The Swedish local government debt office, Kommuninvest, priced its second green bond for the year, and its first-ever green bond in Swedish krona, on Tuesday, smashing the record for a krona-denominated green bond deal. The issuer, which announced a SEK 3-5 bn transaction on Monday, settled on a SEK 5 bn deal following an oversubscribed order book amounting to over SEK 13 billion. Investors in the bond included AP7, Folksam, KfW and SPP Storebrand. The previous record for the largest green bond in Swedish krona was a SEK 2.5 bn dual tranche deal from Fortum Värme in May 2015.
The Kommuninvest green bond will finance lending to Swedish municipal investment projects in renewable energy, energy efficiency, green buildings, public transport and water management. Kommuninvest has built up a green loan book amounting to SEK 14.5 billion (USD 1.6 billion), committing funds to some 60 investment projects in 40 Swedish municipalities and county councils/regions. Renewable energy and Green buildings account for the vast majority of projects in the portfolio, at 43 percent and 39 percent, respectively.
Some of the projects financed by the green bond include the new Högås school in Knivsta, Sweden’s first school built as a passive house, a pilot facility in Umeå for green coal, and an optical waste sorting facility in Halmstad.
Comment from Anders Gånge, Head of Funding & Treasury at Kommuninvest:
– We have been aiming for a Swedish krona green bond for some time, and we feel this was a great debut. The order book shows significant support from Swedish green investors, which was one of the objectives, but also includes recognized international accounts. Pricing was in line with our expectations, with the deal eventually priced at 2 bps below our Swedish benchmark curve. We are glad to see that investors are willing to pay a premium for green.
– With the two green bonds issued this year, we have firmly established green bonds into our funding programme in both SEK and USD, and we look forward to bringing new bonds to the market in the future.
Kommuninvest expects to continue to grow its green loan portfolio, and to be able to be a frequent issuer of green bonds, in multiple currencies.
– Looking at the pace and direction of Swedish local government investment, we see a lot of potential for further growth in green lending, says Anders Gånge. We estimate that, in a few years, 15-20 percent of our lending will finance green projects.
Tomas Werngren, Kommuninvest’s CEO, believes that local government entities can provide significant contributions towards greening financial markets, which by world leaders has been identified as an important component to achieve global climate objectives.
– In Sweden, the local government sector invests well in excess of SEK 100 billion annually, with a clear focus on sustainability and environmental benefits. They are key to achieving Sweden’s ambitious environmental targets.
According to the Kommuninvest Green Bonds Framework, all eligible projects must be approved by its environmental committee, comprising independent environment and climate experts from the Swedish local government sector. The environmental committee audits and finally approves green loan applications, reviews green loan reporting by borrowers and approves investor impact reporting.
Kommuninvest’s role as an aggregator and conduit issuer for cost-efficient public sector investments has been recognized by the OECD, in its report “Green Bonds: Country Experiences, Barriers and Options” published in 2016 in support of the G20 Green Finance Study Group.
Kommuninvest green bonds have received strong support from environmentally focused accounts including AP4, CalSTRS, Everence Financial, NIB and United Nations Joint Staff Pension Fund. Among investors in Tuesday’s Swedish-krona denominated green bond were Alecta, AP3, AP7, Danske Capital, Folksam Group, Nordea Asset Management, KfW, SBAB, SPP Storebrand and Öhman.
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Kommuninvest is a municipal cooperation for efficient and sustainable financing of housing, infrastructure, schools, hospitals etc. Together, we get better loan terms than each one individually. Since its inception in 1986, the Kommuninvest collaboration has helped lower the local government sector’s borrowing costs by many billion kronor. Currently, 274 municipalities and 10 county councils/regions are members of this voluntary cooperation. With total assets of around SEK 370 billion (USD ~42 billion), Kommuninvest is the largest lender to the local government sector and the sixth largest credit institution in Sweden. The head office is located in Örebro.
Anders Gånge, Head of Funding & Treasury, tel: +46 10 470 87 12, e-mail: email@example.com
Björn Bergstrand, Head of Media Relations / Head of Sustainability, tel: +46 (0)70-886 94 76, email: firstname.lastname@example.org