Landshypotek Bank AB, one of Sweden's largest members-owned niche bankers, has priced the first green covered bond from a Swedish issuer and the largest green bond in Swedish Crowns (SEK) to date. The bond is backed by and aims to finance sustainable forestry in Sweden and with an issue size of SEK 5.25 billion (≈ EUR 509 million), it is the largest green issue ever made in the Swedish market.
Landshypotek Bank, one of Sweden’s top ten banks, is the first to issue a green covered bond that exclusively finances sustainable forestry. The bond is based on the contributions of sustainable forestry to biodiversity and to lowering carbon dioxide (CO2) levels in the atmosphere. Having extensive experience in financing forestry, the bank’s green investment specialists and forestry experts have collaborated on preparing a bond that is entirely backed by forest investments.
In addition, the bank notes that there is “substantial interest” in green bonds and its offering has expanded over the last few years. The bonds are often based on defined projects that contribute to a particular, albeit isolated climate benefit for the future.
According to Landshypotek, the green covered bond has been met by a great deal of interest both from investors in and outside Sweden. The books reached over SEK 12 billion (≈ EUR 1.16 billion) after only half an hour. With an issue size of SEK 5.25 billion (≈ EUR 509 million), it is the largest green issue ever made in the Swedish market.
It is very gratifying with the great interest, after only a half hour the books were above SEK 12 billion (≈ EUR 1.16 billion), which shows that investors see the economic and environmental potential of the Swedish forests. It is particularly gratifying to be the first to issue a green covered bond backed by Swedish forests. It is unique and is fully aligned with the bank’s operations to make a real impact in promoting a sustainable society based on entrepreneurial activity across the country. It is positive that investors can see the financial and environmental potential in Swedish forests, commented Martin Kihlberg, Chief Sustainability Officer and General Counsel at Landshypotek Bank.
Landshypotek Bank has financed farming and forestry for almost 200 years. In the last few years, the bank has also presented savings accounts for the entire country and mortgages for houses outside the major cities. The green covered bond is the bank’s next step in this development.
Sustainable forestry, renewable energy and energy efficiency
The bond has been issued under a framework for green bonds that has been prepared pursuant to the Green Bond Principles and is based on sustainable forestry practices, renewable energy and energy-efficient buildings. The framework also received a second opinion from CICERO and was given a shading Dark Green.
The bond is backed by certified forests (PEFC/FSC) or forests with green forest management plans that include setting aside areas of particular conservation value. Properties must have 5 percent deciduous trees to promote increased diversification, increased biodiversity and storm protection.
The forests are privately owned and the bond is backed by forest holdings totalling 320 000 hectares, an area approximately the size of the island of Gotland. The forests encompass around 1.4 percent of Sweden’s productive forest and absorb slightly more than two million tonnes of CO2 annually.
Landshypotek Bank’s green bonds mainly targeted institutional investors who wished to invest in projects that mitigate climate impact and that promote sustainable development in farming and forestry. Danske Bank was structuring advisor, Handelsbanken and Nordea were mandated as joint lead managers for the transaction. The bond amounts to SEK 5.25 billion (≈ EUR 509 million) and has a maturity of five years.