17-10-2023 09:42

What are green bonds?

  • Green bonds are bonds where the money from the bonds are earmarked for green purposes such as financing renewable energy projects, electric vehicles or energy efficient building loans to consumers or businesses.
  • They connect investors who want to invest in green purposes with businesses or consumers who need funding of green business initiatives or green products.
  • They are popular investment objects for large institutional investors, for instance pension funds, asset managers or insurance companies that seek to support green business purposes and support the global, green transition.

Learn more about green loans to consumers or businesses.

How do green bonds work?

In principle, green bonds work just like other bonds: investors in bonds become creditors of the issuing entity – they basically lend money to whoever issues the bond, for instance Nordea. The investors are in return paid a fixed interest rate and returned their initial investment when the bond matures. The issuer of a green bond can then lend the money to green business initiatives, also called green bond assets.

How does Nordea issue green bonds?

Examples of what green bonds have financed

What assets do green bonds finance? At Nordea we use green bonds to finance assets or projects aiming to increase the positive impact or reduce the negative impact on the environment.

Some examples are:

  • Electric ferries
  • Electric cars
  • Electric trains
  • Energy efficiency
  • Waste-to-energy
  • Water and wastewater management
  • Certified green buildings
  • Solar energy
  • Hydro power
  • Wind power

What are green bond assets?

Green bond assets are assets which have been approved to be funded by green bonds. 

In other words, green bond assets are the products or initiatives which are green enough to be financed through green bonds because they live up to the qualification criteria in Nordea’s green bond framework.

Why are green bonds so popular?

There is a growing desire among investors to invest sustainably. Both from an investor and issuer point of view, green is not only the right thing to do; it also mitigates risk and is financially smart. Green bonds are popular, because …

✓ Green bonds make it possible to connect sustainable lending to customers with dedicated investor demand

✓ Green bonds build a more sustainable credit portfolio

✓ Green bonds diversify the investor base and product types