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Danske becomes Nordic ESG debt leader after US$4b in deals

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In one of the world's busiest regions for green debt issuance, Danske Bank has taken a clear lead.

[HELSINKI] In one of the world's busiest regions for green debt issuance, Danske Bank has taken a clear lead.

After arranging US$4.3 billion of sustainable bond sales for Nordic borrowers in 2020, more than any other bank, Danske now expects the primary market to expand by 25 per cent over the coming 12 months, which would be the most ever.

"We will see increased social and sustainability bonds from Nordic countries," said Lars Mac Key, head of sustainable bonds at Danske Bank. "We will also see more Finnish and Norwegian corporates, including high-yield, coming to the market.

Mr Mac Key says growth will be helped by some relatively new kinds of clean debt, such as increasingly popular sustainability-linked bonds. Unlike green bonds, the proceeds of such debt doesn't need to be tied to a specific project, but is linked to broader environmental, social or governance goals.

The Danske banker also says there's "huge potential from financial institutions to make an impact" in areas such as green covered bonds.

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GREEN RECORDS

Last year, Nordic borrowers raised a total of 25.2 billion euros (S$40.68 billion) of debt tied to environmental and social goals or projects. That was the highest amount on record and represented a 25 per cent increase on such issuance in 2019, according to data compiled by Bloomberg.

Sales in Swedish kronor accounted for about half the total issued, with a little over third of the total volume issued in euros, the data showed. Globally, the Swedish krona is the third-largest currency for green debt sales with a 7 per cent slice of the total market, behind euros and US dollars.

A further draw for prospective issuers this year could be the introduction of new European Union Green Bond Standards that will run alongside the existing ICMA Green Bond Principles.

Companies issuing under the EU standards "will see a price benefit that is even bigger than in normal green bonds," Danske's Mr Mac Key said.

Debt bankers at Nordea Bank, which arranged the most green bonds for Nordic corporate borrowers in 2020, similarly expect a boost in supply from social and sustainability-linked bonds.

"Demand for sustainable investments is growing and companies are aware of this and want to tap into it," said Nordea's Povl Bak-Jensen and Antti Saha.

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