for example, only about 1% of both Finlandand Sweden’s building stock achieves or cantheoretically achieve the “A” level EPC, yetbuildings overall and on average consume farless energy than in other European countries.55
Climate Bonds continues to advocate for the
proportional approach of making the top 15%
most efficient dwellings (by primary energy
demand) eligible – which is the approach that
the Technical Expert Group had recommended
to the EU Commission.56
The most vocal criticism came jointly fromthe three important LGFAs – Kommuninvest,
MuniFin and KBN – last December in theform of an official letter to the Commission,
which outlined elements of the points above
as well as significant concerns around theadministrative burden and lack of clarity
around the usability of the so-called Do
No Significant Harm (DNSH) criteria of theTaxonomy; a concern shared by a numberof market participants across Europe andbeyond. We discuss the regulatory framework
which will implement the European
Sustainable Action Plan at length in theupcoming Global Sustainable Debt State of theMarket 2020 report.57

Conclusion
The economic systems of the Nordic countries
were built on the values of a welfare state. The
region continues to embrace the model of astrong public sector that facilitates the requisite
societal systems for its citizens to lead stable andhappy lives.
The early adoption of green and sustainablefinance models and instruments is therefore
no surprise. Under predominantly Sweden’s
trailblazing leadership, Nordic labelled bonds
and the broader decarbonisation agenda havetriumphed, with GSS bond issuance in theregion reaching USD88.2bn at the end of 2020.
This equates to 5% of global (labelled) green
capital flows – more than an order of magnitudelarger than the sizes of the region’s populationand economy.
The pioneer position of Sweden was further
cemented by the country’s inaugural sovereign
green bond issued in September 2020. It is likelythat at least some of the others will follow suit,and in fact Denmark had already announced
its intentions and ongoing plans to do so backin 2019. These will continue to be welcome

developments and crucial to unlocking the scaleneeded to meet the Nordic countries’ net zerotargets, which are some of the most ambitious
in the world. The rest of the public sector –government-backed entities, local governments
and the like – will need to continue to play a role
for this to happen, but so must corporates.
Some early signals from key industries in theregion’s economy and emissions profile, such asenergy (utilities), forestry and transport, indicatethat this change is underway. However, the Nordics
will also need to keep pace with the rest of theworld in engaging other heavy and basic industries,
and take into account the varied nature of natural
resources in each country, including iron ore for
Sweden and aluminium for Iceland. Regulation at
the EU level, along with the emerging transition
finance agenda and the new definitions andstandards these bring, will be useful in creating
further opportunities to scale up sustainable
activities across the Nordic economies.

inclusivity and equity. These instruments andtheir sustainability-themed counterparts, which
blend green and social categories, will offer
another avenue for further growth of finance thatgenerates positive impact. Any growing supply
will presumably be met with enthusiasm fromthe buy-side, with several Nordic institutional
investors already announcing divestments fromfossil fuels, net-zero targets and other dedicatedsustainability mandates. Policy leadership at thecountry and regional level is required to provide
both regulatory pressure as well as incentives
that facilitate favourable conditions for themarket to grow. This is crucial for the region tocontinue to build resilience to be able to thrive
in a resource-constrained world coloured by arange of different climate-related risks.

Related to this, social bonds – pioneered by thelikes of MuniFin and SBB – appear well-suited
for a region whose values are centred on social

Nordic Sustainable Debt State of the Market 2020 Climate Bonds Initiative19

Endnotes
1. Climate Bonds Initiative, Green Bond Database Methodology.
2. Climate Bonds Initiative, Climate Bonds Taxonomy.
3. European Commission, Platform on Sustainable Finance.
4. World Happiness Report, 2021. The World Happiness Report 2021.
5. Climate Bonds Initiative, 2019. The Green Bond Market in theNordics 2018.
6. United Nations, Department of Economic and Social Affairs,
Population Division, 2018. World Urbanization Prospects: The 2018
Revision, custom data acquired via website..
7. Bloomberg Green, 2020. Nordic junk bonds get green treatment as
investor demand soars.
8. Climate Bonds Initiative, 2019. The Green Bond Market in theNordics 2018.
9. Bloomberg Green, 2021. Record ESG bond sales in Nordics mask
worrying concentrations.
10.KBN, 2021. 2020 Impact Report: Green Loans Financedwith Green Bonds.
11. Climate Bonds Initiative, 2021. Green Bond Pricing in the PrimaryMarket H2 2020.
12. NIB, 2019. NIB issues first Nordic–Baltic Blue Bond.
13. Danske Bank, 2019. Green Bond Framework.
14.Eurostat, 2018. Over 40% of the EU covered with forests.
15. Climate Bonds Initiative, 2021. Sovereign Green, Social andSustainability Bond Survey.
16. Hemsö, 2018. Hemsö Sustainability Bond Framework.
17. Getinge, 2020. Getinge issues SEK 1 billion COVID-19
commercial paper.
18. SBB, 2020. Sustainable Financing Framework.
19. Bloomberg Green, 2021. Sweden’s top issuer of green bonds opens
the door to social debt.
20. Almeida, M., Mok, L., Tukiainen, K., 2020. Sustainable Debt Global
State of the Market H1 2020, Climate Bonds Initiative.
21. Climate Action, 2021. H&M Group announces €500 million
sustainability-linked bond.
22. Climate Bonds Initiative, Principles for Transition.

23. ICMA, 2020. Climate Transition Finance Handbook 2020.
24.Energy Facts Norway, 2021. Electricity Production.
25. IEEFA, 2019. Norway’s Parliament approves expanded divestment
from fossil fuel investments.
26.Norwegian Ministry of Foreign Affairs, The Norwegian economy
and business sector.
27. Undercurrent News, 2021. Norway’s SalMar raises $418m
for new green bonds.
28. Norwegian Government, 2019. The Government’s action plan forgreen shipping.
29. Odfjell, 2021. Odfjell SE successfully places shipping’s first
Sustainability-Linked Bond.
30.Nordic Public Sector Issuers, 2020. Position Paper on Green Bonds
Impact Reporting.
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Sponsored by Danske Bank

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State of the Market H1 2020, Climate Bonds Initiative.

Prepared by the Climate Bonds Initiative

Author: Krista Tukiainen
Contributors: Carlotta Michetti, Stephanie Mabbutt,
Miguel Almeida & Amanda Giorgi
Editor: Bridget Boulle
Suggested citation: Tukiainen, K., 2021. Nordic Sustainable Debt
State of the Market 2020, Climate Bonds Initiative.
Design: Godfrey Design© Published by Climate Bonds Initiative, April 2021
www.climatebonds.net
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