Nordic approach to sustainable finance leads discussion at the Global Borrowers & Bond Investors Forum

NIB co-hosted Nordic model focused panel discussions at this year’s Global Borrowers & Bond Investors Forum in London together with Euromoney. The debates highlighted the characteristics, challenges, and future prospects of the Nordic approach to sustainable finance and banking in today’s economic landscape.

The Nordic model has been a prominent concept in economics and sociology, representing a unique approach to development that places a high emphasis on social solidarity and good governance supporting sustainable growth. This has fostered an environment in which ideas such as sustainable finance and ESG have flourished, finding fertile ground in the region.

The Forum held panel discussions on how this Nordic model influences sustainable finance in the Nordic region and beyond. The debates also focused on the role of Environmental, Social, and Governance (ESG) factors and the resilience and innovation of the Nordic banking system. Representatives from across the Nordic region, including Nordea, SEB, and BNP Paribas, highlighted the collective mindset towards sustainability and the potential to strengthen the focus on social bonds.

ESG and Social Structures in the Nordics: Driving Sustainable Growth

The first panel explored the role of Environmental, Social, and Governance (ESG) factors in the Nordic countries as drivers for innovation and sustainable growth. The panel spotlighted the diversity in sustainable investing approaches and the importance of the ‘S’ in ESG for a just transition.

“In the Nordics, the foundation for ESG initiatives is exceptionally fertile, with a resounding consensus on the importance of sustainable finance. Conversations with our investors and clients reveal a remarkable absence of scepticism regarding our sustainability focus. Instead, the inquiries revolve around the means to amplify sustainability efforts,” says Jacob Michaelsen, Head of Sustainable Finance Advisory at Nordea.  

“The prevalent question is no longer ‘Why sustainability?’ but rather ‘How can we further our impact?'”

Kim Skov Jensen, Chief Financial Officer at NIB says this shared understanding allows the region to forge a common path and progress harmoniously towards a sustainable future.

“Fundamental to the Nordic model is the symbiotic relationship between the public and private sectors, which drives our success. This creates a remarkable adaptability that empowers us to swiftly respond to the challenges posed by important changes affecting society including on the sustainability side. Looking ahead, our region should continue to foster innovation, ensuring that our green advancements resonate globally,” says Skov Jensen. 

Pekka Morén, Special Representative of Finland’s Finance Minister, says it was the Nordic countries’ common values and robust institutional foundations that have helped foster the growth of sustainable finance within the region.

“Recognising the global nature of these challenges, we in the Nordics actively collaborate to seek effective solutions on a global scale. Climate change impacts every organisation and individual, compelling us to comprehend its implications for society, the economy, fiscal aspects, and politics. The Nordic countries have pursued this understanding both within our collective efforts and in global cooperation,” says Morén.

Future ESG prospects

Focusing on the future prospects of ESG and sustainable financing in the Nordics, Eirik Winter, Head of Corporate and Institutional Banking, Nordic Region at BNP Paribas, said market forces hold the power to propel the green transition, surpassing the influence of regulators.

“The Nordic region stands out with a notable focus on industrial sectors that are increasingly pivotal globally and within the region. The emergence of established companies swiftly transitioning and innovative newcomers showcases the collaborative efforts involving private risk capital, private equity, and public funding. Financial institutions such as the Nordic Investment Bank have played a vital role in facilitating the viability and sustainability of numerous projects,” says Winter.

Michaelsen reminds that social bond activity currently remains limited in the Nordics. 

“This poses a challenge that warrants attention. There is a desire to witness greater prominence of social bonds in the region, aligning with the Nordic welfare model. However, discussions around the welfare model primarily fall under the purview of governments. Nevertheless, to enhance global relevance, the Nordics can shift focus towards the ‘S’ (social) aspect of ESG, as it is fundamental to achieving a just transition and serves as the ultimate objective,” Michaelsen says.

“While the green bond market approaches saturation, expanding efforts to address social risks can further complement sustainable investments.”

Benjamin Powell, Head of Sustainable Finance Norway at SEB also remarks that while the rapid embrace of green finance is evident within the Nordic investor base, there is a divergence in perspectives and approaches.

“On one hand, we find the fervent advocates of zero-fossil initiatives, driven by a resolute commitment to exclusionary green investments. On the other hand, we encounter investors who aim to navigate the transition by responsibly managing their exposure to fossil fuels,” says Powell.

Morén stresses that systemic change requires predictable long-term plans and commitment. “It takes time, and we need more emphasis on long-termism. A key feature in this change is that globally no one is left behind,” says Morén.

Skov Jensen and Winter both emphasise that despite the Nordic region’s population of only 27 million, it consistently attains the pinnacle of global rankings in terms of equality, sustainability, and innovation. “The Nordic region is for a reason called the Silicon Valley of Europe and a centre for the green transition,” Winter says, adding “we have a much bigger say on the global tables than we might have thought.”

The debate was moderated by John Hay, Corporate Finance editor at Global Capital.

Breaking the Mould: Exploring the Resilience and Innovation of the Nordic Banking System

The second panel explored the resilience of the Nordic banking system. The speakers agreed on the region’s leading role in sustainable finance and providing comprehensive information to stakeholders. They further discussed the proactive support for small and medium sized enterprises (SMEs) and the role of banks in bolstering sustainable growth.

NIB’s Jens Hellerup, Head of Funding and Investor Relations was joined in the panel by Íslandsbanki’s William Symington and Finnish OP Group’s Sanna Eriksson.

“The Nordic banks have been at the forefront of the global development of sustainable finance and innovation in delivering comprehensive information to stakeholders. Nordic financial institutions, including NIB, have been heavily involved in developing the Sustainable Finance market, Green product and frameworks and been involved in different initiatives such EU taxonomy as the Green Bond Principles or the Principle,“ Hellerup says.

Sanna Eriksson, Head of Investor Relations at OP Financial Group and Managing Director at OP Mortgage Bank agrees that providing accessible information to investors is key.

“Stakeholders prioritise the overall sustainability of our issuing entity over specific green finance products. Recognising the formidable influence of ESG, both investors and issuers acknowledge its growing significance, further strengthened by evolving regulations. This shift also benefits investors, as sustainable financing progressively embraces greater transparency. As a cooperative, sustainability is ingrained in OP’s DNA, and now, to the advantage of our investors, transparency takes centre stage,” Eriksson says. 

The panel also discussed what role banks have in supporting the local markets and the ESG implementation in the region.

“NIB takes a proactive stance in bolstering sustainable growth in the Nordic-Baltic region by supporting SMEs through the funding of other financial institutions for on-lending purposes,” says Hellerup.

“I find local currency markets to be immensely valuable, as they provide a sturdier outlook on market dynamics. What sets the Nordic local currency markets apart is their profound interest in ESG considerations,” says Íslandsbanki’s William Symington.

“Sustainability is a dynamic journey that varies for each issuer and investor, with distinct paths to traverse. Banks play a pivotal role in supporting this journey towards sustainability. However, true progress hinges on the spirit of collaboration. Our sustainability is intertwined with that of our customers, emphasizing the collective responsibility we share in forging a more sustainable future,” Sanna concludes.

Atanas Dinov Bank finance editor at Global Capital moderated the debate.

The Forum, now in its 32nd year, convenes key players in the fixed-income domain from more than 50 countries, highlighting its importance in the international financial calendar.