Sustainable finance products and services

Green Bonds

Green bonds are a fixed-income financing instrument where 100% of the money from the bonds are earmarked for 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 for 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 financing. 

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 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 framework for green bonds, which we follow when issuing new green bonds. 

Green Loans

A green loan is a form of financing that enables borrowers to use the proceeds to exclusively fund projects that make a substantial contribution to a climate or environmental objective. A green loan is similar to a green bond in that it raises capital for green eligible projects. However, a green loan is based on a loan that is done in a private operation with the bank. A green bond usually has a bigger volume and could be listed on an exchange or privately placed. 

Green loans are loans that fulfil the criteria in Nordea’s Green Bond Framework. The criteria are based on internationally recognised green bond standards. By creating a green loan, Nordea essentially gives the loan a quality label. In doing so, Nordea sets strict criteria for how to use the proceeds from the loan and how to report its environmental impact. 

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 targeted at vulnerable population groups. For example people living below the poverty line, excluded or marginalised populations, people with disabilities, migrants and undereducated persons. The issuers of social bonds are typically 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 (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. 

Sustainability-Linked Bonds

Sustainability-linked bonds (SLBs) is 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 conditionalon 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.