Northern Europe-based financial services company Nordea announced the issuance of a NOK 4.1 billion (USD$400 million) bond, the first of its kind to have proceeds earmarked exclusively to finance sustainability-linked loans.
Sustainability-linked debt is one of the fastest growing areas of sustainable finance, with attributes including interest payments tied to an issuer’s achievement of specific sustainability targets. According to Nordea, corporate interest in sustainability-linked loans has surged, given the flexibility to use proceeds for general corporate purposes, while with instruments such as green bonds, raised funds can only be allocated to specific categories of green projects.
Jacob Michaelsen, Head of Sustainable Finance Advisory at Nordea, said:
“We want to innovate and take part in moving the market forward. This new framework builds on the successful development of the green bond market while also recognising the considerable momentum in the sustainability-linked loan market.”
Nordea’s new bond was issued under a framework – similar in structure to those used for green bonds – outlining eligible categories for use of proceeds. According to the framework, funds from the bond offering may be used to finance or refinance sustainability-linked loans contributing to combating climate change, with key performance indicators considered “material” and “ambitious” by an external reviewer, and aligned to the Sustainability-linked Bond Principles.
Nordea stated that it developed the framework in order to cater to “transition assets” that may not qualify as “green,” but that still may have strong alignment to sustainability goals.
Michaelsen, added:
“With this bond, we’re giving investors an opportunity to confirm that they’re actively supporting the companies in their transition.”
Investors in the new bond included Storebrand Asset Management, AMF, Carnegie Fonder, Danske Invest, If Skadeförsäkring AB, Handelsbanken Fonder, Nordea Asset Management, SEB Investment Management and Simplicity.
Helena Lindahl, Senior Portfolio Manager at Storebrand Asset Management said that Nordea “great creativity by issuing the first bond backed by sustainability-linked loans, capturing a wider circle of sustainable lending which would not necessarily be captured by their issuance of green bonds, but is sustainable nonetheless.”
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