Sweden issues its first green bond

The Swedish National Debt Office issued its first ever sale of a sovereign green bond. "This is an important step towards directing financing flows to climate-smart and sustainable investments," says researchers at the Stockholm Sustainable Finance Centre (SSFC).
What distinguishes the green bond from other sovereign bonds is the fact that investors will be able to monitor which government expenditures the bond is linked to, and which environmental and climate effects the expenditures contribute to achieving. 

“Sweden has long been the leading country in green bonds, and it is great to see that the government is now taking this step. I think we can expect investors to be eager to be part of the ambitious green investments that the Swedish government is making”, says Aaron Maltais, Program Director for the Stockholm Sustainable Finance Centre and Senior Research Fellow at the Stockholm Environment Institute.

The largest share of funding for the sovereign green bond will be allocated to maintenance and reinvestment in the railway system. Funds will also be allocated to innovative projects such as the Hybrit initiative for fossil-free steel production, a collaboration between SSAB, LKAB and Vattenfall, with the support of the Swedish Energy Agency. This project has the potential to revolutionise one of the most polluting industries in the world. The steel sector accounts for some 7% of global CO2 emissions and 10% of emission in Sweden.

The government has commissioned an independent review of the framework governing green bonds from Cicero, Center for International Climate Research. The rating given is the highest on a four-point scale, dark green.

“I expect that reporting from the Swedish government will maintain a high standard and be linked to Sweden's overall environmental objectives. This is important. Our latest research from SSFC, shows that all too often there is a disconnect between green bond frameworks and organisational level sustainability targets, and that there is still much variation in the quality of reporting. The more high-quality reporting, the better for the future of green bond markets”, says Aaron Maltais.
Sovereign green bonds grow the green portion of the bond market
SSFC research shows that one of the most important benefits of green bond markets is that they contribute to changes in the way issuers and investors interact, and this has the potential to raise expectations on sustainability performance in bond markets more generally.

“This is an important development considering that the global bond market is significantly larger than public equities”, says Emma Sjöström, Deputy Director of Stockholm Sustainable Finance Centre and Director of the sustainable finance initiative at Misum, Stockholm School of Economics. 
“It is important that “ordinary” bonds incorporate green perspectives to a greater extent than today, and that we do not put all our hope to green bonds for the necessary shift of capital towards green economic activity. This is further explored in the upcoming SSFC Insight into the role of bonds for climate change”, says Emma Sjöström. 
Senior Research Fellow, Stockholm Environment Institute (SEI)
Aaron Maltais
Program Director
Research Platform Manager – Sustainable Finance Research Fellow.
Emma Sjöström
Deputy Program Director