Sustainable finance products and services

Sustainable finance product offering

Our sustainable finance product offering falls under two general categories: use-of-proceeds financing, where proceeds are allocated to specific activities, and sustainability-linked general corporate financing. For Nordea’s own issuances and financing, the eligibility criteria for both categories are further described in Nordea’s respective frameworks. Find descriptions of the different sustainable financing formats below.

Our approaches to sustainable financing

Green Bonds

Green bonds are a fixed-income financing instrument where the proceeds from the bonds are allocated to climate-related or environmental projects. The bonds can be issued by public, private or multilateral entities to raise capital for projects that generate identifiable climate or environmental benefits. Examples of projects include renewable energy, energy efficiency, water and waste management, pollution prevention and control, and green buildings. The proceeds from the bonds are tracked and managed in a reliable manner and transparency is ensured by reporting after issuance. 

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. The investors are in return paid a fixed interest rate and returned their initial investment when the bond matures.

Green bonds have become popular for investors to align their financial goals with their values and contribute positively towards the transition to a more sustainable low carbon economy. They connect investors who want to invest in green purposes with businesses who need funding of green business initiatives or green assets. 

Nordea works with clients to develop a Green Finance Framework, which articulates how the client’s governance and management systems are used to track, manage, and report on the use of proceeds so they are allocated only to eligible green projects. This framework is reviewed by a second opinion provider which provides an independent confirmation that the Framework is aligned to the Green Bond Principles, and has clear climate or environmental benefits. 

Nordea has developed a Green Funding Framework, which we follow when issuing new green bonds. For Nordea-issued green bonds, we also publish on our website, on a yearly-basis, a report specifying the allocation of proceeds of issued bonds, as well as environmental impacts of the green bond assets or green bond asset portfolio. The proceeds of Nordea-issued green bonds are managed on an aggregated basis (portfolio approach) and allocated to our green bond asset portfolio (for further information, please refer to our Green Funding Framework and ISS SPO).

Green Loans

A green loan is a form of financing that enables borrowers to use the proceeds to exclusively fund projects that contribute to a climate or environmental objective. A green loan is based on a loan that is done in a private operation with the bank. 

Green loans are loans that fulfil the criteria in Nordea’s Green Funding Framework, and may thus be included in Nordea’s green bond asset portfolio. The criteria are based on internationally recognised green bond standards. All new green loans included in Nordea’s green bond asset portfolio are verified by our external second party opinion provider, whose latest opinion is made publicly available on Nordea’s website.

Sustainability-Linked Bonds

Sustainability-linked bonds (SLBs) are a fixed income instrument where its financial and/or structural characteristics are tied to predefined sustainability objectives that support the issuer’s overall sustainability strategy. 

Unlike other forms of sustainability-linked debt financing, such as green bonds which are "use-of-proceeds" bonds that finance specific projects, SLB issuers decide how the borrowed funds are used (general corporate purposes). Instead of earmarking funding for a particular project, SLBs make the financial or structural characteristics of a bond conditional on whether or not the issuer meets predetermined key performance indicators (KPIs) which are evaluated against predefined Sustainability Performance Targets. As such, SLBs incentivise the issuer’s achievement of material, quantitative, pre-determined, ambitious, regularly monitored and externally verified sustainability objectives. 

Nordea helps its clients to issue sustainability-linked bonds and to develop sustainability-linked bond frameworks, which articulate how the client’s sustainability metrics and targets are incorporated into debt issuance. Frameworks are reviewed by a second opinion provider which provides an independent confirmation that the framework is aligned with the Sustainability-Linked Bond Principles. 

Sustainability-Linked Loans

Similar to SLBs, Sustainability-linked loans (SLLs) are a type of lending arrangement where the company’s borrowing costs are tied to its progress on meeting a certain set of measurable annual sustainability targets (Sustainability Performance Targets). If the company meets those key performance indicators (KPIs), it gets a discount on the interest paid. If not, it pays a premium.

Social Bonds

Similar to green bonds, social bonds are fixed income securities whose proceeds are earmarked to finance projects with a defined social impact, often targeting vulnerable population groups. These groups may include people living below the poverty line, marginalised populations, people with disabilities, migrants and undereducated persons. Typically, social bonds are issued by agencies, governments, corporates and international groups of states, such as the European Union.

Social bonds give investors the opportunity to improve the social profile of their portfolios and to make a measurable impact by investing in social projects and/or companies. Social projects include themes such as affordable basic infrastructure and housing, food security and sustainable food systems, access to essential services (such as healthcare, financial services, education and training) and socioeconomic advancement and empowerment. 

Issuers also have the possibility of issuing a sustainability bond, which is used exclusively to finance a combination of green and social projects. 

Nordea helps its clients to issue social bonds and works with clients to develop social bond frameworks, which articulate how the client’s governance and management systems are used to track, manage, and report on the use of proceeds so they are allocated only to eligible social purposes. Social bond frameworks are reviewed by a second opinion provider which provides an independent confirmation that the framework is aligned with the Social Bond Principles. 

 

 

Alignment with the ICMA Principles for Loans and Bonds

Any sustainability-linked financing instrument issued or facilitated by Nordea follows the Principles, as formulated by the International Capital Market Association, which outlines current best practice. Bonds and loans aligned with these principles should improve transparency and promote disclosure, thereby underpinning the integrity of the market. 

 

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