When you have a bank that specialises in financing sustainable forestry, issuing a Green Bond seems the natural thing to do. Thus, Landshypotek Bank, a Swedish member owned bank that has been active since 1836, became the first issuer of a Swedish Green Covered Bond. Danske Bank acted as Green Bond Structuring Advisor and joint bookrunner for the transaction.

Supporting sustainable forestry

Sustainable forestry can contribute to the mitigation of climate change as forests provide green fuel as well as raw materials such as wood for construction, which is superior to steel or concrete in terms of climate impact. Forests are also important carbon sinks, which puts importance on measures that aim at increasing the resilience of forests to adverse conditions.

Landshypotek Bank’s first Green Covered Bond is backed by certified forests (PEFC/FSC) or forests with green forest management plans that include setting aside areas of particular conservation value. Properties must have 5 per cent deciduous trees to promote increased diversification, increased biodiversity and storm protection.

The total size of forest holdings backing the bond amounts to 320,000 hectares, an area approximately the size of Gotland. The forests absorb slightly more than two million tonnes of carbon dioxide every year. The framework received a second opinion from Cicero, which assigned a “dark green” shading, the best possible ranking obtainable.

Sweden’s first Green Covered Bond

The inaugural Green Covered Bond issue took place on 16 May 2018 and reached a total volume of SEK 5.25 billion making it the largest Green Bond issue in the SEK market at the time. The five-year bond was rated AAA by S&P and was met with outstanding investor demand, exceeding SEK 12 billion. As a result of the high investor demand Landshypotek managed to achieve a funding advantage or “greenium” of approximately six basis points with its first Green Covered Bond.