Green loans are loans meant for sustainable, environmentally friendly purposes, such as reducing CO2 emissions, or purposes contributing to the green transition in society such as developing new environmentally friendly technology.
Some examples of green loans to personal customers:
A loan for an electric car
A loan for installing solar cells on the roof of a house
A loan for improving the thermal insulation of a house so that less energy is spent on heating
Some examples of green loans to companies:
A loan to build a solar park
A loan to build zero emission buildings
A loan to ensure growth of a company working with water cleaning technology
What is the connection between green loans and green bonds?
When a bank lends money to businesses or consumers, it needs to find the money somewhere – to fund the loans. This can be done by issuing bonds. Green bonds are bonds where the money from the bonds is earmarked for sustainable purposes such as funding green loans to consumers or businesses. This is also known as green financing.
Green bonds are popular investment objects for large institutional investors such as pension funds wanting to support the transition to a sustainable future. To ensure that the loans funded by our green bonds truly are sustainable, Nordea has developed a green bond framework.