NIB’s funding in autumn 2014—focus on green bonds

In the second half of the year, NIB will be eyeing the green bond market. “We are gearing up to expand our green programme this autumn”, says Lars Eibeholm, Vice-President and Head of Treasury at NIB, in this interview with the NIB Newsletter.

Half of the funding year 2014 is over. What are the results and plans for the second half of the year?

We are well ahead in the funding programme and have already funded about 80% of the approximately EUR 3.5 billion that we need. Of course, raising funds is the first objective, but there are other important aspects, such as diversification of funding sources. This is one of our key aims. USD is still our most important funding currency with 29% of the total funding, but we are happy that the Australian and New Zealand Dollar markets have again contributed about 40% of the programme. About 28% of the debt we’ve issued so far this year is denominated in euros or Nordic currencies.

The five-year USD benchmark issued in April has been successful. The bond is one of the most expensive in its category in the dollar market, which is also important as a reference point in other markets.

NIB has about EUR 800 million more to fund by year-end. Therefore, the Bank is unlikely to issue another traditional USD benchmark. However, NIB expects to be active in the green bond benchmark market. A green benchmark bond in EUR or USD is a further step for the green bond programme.

The Bank already has experience of issuing NIB Environmental Bonds. How will the new bond differ?

NIB has been issuing green bonds under its Environmental Bond framework since 2011. However, these issues have been private placements bought entirely by one investor or a small group of investors. Now we are thinking of giving the broader market of mainly socially responsible investors access to NIB’s green lending through a larger and more liquid issue.

One reason for this is that the market for green bonds has developed rapidly; it is now about five times bigger than it was two years ago. From a funding desk perspective, this allows the Bank to attract investors who are not normally interested in NIB’s traditional benchmarks.

With the green bond market growing and becoming more standardised, NIB has updated the framework for its Environmental Bonds and improved its reporting on projects for investors. We believe the updated framework is clearer and more transparent, so it will serve as a good basis for NIB’s green bonds going forward. The framework is being reviewed by the Norwegian research institute CICERO and we expect it to be finalised shortly.

NIB has an explicit environmental mandate from its owners. Did this inspire the steps towards becoming more active in the green bond market?

We think it’s natural for NIB to be active in the green bond market. On the project side, we perform an environmental assessment and evaluate the level of impact as well. We do have a very good understanding and an established process for environmental loans, which we can use for our green bond issuance. Issuing green bonds fits very well with NIB’s mission.

Is there something specific to expect from NIB in autumn 2014?

Yes, we hope to be able to announce the issuance of NIB’s Environmental Bond during the coming weeks, and we are looking forward to engaging with investors for this transaction.