April 20, 2015
$120 Million Green Bond from Nordic Investment Bank
by Robert Kropp
The fixed income issuance, driven by investors incorporating environmental, social, and corporate governance factors, will finance loans to environmental projects in Scandinavia.
SocialFunds.com — At the United Nations headquarters in January of last year, Ceres unveiled the Green Bond Principles, a set of voluntary guidelines for banks intending to issue fixed income products designed to finance projects such as renewable energy, energy efficiency, sustainable waste management, sustainable land use, biodiversity conservation, clean transportation, and clean water and/or drinking water.
At about the same time, Ceres announced the launch of its Clean Trillion campaign, an effort designed to encourage a marked increase in global investments in clean energy. “In order to limit global warming to 2°C and avoid the worst effects of climate change, the world needs to invest an additional $44 trillion in clean energy,” Ceres stated, “more than $1 trillion per year for the next 36 years.”
In Scandinavia last week, the Nordic Investment Bank (NIB) announced the issuance of the NIB Environmental Bond (NEB), which is prices at one million Swedish kroner (SEK), or $120 million. The order book opened on April 16th, and quickly reached 850 million SEK. “The transaction was driven by those investors integrating environmental, social and governance (ESG) considerations within their investment process,” NIB stated.
“NIB has established a framework that allows for funds raised through issuances of NIB Environmental Bonds to be directed to its environmental lending projects, which qualify as eligible under the framework if they satisfy strict internal environmental sustainability criteria and are aimed at (but not limited to) reducing emissions to air by promoting energy efficiency, renewable energy, public transport solutions and recycling; as well as reducing discharges to water by improving wastewater treatment,” the bank stated.
NIB’s environmental bonds have focused on a considerable number of clean energy projects in its member countries thus far.
In its report on the Clean Trillion goal, Ceres stated, “Today’s leading providers of capital to clean energy are primarily commercial banks, national and multilateral development banks and electric utilities,” an example of which is NIB. However, Ceres continued, “Clean energy projects need new and additional sources of capital, and the largest potential providers are institutional investors such as pension funds, insurance companies, sovereign wealth funds, endowments, foundations and investment managers.”
It has been widely noted over the past three years that as much as 80% of the reserves already counted as assets on the books of fossil fuel companies must stay in the ground if the the most devastating effects of climate change are to be avoided. It seems reasonable to question whether an overly narrow view of fiduciary duty has prevented sustainable institutional investors from deploying their considerable assets—over $75 trillion, according to Ceres—in clean energy investments. But considering the ongoing free fall of the valuation of coal companies, it seems reasonable to ask whether it is past time to move institutional assets into clean energy investments.
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