Green Voices of Nasdaq Nordic: Local Government Plays Key Role in Blossoming Green Bonds Market .

The Finnish municipalities have ambitious sustainability targets.

Green Voices of Nasdaq Nordic: Local Government Plays Key Role in Blossoming Green Bonds Market

The Nasdaq Nordic Sustainable Bond Market is flourishing due to our continued commitment to the environment, society and a more responsible future. With over one hundred green and sustainable bonds listed, it is a testament to the extensive integration of sustainable practices amongst Nordic companies.

Nasdaq’s sustainable bond listings offer high transparency that makes it easier for investors to invest and manage risk, which goes hand in hand with our overall mission to provide fair, transparent and efficient markets.

In this series, called Green Voices of Nasdaq Nordic, we are providing a platform that allows our green bond issuers and investors to share their stories. This story shines a light on MuniFin’s growing green bond offerings and the increased demand for such assets.

Municipality Finance Plc, or MuniFin, the third largest credit institution in Finland, first issued a green bond in September 2016, and as one of the only issuers in the country with a global investor base, the Helsinki-based firm has seen blossoming demand for these assets.   

MuniFin, which is owned by the Finnish public sector, including municipalities, the government of Finland and the public sector pension fund Keva, was the first financial institution in Finland to offer green financing for environmentally friendly projects and the first Finnish issuer of green bonds. Last year, the firm became the first green bond issuer for Nasdaq Helsinki’s new sustainable bond market, listing its two outstanding green bonds.

“Recently, I have observed quite a big change: these environmental topics have become a part of public and political agendas,” said Joakim Holmström, the executive vice president of capital markets at MuniFin. “The awareness has definitely increased so that everybody has to pitch in for this greater good.”

Establishing Targets

The Finnish municipalities have ambitious sustainability targets, according to Antti Kontio, the head of funding and CSR at MuniFin. Most municipalities have implemented a plan to become carbon neutral by 2030, outpacing the government’s goal to do the same by 2045.

“The municipalities are very ambitious and are currently leading the way, which is a very positive sign,” said Kontio. “I think that the same kind of thinking can be transferred to companies. ESG criteria needs to be integrated into everything that the companies do.”

Learning Curve

While there is growing interest in green bonds, there is a learning curve for those trying to enter the market.

“When we first issued our green bond, we very much felt that these projects are a natural addition to what we do,” said Holmström. “But we did not realize that we can learn so much from our customers as well.”

Before green financing, MuniFin did not always know all of the details of a project. Now, however, MuniFin needs to know every aspect, including the life cycle analysis, of a project before getting involved because, for investors, the most critical part of selecting a green bond is a clear understanding of what the projects are about and their environmental impacts. This way of thinking “has changed the whole way that the company operates,” said Holmström.

Because focusing on green finance might shift a firm’s strategy, entering the green bonds market requires educating the entire company on sustainability related questions.

“The salespeople and the account managers who are responsible for the client relationships have to be aware of what the product is and what it is used for,” said Holmström. “Then there are a lot of discussions with the customers and trying to educate them in these areas.”

As more issuers and consumers look toward the green bond market for sustainable investing, MuniFin plans to share its expertise in the international capital markets and the benefits of going green.

Benefits of Going Green

“We’ve learned that issuing green bonds is definitely worthwhile; there are benefits on the funding side, but also more general benefits,” said Kontio.

On the funding side, the primary advantage is the expansion of the investor base.

“There is a growing number of dedicated investors for the green bonds, and you cannot reach them without this green bond product,” he continued.

Beyond funding, issuing green bonds can improve engagement with the asset-side of the business, according to Holmström.

“You raise the awareness within the company, asking, ‘What are the assets you have; what are you doing?’” said Holmström. “It makes the cooperation between the different departments more in-depth.”


Making a Difference

Besides increasing a firm’s investor base and enhancing cooperation amongst departments, green bonds are improving infrastructure and sources of energy for the larger population.  

MuniFin, with a portfolio of over 1 billion Euros, has funded 59 projects thus far. Approximately 60% of the portfolio is dedicated to public transportation, which includes Finland’s metro extension, new tram line and electric busses projects, as Kontio noted.

Of the projects MuniFin has funded, the subway expansion and the tram line were perhaps the most significant endeavors, especially as the latter is brand new and part of an effort to replace the current bus network and reduce CO2 emissions. 

In addition to transportation projects, there are also green bonds funding new schools and residential buildings, even water management plants. MuniFin recently financed 50% of a new water management facility in eastern Finland that utilized new technology to clean the water, said Kontio.

But “if you want to make the biggest impact your investments would be in renewables,” said Kontio.

“In a dream world, we would see more of these assets,” said Kontio. “It is not just MuniFin – in general, everybody is looking for these kinds of investments.”

Nasdaq’s Role in Sustainability

The Nasdaq Sustainable Bond Market was launched in July of 2015 with a total volume of 740 million euro.  In 2017, €1.7bn ($1.9bn) was raised on the Nasdaq Nordic Sustainable Bond Market, up 81% from 2016. In 2018, €4.7bn was raised through green bonds across the Nordic and Baltic markets. We facilitate infrastructure, monitor issuers and foster dialogue to ensure the continued growth of the markets. 

Bonds can be listed on Nasdaq Sustainable Bond Market if a set of criteria are fulfilled. The respective criteria are based on the green and social bond principles (the GBP and SBP), for which ICMA acts as secretariat, and have been developed in cooperation with Sustainalytics, a global leader in environmental, social and corporate governance (ESG) research. Issuers that wish to list green, social or sustainable bonds on our sustainable bond market go through the same process as traditional bond issuers. However, the issuer must supply Nasdaq with information regarding the bond or bond framework as well as the third party’s review when applying to list. 

To learn more about the listing process visit our website.

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