Ann-Charlotte Eliasson, head of Nordic debt listings at Nasdaq, expects another good year for the exchange's sustainable debt segment after new products came to market last year and geographical interest increased.
Issuance on the Nordic exchange’s sustainable debt market doubled to just over €8bn ($9.2bn) last year, up from €3.8bn in 2017. In August last year Nasdaq Nordic’s sustainable debt market also reached 100 listed green bonds.
Eliasson told Markets Media: “The sustainable debt market had 15 new issuers in 2018 and we expect a good year in 2019.”
She highlighted Landshypotek Bank issuing the first ever covered green bond to finance sustainable forestry. Landshypotek is a Swedish bank founded in 1836 which finances investments and entrepreneurial advancements aimed at developing the countryside
The 5.25bn Swedish Kronor (€506m) bond issued by Landshypotek together with Danske Bank, Nordea and Handelsbanken, was also the largest ever green bond in that currency according to Nasdaq. The exchange said: “The bond was issued under Landshypotek Bank’s EMTN program and was the first of its kind to be listed on Nasdaq Stockholm.”
She also expects growth in green structured products following the improving investment climate for these types of products in the Nordics.
“Advanced Soltech were pioneers of green retail bonds and attracted a lot of interest,” added Eliasson. “We expect to see issuance aimed at retail in 2019.”
Nasdaq Nordic launched a sustainable bond market in Finland last year adding to listings in Latvia, Lithuania, Iceland, as well as Sweden. The Helsinki Sustainable Bond Market listed green bonds from Munifin, the Finnish credit institution, totaling approximately €1bn.
“Iceland is interesting as they already have a lot of green companies and we also have an eye on Denmark, where there is a lot of interest,” continued Eliasson.
The City of Reykjavik listed the first green bond on Nasdaq Iceland, which was also the first sustainable bond from the country’s local government, in December last year.
Fredrik Ekström, head of Nordic fixed income at Nasdaq, said in a statement: “Sustainability continues to be an increasingly important factor behind many investment decisions, and issuers subsequently want products that respond to this demand. The Nordic region is rapidly becoming a hub for listing sustainable bonds and other products, aimed towards both large, institutional investors and smaller private investors.”
The track record for listings of Nordic debt products was also a driver behind Nasdaq’s launch of a US Corporate Bond Exchange, announced at the end of last year.
“US companies are interested in listing bonds in Europe to attract European investors without having to meet additional regulations,” said Eliasson. “PepsiCo became the first company to transfer its listing and we are in dialogue with several other issuers.”
Global green bond volume
Global green bond issuance reached $167.3bn last year, 3% more than in 2017, according to preliminary end-of-year figures from the Climate Bonds Initiative. The market’s growth was much slower than the 84% year-on-year increase achieved in 2017.
The Climate Bonds Initiative said in a report: “2018 has also seen the rise of sustainability, SDG [Sustainable Development Goals] and social bond issuance, which if added to the total green bond figure take 2018 volumes to $202.5bn.”
The SDGs were adopted by in 2015 by the United Nations, comprising of 17 goals and indicators for success. The SDGs aim to provide a roadmap to help organisations navigate the environmental, social and economic challenges the world faces.
Last year financial corporates issued $49bn of green bonds, or 29% of the annual total, up from 14% in 2017.
“This is the first time since market inception that financial corporates represent the largest share of annual volumes,” added Climate Bonds Initiative. "More broadly, greater volumes from banks bode well for the growth of the green loan market and green finance generally."
Green loans
Global green and ESG loan volumes increased fourfold last year compared to 2017 according to the LPC team at Refinitiv, formerly the financial and risk business of Thomson Reuters. Issuance was $59.9bn last year, compared to $14.5bn in 2017.
Nearly all, more than 83%, of total 2018 global green and ESG loan volume was raised in Europe, Middle East and Africa.
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Maria Dikeos, head of global loans contributions at Refinitiv, said in a statement that the publication of Green Loan Principles, with initial criteria for designation of green and ESG loans has meant a focused guidance for the market with a growing group of loan and bond institutional money prioritising green/ESG investment opportunities.
The Loan Market Association launched the Green Loan Principles in March last year to provide a consistent methodology for use across the wholesale green loan market.
“We’ve also seen an increase in project finance initiatives with associated green requirements, with green loan structures, and more specifically, ESG lending becoming more popular, particularly with larger corporates,” said Dikeos.
Ratings
S&P Global Ratings said this week that it has started to include environmental, social, and governance sections within its issuer credit rating reports on corporate entities.
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The announcement coincides with the publication of the UN Principles for Responsible Investment (PRI)'s report which recommends that credit rating agencies explicitly signpost credit-relevant ESG risks and opportunities in rating reports.
S&P started with the oil & gas sector and utilities - the two sectors that have greater exposure to ESG risks and opportunities.
The ratings agency is rolling out the new section to all major companies across every sector, and to smaller companies in the sectors most exposed to ESG factors which may be relevant to ratings. The process will cover approximately 2,000 credits this year, or around 40% of S&P’s rated corporate universe.
Carmen Nuzzo, senior consultant, credit ratings initiative at the UN Principles for Responsible Investment, said in a statement: "The inclusion of ESG sections within rating reports is a crucial step in addressing one of the key investor-credit rating agency disconnects that we identified at the start of the initiative. As such, we welcome S&P Global Ratings' proactivity and efforts to enhance transparency across its ratings analyses, especially as market interest in ESG factors continues to rise."
