06-04-2022 16:36

Top ESG trends in Nordic real estate

Nordic real estate companies are helping to fuel the boom in sustainable debt issuance in the region. Ebba Ramel from Nordea Sustainable Finance Advisory shares the latest ESG and sustainable finance trends in the sector.
Colourful architecture buildings

Sustainable debt has grown at a record pace in recent years, and one of the main drivers in the Nordics is the real estate sector.

“Real estate was one of the first sectors to engage with green finance,” says Ebba Ramel, the Sweden country lead for Nordea’s Sustainable Finance Advisory team. “That engagement has only increased.”

Given the large number of real estate companies in Sweden and Nordea’s role as one of the largest bookrunners for sustainable debt in Nordic real estate, Ramel has her finger on the pulse when it comes to sustainable finance trends in the sector.

“It’s exciting to work with such a range of real estate companies, which are all on the same journey but at so many different levels and stages. I learn something new in every client conversation, from how companies calculate their data to what systems they use,” she says.

Sustainability is now driven by the business instead of being a separate unit.

Ebba Ramel, Nordea Sustainable Finance Advisory

Sustainability now a business driver for real estate

With environmental and energy performance certificates for buildings, real estate companies have had a convenient way of defining what’s green, according to Ramel. That partly explains real estate’s frontrunner status in sustainable finance and the relatively large number of green bonds coming from the sector. Such companies have a longer history of knowing about their buildings and working with climate data compared to other kinds of businesses, Ramel explains.

She notes that the real estate sector has moved from dealing with sustainability as a separate, isolated topic to something that’s integrated into the core of the business.

“Sustainability is now driven by the business instead of being a separate unit,” she says.

That transition is happening faster in real estate than other areas due to the potential for income gains, for example from adjusting to clients’ needs and requirements, and cost reductions, for example from energy and materials. Tenant demands are not the only driver; so is regulation, including the EU Taxonomy, Sustainable Finance Disclosure Regulation (SFDR) and the coming Corporate Sustainability Reporting Directive (CSRD), requiring a higher rate of sustainability disclosure.

Sustainable bond issuance in Nordic real estate, by format

Sustainable bond issuance in Nordic real estate, by country

Current core sustainability issues for real estate companies

When it comes to sustainability, Ramel sees the following issues topping real estate companies’ agendas:

1. Climate change mitigation

Real estate companies are focused on reducing their environmental footprint. Key focus areas include material selection, energy usage, reuse of materials and waste handling.

A growing number of companies are setting climate targets in line with the Science Based Targets initiative (SBTi), which is currently developing SBTi guidelines for buildings.

Nordic real estate companies setting or committing to the Science Based Targets initiative

All companies are based in Sweden except for one committed in Norway in 2020 and one committed and one with targets set in Finland in 2019.


Among Swedish real estate companies, there are currently 14 companies with approved targets and an additional five that have committed to targets (see table below).

Swedish real estate companies with SBTi climate targets

Companies with SBTi-approved targets

Companies with SBTi-committed targets

AMF Fastigheter
Diös Fastigheter

HSB Riksförbund ekonomisk förening


2. Climate change adaptation

Another core focus of real estate companies is ensuring buildings are resilient to climate change. For physical assets, it’s becoming more important to understand if buildings are at risk for flooding, for example, from higher sea levels.

3. Social issues

More property owners are looking at social issues in the value chain. For example, who are they hiring to build a property? How do they handle social issues, such as working conditions, harassment and safety?

Social factors are also considered by residential real estate companies with properties in underserved areas. One example is Trianon, which has included social categories in its sustainable finance framework, allowing the company to finance employment generation, affordable housing and investments in social environments in socio-economically weak areas.

4. Biodiversity and land use

During the Covid-19 pandemic, many office and commercial buildings sat largely empty or underutilised. That has triggered discussions about whether buildings can be used in a more efficient way, helping biodiversity and protection of land use. Real estate companies are starting to use rebuilding as an alternative to new buildings. 

Sustainable finance developments on the horizon for real estate

When it comes to future developments within sustainable finance and real estate, Ramel highlights the following five hot topics:

1. Reporting under the EU Taxonomy

The EU’s new classification system for green investments, the EU Taxonomy, is top-of-mind for many real estate companies, according to Ramel. 2022 is the first year companies will need to report on their eligibility, or whether they are covered by the Taxonomy, while next year they will need to report on their Taxonomy alignment.

“We have seen the first companies reporting now, some on eligibility, some also on alignment,” says Ramel.

She notes that one challenge is that the Taxonomy requires existing buildings to be in the top 15% of most energy-efficient buildings to be green. The question is: What is the top 15%? That varies by country, Ramel notes.

“That’s a challenge many companies are dealing with – finding the definition to be able to say they’re aligned with the Taxonomy,” she says.

2. Updates to frameworks

Many real estate companies produced their green bond frameworks around three years ago. That means it’s time for an update, given that many of the Nordic real estate companies have a second party opinion with a three-year expiration date.

“With many real estate companies now updating their frameworks, that leaves room to expand them to include new formats, such as social and sustainability-linked bonds,” says Ramel.

Nordic companies with a social use-of-proceeds format include SBB, Studentbostäder i Norden, Hemsö Fastigheter, Y-Foundation and Trianon.

3. Opportunities with sustainability-linked bonds

Real estate companies are often already working with climate targets, such as energy performance and emissions reduction goals. Those targets can work well with sustainability-linked bonds, in which the bond characteristics, such as the coupon rate, vary depending on whether the issuer meets set ESG targets.

“The sustainability-linked format can be a good format for companies to show investors their climate ambition, together with setting Science Based Targets,” says Ramel.

Atrium Ljungberg, for example, recently launched its framework for issuing sustainability-linked bonds.

4. Climate adaptation bonds

Given that companies are more focused on adapting to and becoming more resilient to climate change, we could see more climate adaptation bonds from real estate companies, according to Ramel.

“With costs related to climate adaptation likely to increase, we expect the bond category will be included in frameworks going forward,” she says.

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