Bankers in Sweden reveal financial perks of ethical funding

Stockholm

SWEDEN'S once battered credit market is finding relief in an unexpected place.

As firms and governments try to recover, they are selling more debt earmarked for ethical projects than ever before. That issuance has provided a lifeline to a market that suffered one of the worst crashes in its history just a few months ago.

Anna Reuterskiold, a green bond specialist on Nordea's debt capital markets desk in Stockholm, says companies and government agencies have figured out that "you can get better terms if you issue green". She says "there's a wider investor base" when it comes to green bonds, which has made all the difference since the crisis.

"The issuers that we talk to say that green has remained an open line of communication to investors during this time of stress," she said. "Social bond issuance was US$31.6 billion in the first five months of 2020 - nearly double that in the whole of 2019. Some 54 per cent of 2020 volume has been issued in response to the Covid-19 pandemic."

Just three months ago, bond issuance in Sweden ground to a halt as credit spreads blew out to financial-crisis proportions and more than 30 fixed-income funds slammed shut to halt a client exodus.

But bankers have marvelled at the pace of the rebound. Dan Margolin, a Nordea banker working on the same desk as Ms Reuterskiold, says "it's been enormously quick". In a matter of weeks, "we've come back to nearly the same levels as pre-corona".

A major driver has been a deluge of climate-friendly debt sales, with the Swedish market alone seeing "eight green corporate bonds in the last two weeks", Mr Margolin said.

"It's great that we're now opening up the Norwegian high-yield market as well," said Mr Margolin. "We've seen there's solid interest." BLOOMBERG