Green bonds link investors to sustainable projects

Green Week 2016 continues on Wednesday 1 June with a focus on investments that make it happen: how can we find the money to finance the changes needed to make our future green. The question is asked by the Nordic Council of Ministers' information office in Stockholm and the independent Swedish think tank Global Utmaning.

Catharina Nystedt Ringborg, Vice President of Global Utmaning said in her opening remarks that the green bond concept is a very good answer to reducing the risk of investing into environmental projects.

“It also allows investors to work within existing mandates,” Ringborg says at a seminar in Stockholm to discuss market trends and current challenges in climate-friendly investment projects, and what needs to be done to ensure that green bonds are a safe investment in the environment.

The Stockholm seminar is part of the Green Week, which is Europe's biggest annual conference on environment policy, bringing together participants from government, industry, non-governmental organisations, academia and the media to exchange ideas and best practices. The event week is arranged by the European Commission.

Sven Hegelund, Member of the Board of Directors at NIB agrees with Ringborg and says green bonds are a new and exciting way of financing sustainable investments.

“There exist only a few green banks with a sustainability-mandate issuing green bonds, the most dedicated of them is most probably the Nordic Investment Bank in Helsinki,” says Hegelund.

How green bonds came about

Christopher Flensborg, one the architects of green bonds and Head of Sustainable Products and Product Development, Fixed Income and DCM, Global, SEB, commented that a green bond is a very simple product, basically a normal bond linked to green projects.

“Back in 2007, a lot went on in the financial market and many investors couldn’t find assets to invest in. At the same time there were many solid green projects needing financing. So, we needed to create a way of linking the issuers to these projects,” Flensborg says.

“I think that the green bond represents an excellent instrument to steer investors towards investing into sustainable projects,” says Helena Lindahl, Portfolio Manager at Storebrand/SPP’s Asset Management Stockholm.

Green bonds could erect wrongs made with ordinary bonds

Lindahl stressed that capital markets have actually invested itself into the climate “mess” that world currently is in.

“We used bonds to cause the projects that we see today. Now we have the opportunity to flip the coin and invest ourselves out of the mess,” says Lindahl who manages SPP’s Green Bond Fund.

“The Nordic market has been on the forefront of the green bond market and that still it seems that investors are just getting warmed up”, Lindahl says.

Green bonds not without costs

Jens C. Hellerup, Head of Funding and Investor Relations at NIB asks who should pay for the green bonds regarding the issuing and monitoring of the green projects they help finance.

“For us there is an extra process for issuing green bonds and the question is who should pay for this. Would for instance pension funds accept a lower return in return for a more sustainable future.”

Cautiously optimistic politicians

Penilla Gunther (KD), Nordic Council and a Member of the Control Committee of NIB says she believes that anyone who doesn’t care about sustainability will just be overrun and passed by in the future.

“There is a real advantage of being ahead with sustainable investments financed with green bonds and NIB is one of the front runners. I am positive about the future of green bonds but I think we need to know more about it.”

Jytte Guteland (S), European Parliament welcomes the use of green bonds and says they are a way financing the future.

“Of course we politicians are interested in the opportunities offered by green bonds. This is a way of investing that we will have to look further into.”

Film from the seminar:

Footnote: Sven Hegelund has an assignment for the Nordic Council of Ministers and NEFCO to write a report for G20 about Green financing the Nordic way. The report will be presented within a month.