Danske Bank joint structuring manager and lead manager for SEK 500m green bond to finance energy efficiency improvements

Did you know that buildings consume about one third of the total energy consumption in Sweden, and are an equal source of carbon dioxide emissions?

New buildings can be designed to operate with close to zero energy consumption, but to make a significant impact on the overall energy consumption, actions must be undertaken to improve the performance of the existing building stock as well.

That’s exactly the objective for the SEK 500m green bond successfully issued by Samhällsbyggnadsbolaget i Norden AB (SBB), where Danske Bank have acted joint structuring advisor and lead manager.

The bond will target investments in a portfolio of older residential buildings, with the goal of achieving energy efficiency improvements of min. 30 per cent. This corresponds to an annual reduction of 868 tons of CO2 emissions. The improvements will not only contribute to more environmentally friendly homes, it will also improve the housing standard for tenants and reduce the operational costs of the buildings.

“We are very proud to have acted joint structuring advisor and lead manager on SBB’s green bond, which is an innovative new way of addressing energy efficiency investments with green bond issuance,” says Lars Mac Key, Head of DCM Sustainable Bonds.

A non-traditional green bond to finance both acquisition and energy improvements

Traditionally, real estate companies use green bonds to finance buildings already holding an environmental certification. SBB’s green bond will instead refinance a targeted portfolio of rent-regulated residential apartment houses, predominately built between the 1950s and 1980s, with the aim of reducing energy consumption.

Over a five-year period, SBB is committed to perform energy efficiency investments to the targeted portfolio, to reduce the purchased amount of energy (kWh) per heated square meter and year by at least 30 per cent.

“It is crucial to perform energy efficiency operations to older buildings, in order to meet the targets set under the Paris agreement in 2015. That’s why it is fantastic that we have the possibility to finance both the acquisition of an old building as well as the performance of energy efficient measures with a green bond issuance,” says Lars Mac Key.

Read SBB’s press release here.

Fact box

  • The five year green bond of SEK 500m was priced at 3m Stibor +330bps. The deal attracted large interest from the investor community with orders over SEK850m (excluding JLMs).
  • 84.2 per cent of the order book was Swedish, but also Norwegian (11.6 per cent) and Finnish (4.2 per cent) took part of the trade.
  • The green bond supports the Sustainable Development Goal 11 –“Make cities and human settlements inclusive, safe, resilient and sustainable”
  • S&P have rated the green bond with an overall score of 64, which equates to E2 on S&P’s scale of E1 to E4. The score reflects the net environmental impacts of the technologies that SBB have been and will finance over the next five years.