by Roger Aitken — Finland’s leading provider of financial services in the country to local government and public housing sectors, Municipality Finance (MuniFin), opened trading on the London Stock Exchange (LSE) this month to mark the listing of its first ever green bond, a $500 million (m) benchmark-sized issuance, on the 200-year old exchange.
The 5-year bond carrying a 1.48% annual yield listed on the LSE’s Green Bond Segment, which launched last year as a world first to provide a new range of green fixed-income funding options for issuers and investors. The issue met with high global investor support and was oversubscribed within a few hours of the launch at the end of September.
MuniFin, which has an ownership structure that includes the government of Finland, Finnish municipalities and public sector pension fund Keva, plans to use the proceeds from the bond to invest in projects promoting the transition to low carbon and climate resilient growth across Finland.
Eligible projects are identified in MuniFin’s Green Framework, which was drafted in accordance with the Green Bond Principles, a set of guidelines framing the issuance of green bonds and the Centre for International Climate and Environmental Research, Oslo and in collaboration with the Stockholm Environment Institute.
Pekka Averio, President and CEO, MuniFin, together with representatives including Hannele Pokka, Permanent Secretary at the Finnish Ministry of Environment, the Finnish embassy and joint lead banks, attended the opening of trading at the exchange to mark the new listing.
MuniFin’s Averio commenting said: “Most of our lending portfolio consists of investments that could be categorised as socially or environmentally responsible. As we are one of the most important credit institutions in Finland, we feel that we have a central role in raising environmental awareness in the Finnish public sector and encouraging our customers to make more environmentally friendly investments.”
He added: “Our aim is to support this change by offering a small margin discount for projects that are approved green financing. We have a long history with the London Stock Exchange in connection with our previous bond issues.”
Categories for investment consideration by MuniFin, which holds long-term credit ratings of ‘Aaa’ from Moody’s and ‘AA+’ from Standard & Poor’s, include renewable energy, public transport, sustainable buildings, water and waste water management, energy efficiency and environmental management.
With the total value of the green projects funded by MuniFin so far being c.€400m, several other investments are being considered for funding.
Nikhil Rathi, Director of International Development at LSE Group, a member of the UN Sustainable Stock Exchange initiative, remarked: “Finland’s first ever green bond has the potential to unlock and promote green financing across the country.
Already the exchange’s green bond platform is a “recognised world leader” according to Rathi in green and sustainable finance, facilitating international investment from India to China and Japan.
“We believe there is an opportunity to be the funding partner of choice for the wider Nordic region,” he added. “There is an undeniable shift in momentum in green and sustainable financing across the world and the LSE is uniquely placed…to support issuers and inventors in this green funding revolution.”
To date, 37 green bonds have been issued by international institutions, municipalities and corporates that are listed on LSE in seven currencies that have raised over $9.3 billion (bn). Eleven new green bonds in six different currencies have raised c.$3.6bn alone in 2016.