27-09-2023 11:29

A maturing Nordic sustainable bond market: lessons learned and expectations for the future

Sustainable bonds further solidified their position as a legitimate part of the global bond market during 2023. With sustainable bond issuance and activity withstanding an uncertain 2022, sustainable bond volumes are on the rise again into 2023, and taking a greater share of the total market. While we are seeing greater alignment in sustainable bond practices across regions, there is much to be learned from the Nordic market in particular.
Upward viewpoint of trees inside a forest

The Nordic sustainable bond market has demonstrated resilience relative to the global sustainable bond market in recent years. Sustainable bond volume experienced a comparatively modest decline in from 2021 to 2022, and a slightly more pronounced bounce back in activity into 2023. This increased resilience can be taken as a sign that sustainable debt markets are entering a phase of maturity in the region, following relatively pronounced growth over the past few years.

Key expectations as the sustainable bond market matures

  1. Inaugural sustainable issuances will attract increased attention.
  2. Sustainable debt structures will become increasingly sophisticated, with more tailored incentives and impacts.
  3. The details will matter more as investors look beyond sustainability labels.

These trends in the Nordics can be attributed to a combination of factors, including a generally strong commitment to corporate sustainability, transparency and robust regulatory regulation. In addition, the composition of sustainable debt issuance in the region has likely also played a role. The Nordic market has witnessed a relatively diverse range of issuers, particularly of sustainability-linked bonds, compared to the global market. Moreover, while the global market has witnessed a stagnation in growth of sustainability-linked issuances over the past year, the Nordic market has continued to see growth in this segment, with new issuers becoming increasingly able to access sustainable finance.

Green bonds, however, continue to dominate in the Nordic market, taking an 83% share of sustainable volume in H1 2023. With green bonds being the dominant share of the market and the longest-standing sustainable format, we begin there in our search for expectations for the maturing market.

Green bonds: Sweden leads the charge

When it comes to the strength of the green bond market in particular, Sweden outshines its Nordic neighbors. The country boasts the highest number of issuers and amount issued, making it a benchmark for sustainability efforts in the region. Sweden’s advanced green bond market makes it the sixth largest issuer by amount issued since the inception of the green bond market. Only China, Germany, France, USA and the Netherlands beat Sweden in the ranks.

While Sweden tops the Nordics in most aspects of green bond issuance, the country shows the lowest average deal size in the Nordics. Looking at the number of sectors represented in each country suggests that green bonds have permeated more deeply into the Swedish market than elsewhere in the region. 

Here’s a closer look at some key figures since the green bond market’s inception:

Number of green bonds issued7963301840
Amount of green bonds issued (EURm)31,58024,94856,30583,166
Average deal size (EURm)40036918799
Rank in global issuance chart1620136
Number of sectors represented9151930

Source: Bloomberg (26.9.2023), data excludes Supranational deals

Norway comes second in the Nordic ranks, with a market two-thirds of the size of Sweden’s by amount issued. The average deal size is larger in Norway, while the number of green bonds issued has been more modest there compared to Sweden. While Finland has the smallest green bond market in the Nordics, the impressive sectoral diversity, given the market size, indicates that green bonds have taken a comfortable hold. To further understand the green bond market across countries, we must also look at how it has developed over time. 

Nordic green bond market: A shift from municipalities to corporates

In the Nordics, municipalities were the initial trailblazers in the green bond market. Norway took the lead in kickstarting the Nordic sustainable finance market in 2010 when Kommunalbanken issued its inaugural green bond. The country has since become a seasoned issuer, with over 20 green bonds issued.

The City of Gothenburg followed suit in 2013, opening the Swedish green bond market and consistently issuing at least one bond per year since. In Finland, MuniFin (Kuntarahoitus) played a pivotal role in launching the Finnish sustainable bond market in 2015 and has actively participated since its inception. Denmark stands out from the rest, with a corporate entity, namely Vestas, first entering the market in 2015.

However, the landscape has since evolved, with corporates now dominating the sustainable bond market in most Nordic countries, except for Norway, where financial institutions play the most significant role.

Nordic market maturation: Seasoned issuers take an increasing share

Further underscoring the maturing of the Nordic sustainable bond market, it is noteworthy that the proportion of seasoned vs inaugural issuers is generally increasing year-on-year. This shift towards more seasoned issuers signals a greater level of experience and confidence from both issuers and investors in the region, and propels its continued evolution as participants become more able to push on standards and performance.

Source: EF Data 2023 

When it comes to the shift from inaugural to seasoned sustainable bond issuers, Sweden is an excellent case study for illustrating market maturation. The country has witnessed a consistent increase in the number of seasoned issuers each year, surpassing its Nordic counterparts in this regard. This is due to its considerably larger and more active sustainable bond market. 

The market trends in Norway and Denmark have been similar in recent years, with fewer active issuers in these countries. Consequently, the actions of a single issuer can significantly impact annual results. Finland, on the other hand, stands out for its less consistent trend.

Expectations for the maturing market

As the market matures, we expect increased competition, greater sophistication and a focus on the substantive impact of sustainable bonds. This would place the Nordics on track to continue to lead the global stage for sustainable bonds:

  • We expect inaugural issuers will have the ability to draw increased attention when bringing sustainable bonds to the market for the first time. This is likely to be particularly true for issuers from new or underrepresented sectors. 
  • As market stakeholders gain depth and experience, we anticipate the development and normalisation of increasingly sophisticated sustainable financing structures. Growing expertise will enable issuers to craft innovative and tailored sustainable finance structures that both meet the needs of investors and effectively target identified sustainability issues.
  • We foresee a shift in investor behaviour as sustainability becomes increasingly embedded in investment strategies and familiarity with sustainable debt instruments continues to grow. Investors will scrutinise the quality and impact of sustainable bonds more closely, rather than relying on the relevant sustainable label alone. 


Stella Mylläri
Nordea Sustainable Finance Advisory
David Ray
Nordea Sustainable Finance Advisory

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