Sweden’s $8.3bn green bond issuance outstrips Nordic rivals

Public sector green issuance has been overshadowed by Sweden’s local government funding agencies to surpass the total Nordic issuances in 2019.

Source: Expert Investor

Local government funding agencies have dominated regional public sector issuance. Sweden has issued a whopping $8.26bn in green bonds so far in 2019, equivalent to about half of the total issuance across the Nordics, according to data by the Climate Bonds Initiative (CBI).

The runner-up nations were Norway, issuing $3bn worth of green bonds; followed by Finland with $2.6bn; Denmark ($2.4bn) and Iceland ($115m), CBI data says. Sweden, which raised $6.2bn from green bonds in 2018, has dominated the market in the Nordics since 2014.

Björn Bergstrand, head of sustainability at local government funding agency (LGFA) Kommuninvest, told Expert Investor: “There is a fruitful ecosystem of issuers, banks and investors [in Sweden], coupled with high climate awareness and a history of innovation throughout society, industry and the banking system.”

Thomas Nystedt, group treasurer at Vasakronan, a Swedish corporate issuer, believes that the sustainability focus of investors in Sweden has supported the high issuance in the local market.

He said: “The AP funds (our owners) and other large investors realised at an early stage that there is risk connected to sustainability and that there is lower risk in sustainable companies.” Vasakronan issued green bonds worth SEK10.8bn (€1.01bn) across six currencies up to September 2019.

Local government funding agencies

Kommuninvest said that it raised $1bn from a recently issued green bond that matures in April 2023. It pays a coupon of 1.625%, 11 basis points above mid-swaps and 9.55 basis points over US Treasuries.

The green bond was oversubscribed with orders amounting to $2.2bn and allowed Kommuninvest to tighten pricing by three basis points, the LGFA says.

It was the ninth green transaction and the largest green bond to date from a Nordic sovereign, supranational and agency issuer, Kommuninvest said.

Christian Ragnartz, head of debt management at Kommuninvest, commented: “Swedish local governments continue to make substantial investments in green infrastructure, thereby contributing to Sweden’s objective of becoming one of the first fossil-free welfare countries in the world.”

Sustainable infrastructure investments

According to a 2018 CBI report on the Nordics green bond market, LGFAs dominate public sector issuance in the Nordics. “LGFAs are prevalent in the region as a pooled funding model for the public sector. They are well-established institutions set up with a specific mandate to finance municipalities, cities, counties, regions, government-backed companies and agencies.

“The key advantage of LGFAs is aggregation. LGFAs can raise funding in large amounts, including benchmark bond deals, and use the proceeds to lend to even the smallest of public sector entities,” the report noted.

Anna Reuterskiöld, associate for debt capital markets at Nordea, told Expert Investor that LGFAs fund green buildings as part of their sustainable infrastructure investments.

Their sustainability credentials are often certified and present a “relatively straightforward case”, which partially explains the relatively large flows into these assets and why real estate companies are large issuers of corporate green and sustainability bonds, she says. Yet, she adds “we are seeing a broader variety of corporate issuers going ‘green’”.

Nordic sovereign green bonds

Sweden announced in July that the state intends to issue green bonds by 2020.

Per Bolund, minister for financial markets and housing, described it as “an important part of the transition to sustainable development”. “The financial market plays a key role in this transition, and the government wants to improve the opportunities for sustainable investments by promoting the market for green bonds.”

Denmark’s central bank is currently mulling the issue.

“At present, no decision has been made on offering sovereign green bonds, but, for a while, Danmarks Nationalbank has assessed various options for partial coverage of the government’s financing needs through sovereign green bonds,” a spokesperson from Denmark’s central bank told Expert Investor.

“In particular, the focus has been on models that support a continued liquid and well-functioning Danish government bond market. Issuance of green bonds can contribute to financing, but also to increased transparency of Denmark’s progress on climate action.”


Nordic issuers embraced the green bond market when it was still in its infancy, the CBI report noted. In 2019, the Nordic nations total issuance of $16.3bn made up 16% of the total European green bond market, according to CBI data. “By and large, the story of the Nordic green bond market is about many small and many repeat issuers creating a big impact.

“Their green bond markets have evolved in the context of the Nordic Model, which relies strongly on consensus and cooperation to achieve equitable and sustainable social development,” CBI said.