“There is a healthy pipeline of loans with a high environmental impact that are eligible for NEB financing. We are therefore optimistic about this year – we might even pass the EUR 1 billion mark in 2022 and have a record year of NEB issuance,” says Jens Hellerup, Head of Funding & Investor Relations at NIB.
22 Feb 2022
Broadening the scope: mobilising green investors in the region
NIB has been active in the green bond market for more than ten years. Recently, the Bank has further expanded the geography of NIB Environmental Bonds (NEB) to attract environmentally conscious investors in Denmark and Norway. According to NIB’s Head of Funding & Investor Relations Jens Hellerup, this not only allows to bring investors closer to projects and accelerate the growth of regional green fixed income markets, but also sets the tone for new heights in NEB issuances.
Earlier this year, NIB issued its inaugural DKK denominated environmental bond. The transaction followed a dual NEB tranche at the end of 2021, which also saw the Bank’s first ever green bond issued in NOK, alongside a SEK denominated bond. With these, NIB has now issued more than EUR 6 billion of environmental bonds in eight different currencies.
“By issuing bonds denominated in the three major Nordic currencies, NIB gives investors in our member countries an opportunity to channel their funds directly to projects ‘in their backyard’. NEBs help us to fulfil our environmental mandate of lending to projects with a clear and measurable positive impact on the environment,” says Jens Hellerup, Head of Funding & Investor Relations at NIB.
Thus far, NIB has financed more than 130 projects with the proceeds of its environmental bonds. Some of the latest loans supported by NEBs include green building development in Norway or the electrification of rail transport in Denmark, allowing investors from these countries to witness the impact of their investments directly.
Establishing a name in a growing market
According to Hellerup, Environmental, Social and Governance (ESG) factors are traditionally well integrated in investment decisions in all Nordic countries. However, some differences can be seen in terms of how well established the green markets are.
“NIB has been issuing in Swedish kronor for many years, as there is a long standing, receptive and supportive investor base for NEBs. Meanwhile, Norwegian and Danish kroner bonds are recent additions to more nascent, but fast-growing green bond markets. By being active from the start, NIB plays a role in supporting their growth and development,” comments Hellerup.
“Furthermore, we also see significant benefits for NIB – environmental bonds in local currencies attract additional investors and further diversify our investor base. They act as signals to the market about NIB’s strong commitment for sustainable finance. Different kronor bonds can therefore also help to spread knowledge about NIB in our owner countries.”
A healthy pipeline for a record year
Only prudently selected projects that benefit the environment and contribute to resilience and climate change mitigation can receive funding from the NEB proceeds. With NIB’s ever-increasing focus on environmental lending, the Bank’s Head of Funding & Investor Relations also expects higher issuances of NEBs in 2022.
“There is a healthy pipeline of loans with a high environmental impact that are eligible for NEB financing. We are therefore optimistic about this year – we might even pass the EUR 1 billion mark in 2022 and have a record year of NEB issuance,” says Hellerup, commenting on the estimated volumes.
“The overall funding plan for the year is approximately EUR 6.5–7.5 billion. This includes at least two global USD benchmark bonds and continued activities in the Nordic local capital markets. As we expect at least EUR 1 billion in environmental bond format, a benchmark NEB in euro is also part of our funding strategy this year”, adds Hellerup.
Building on ten years in the green bond market
Last year, NIB celebrated its 10-year anniversary of issuing Environmental Bonds. According to Hellerup, NEBs have been well integrated in the Bank’s business model, and NIB expects to continue playing an important role as an issuer in the sustainable bond market.
“The sustainable bond market is undergoing changes, including the legislative proposal to establish a European standard for green bonds aligned with the EU taxonomy. As a forefront market participant, we are naturally following and considering all initiatives closely. As an early step, we have started to assess the eligibility and the alignment of our NEB portfolio with the EU taxonomy,” says Hellerup.
“NIB also recognises the importance of promoting ambitious sustainability transitions and therefore started extending sustainability-linked loans last year. This is in line with the Bank’s updated strategy that aims to accelerate the delivery of its mission in light of the changing economic conditions, the development of sustainable finance markets, and the challenge of climate change.”
“All in all, it should also be mentioned that when we talk to our investors, green bonds and sustainable finance tops the agenda on all levels in the investment community. Therefore, there is no doubt this market will continue to develop,” concludes Hellerup.