Since the lending offered by MuniFin has wide direct and indirect impacts on society, responsibility has been broadly integrated in the company’s strategy. In 2017 MuniFin defined the key principles of responsibility, which have worked as a basis for the Responsibility report. Responsibility at MuniFin is based on four principles: responsible products and services, forerunner in sustainability, improving wellbeing at work and strong corporate governance.

For each key principle, MuniFin has defined indicators and goals, which are monitored annually. MuniFin promotes the achievement of almost all sustainable development goals (SDGs) set by the United Nations.

At the beginning of 2016, MuniFin launched green finance to its customers, a financial product that enables customers’ projects that support sustainable development and climate goals in Finland. During 2017, 25 projects amounting to almost EUR 600 million were added to the green portfolio. The total value of the green portfolio grew to over EUR 1 billion in the end of 2017. The estimated direct annual greenhouse gas emissions avoided for projects approved in 2017 totals approximately 19,400 tons of CO2.

– During the past years we have noticed that the demand for responsible investments is growing fast. We hope that these reports give a new and transparent picture of our responsible operations and commitment in achieving the domestic climate goals, says Esa Kallio, President and CEO at MuniFin.

More information:

Responsibility

Esa Kallio, President and CEO, MuniFin, tel. +348 50 337 7953, esa.kallio(at)munifin.fi

Antti Kontio, Head of Corporate Responsibility, MuniFin, tel. +358 50 370 0285, antti.kontio(at)munifin.fi

MuniFin’s green portfolio is highly concentrated on two sectors: public transportation and sustainable buildings. The largest individual projects are the Western metro extension and Tampere tramway, most typical project being a school building. In 2017, first residential buildings in social housing were added in the portfolio. 

The new product has been well received in the MuniFin’s customer base. Municipalities have significant potential in achieving Finland’s long-term climate goals and MuniFin wants to support this development by offering a margin discount. Impact reporting for green finance will be published annually.

Responsible investments will be launched in 2018

In 2017 MuniFin decided to establish a portfolio for responsible investments. The socially responsible investments (SRI) portfolio will be launched in 2018 and its target size is directly linked to the total amount of outstanding green bonds. In addition, MuniFin monitors all investments through a quarterly calculated ESG score.

Further information:

Antti Kontio, Head of CSR, tel. +358 50 3700 285, antti.kontio(at)munifin.fi

Previously MuniFin has issued two publicly traded green bonds. The public green bond transactions were issued in 2016 and 2017, sized at USD 500 million and EUR 500 million respectively.

The first private transaction, arranged between MuniFin and Fukoku Life, highlights both the issuer’s and investor’s commitment to the development of the green bond market.  

– Fukoku Life is very pleased to be the first institutional investor to subscribe to MuniFin’s Green Bond program in private placement format, and thereby contribute to further reduce greenhouse gas emissions and improve energy efficiency in Finland. “Contribution to Society” is one of Fukoku Life’s management philosophy. Thus, this investment is an emblematic example of our social and environmental consideration, not only in Japan but also worldwide, comments Takehiko Watabe, CIO, Fukoku Mutual Life Insurance Company.

– We are delighted to cooperate with Fukoku Life, a prime Japanese ESG investor. This transaction emphasises MuniFin’s long-term presence and commitment to the Japanese market. Hence, we are particularly pleased to offer our green bonds to the Japanese institutional investor base, says Esa Kallio, President and CEO (interim), Head of Capital Markets, MuniFin.

The transaction was arranged by Crédit Agricole CIB.

– MuniFin Green Bonds framework has been drafted according to the Green Bond Principle and a second opinion has been given by both the Stockholm Environment Institute and CICERO. MuniFin chose a very strong selection process for eligible projects by putting in place an independent Green Loan Committee which evaluates, approves or declines and grades each projects. The involvement of Fukoku Life in supporting MuniFin’s Green Bond Framework highlights a strong endorsement of their policy, comments Tanguy Claquin, Global Head of Sustainable Banking at Crédit Agricole CIB.

Further information:

Joakim Holmström
Vice President, Head of Funding, MuniFin
joakim.holmstrom(at)munifin.fi
tel. +358 9 6803 5674

Antti Kontio
Funding Manager & Head of Corporate Responsibility, MuniFin
antti.kontio(at)munifin.fi
tel. +358 9 6803 5634

The paper has been developed by a working group comprising public sector green bond issuers from the four Nordic countries Denmark, Finland, Norway and Sweden. They include the local government funding agencies Kommunalbanken (Norway), Kommuninvest (Sweden) and MuniFin (Finland); the Swedish Export Credit Corporation (SEK); and six Swedish municipal or regional issuers including City of Gothenburg, the municipalities of Lund, Norrköping and Örebro, Region Skåne and Stockholm County Council. Denmark’s municipal lending agency KommuneKredit has been part of the working group but intends to comply at a later stage.

The idea of a harmonised approach to impact reporting came up as Kommuninvest prepared its reporting after launching its debut green bond in 2016. Realising that there would be benefits both to issuers and to investors from a harmonisation of impact reporting efforts, Kommuninvest initiated a working group together with other Nordic issuers.

– What characterises Nordic public sector issuers of green bonds is that we finance projects across a range of categories and sizes, and that we have a limited number of people available to work with environmental reporting. There are some guidelines on impact reporting available in the market today, but we felt a degree of tailoring to regional market and portfolio characteristics were necessary to deliver meaningful reporting, says Björn Bergstrand, Head of Sustainability at Kommuninvest.

– Through this group harmonisation initiative, we ensure transparency and consistency in reporting from the Nordic public sector green bond market. We hope this guide will be useful to other green bond issuers in the Nordic region as well as in other geographies, and to the investor community. We believe it raises the bar for green bonds impact reporting, and we encourage other issuers to build on this so that the market may continue to advance, says Bergstrand.

The paper proposes an outline for reporting environmental benefits of green bond investments. It provides guidance on general matters such as to report on actual impact when feasible, to distinguish between reduced and avoided emissions, and to report impact in relation to the share financed by green bonds. The paper also recommends issuers to report impact in relation to amounts disbursed and outstanding, as opposed to amounts committed.

– This means that if disbursements to a project are made gradually, environmental impact will also be taken into account gradually. Amortisations will gradually reduce the issuer’s reported environmental impact of a project, but will free up capacity to finance new projects, says Bergstrand.

The paper furthermore provides suggestions for metrics and indicators relevant to eight different project categories. This effort builds upon reporting approaches suggested by the Green Bond Principles and multilateral development banks, but adds indicators for categories such as clean transportation and green buildings, that have previously not been addressed.

As a first step toward approaching social impact, the paper includes a few social impact indicators on a ‘nice to have’ basis.

The paper has benefited from input from CICERO Center for International Climate Research, the Nordic Investment Bank, SEB, and Crédit Agricole CIB as well as several investors throughout the process.

The issuer group intends to manage the position paper as a live document, to be updated on a regular basis. The group encourages feedback and will seek to develop its methodology to provide as relevant and appropriate impact reporting as possible. Events to introduce the paper to issuers and investors are planned for a number of cities, with Frankfurt, London, Paris and Stockholm confirmed at time of the launch.

The position paper will be available for download on the signatories’ web pages such as www.munifin.fi, www.kommuninvest.org and www.kommunalbanken.no from 18.00 hrs CET on October 24, 2017.

Comment from Chris Wigley, Senior Portfolio Manager, Mirova:

– This new paper on impact reporting is in tune with the current movement towards greater transparency. It is thoughtful and innovative, and advances research in this field to yet another milestone.

Comment from Christa Clapp, Research Director of Climate Finance, CICERO:

– This impact reporting initiative is impressive, timely and highly welcome. It will clearly facilitate a harmonisation of impact reports in the green bond market. It will also hopefully trigger discussions on how to present impacts to investors when these are not easy to assess.

Comment from Ulf Erlandsson, Senior Portfolio Manager, Strukturinvest Fondkommission:

– We think the Nordic public sector issuers’ position paper is a very effective document for lowering the barriers to issue green bonds. Alignment of green metrics, such as those suggested in this document, also greatly simplifies the green due diligence required for investors to invest.

Comment from Tanquy Claquin, Head of Sustainable Banking, Crédit Agricole CIB:

– Transparency, reliability and consistency of data are critical to further expand the green bond market and sustainable finance in general. In this respect, this Nordic public sector issuers’ initiative is tremendously helpful. It will serve issuers, well outside of the group signatories, and contribute to better practices and exemplarity in the market in general.

Comment from Christopher Flensburg, Head of Climate & Sustainable Financial Solutions, SEB:

– This position paper is an important milestone in securing a better dialogue and enables investors to understand the impact of their investments. It is initiatives like this which will allow finance to proactively contribute to building sustainable societies.

Further information:

Kommuninvest (Secretariat for Position Paper and main contact for questions & comments)
Björn Bergstrand, Head of Sustainability and Senior Investor Relations Manager, +46 708 86 94 76, e-mail: bjorn.bergstrand(at)kommuninvest.se

Kommunalbanken
Sigbjørn Birkeland, Chief Financial Markets Officer, +47 934 80 893, e-mail: sib(at)kbn.org

MuniFin
Antti Kontio, Head of Corporate Responsibility and Manager, Funding, + 358 9 6803 5634, e-mail: antti.kontio(at)munifin.fi

Stockholm County Council
Frida Korneliusson, CEO, Treasury of Stockholm County Council, + 46 707 37 44 20 e-mail: frida.korneliusson(at)sll.se

– We did expect a marked oversubscription as the demand for responsible investments is currently growing. MuniFin enjoys an excellent reputation among investors, and our green framework received a very positive welcome in investor meetings prior to the issue, says Joakim Holmström, Vice President, Head of Funding at MuniFin.

This is by far the most sought after benchmark in the history of MuniFin both measured by the size of the bond. Almost 100 investors participated, which is more than for any other benchmark bond previously offered by MuniFin.

The decision to enter the green bonds market was a strategic one for MuniFin. These bonds can help MuniFin to expand its international investor base while at the same time allowing MuniFin to accelerate the sustainable investments the Finnish municipal sector makes.

A flying start for green financing

MuniFin has offered green financing for its customers’ environmental investments since spring 2016. The project portfolio is currently approaching EUR 1 billion.

– We can already see how the margin discount we offer for these projects is guiding our customers towards more ecological choices when they plan their investments, says Antti Kontio, Manager, Funding and Head of Corporate Responsibility at MuniFin.

MuniFin intends to continue issuing green bonds on a regular basis. The size of the bonds and issuance frequency will depend on the demand for green financing. So far, the demand has been a positive surprise for MuniFin. In the future, sustainable and low-carbon construction projects are expected to account for the most significant growth in the portfolio.

– From the climate impact perspective, we would like to see more renewable energy projects in our portfolio, Antti Kontio comments.

Transaction information

MuniFin’s second green bond was priced on 26 September 2017 and its value date is October 3, 2017. The 500 million 10-year bond was priced 7 basis points below mid-swaps. Fixed coupon for investors is 0.75 % and price 99.724%. The book reached EUR 2.8 billion before closing at 10am CET on 26 September 2017.

The investor base was primarily European. Germany accounted for 24%, Nordics 22%, France 13%, Asia 12% and other Europe 29%. Banks were the largest investor group for 44% followed by insurance/pension funds 25%, central banks and official institutions 20% and asset managers 10%.

Lead arrangers of the bond were BnP Paribas, Credit Agricole CIB, DZ Bank and Nordea.

What is green financing?

Projects for the green portfolio are selected by an external Green Evaluation Team comprised of environmental experts. The selected projects must meet the criteria set forth in MuniFin’s Green Bonds Framework. Projects are given a discount on the margin, depending on the scope of their environmental impacts.

Green projects granted financing >

Further information:

Joakim Holmström, Vice President, Head of Funding
Tel. +358 50 4443 638,  joakim.holmstrom@kuntarahoitus.fi

Antti Kontio, Manager, Funding, Head of Corporate Responsibility
Tel. +358 50 3700 285, antti.kontio@kuntarahoitus.fi

The proceeds of the transaction will be used to finance projects according to MuniFin’s Green Bonds Framework. The current projects in the green financing portfolio consist of public transportation, sustainable buildings, water and waste water management, renewable energy and energy efficiency. 

MuniFin launched its inaugural USD green bond on September 27th, 2016.

Indicative roadshow schedule: 
                                                                
Sep 11th:              Sweden
Sep 12th:              Denmark                             
Sep 13th:              France                               
                                                                
Sep 18th:              Finland
Sep 18th:              UK
Sep 19th:              Netherlands
Sep 20th-21st:     Germany
                                                                
Further information:

Joakim Holmström, Vice President, Head of Funding 
tel: +358 9 6803 5674

Antti Kontio, Manager, Funding, Head of Corporate Responsibility 
tel: +358 9 6803 5634

Further information on MuniFin Green Bonds >

MuniFin investor relations >

Each project is finally approved by an external Green Evaluation Team that consists of three environmental experts. Impact calculations are conducted by Ramboll Finland Ltd. Besides the measurable direct impacts, MuniFin’s eligible green projects also have significant indirect environmental impacts.

The MuniFin Green Bond Report for financial year 2016 covers all eligible green projects, their estimated climate impacts and the green lending development in Finland.

Find out more about MuniFin Green Bond and green lending >

The Climate Bonds Initiative (CBI) is an investor-focused not-for-profit organisation which promotes large-scale investment in the low-carbon economy. The inaugural Green Bond Pioneer Awards were launched in 2016. On 6 March 2017, the second round of awards were published.

MuniFin was awarded in the New Country issuance category. All and all, 16 organisations and financial institutions received the recognition. A panel of external industry based advisers were engaged in the CBI awards process in order to confirm that the awardees had met the objective criteria for inclusion in their categories.

With the Green Bond Pioneer Awards CBI aims to recognise leading financial institutions who have pushed green finance forward and developed the green bonds market through their pioneering initiatives and issuances, providing a positive example of low carbon investment.

MuniFin aims to revolutionise the environmental investment scene in Finland

In 2016, MuniFin issued Finland’s first ever green bond after its green lending solutions were received well by its customers. The company is aiming to issue a green bond every 18 to 24 months.

During the first year of MuniFin’s Green Financing, nearly 20 investment projects worth nearly EUR 450 million received the company’s green financing.

– MuniFin wishes to thank Climate Bonds Initiative for the New Country Green Bond Pioneer recognition. We believe that municipal sector is in key role when it comes to combatting climate change. As the first green lender in Finland, we truly are in a position to ignite the green revolution and raise environmental awareness, says Antti Kontio, who headed the preparation of MuniFin’s Green Bond and is now heading the company’s corporate responsibility activities.

What makes MuniFin’s Green Financing exceptional in the global marketplace is the fact that the lending is offered to customers at a margin discount. With the help of discount, MuniFin encourages its customers to make more pro-environmental choices. The projects’ suitability for the green funding framework is assessed by an independent team of external experts.

About Climate Bonds Initiative >

MuniFin Green Bond >

Finland’s first ever green bond, i.e. a bond earmarked for environmental investments, was launched at the end of September. The bond attracted a great deal of interest already in advance and was oversubscribed within a few hours.

On the bond’s value date – Tuesday, 4 October 2016 – the London Stock Exchange celebrated Finland’s first green bond in a market opening ceremony, which was attended by representatives from Finnish municipal customers, the Ministry of the Environment, the Finnish embassy, joint lead manager banks and MuniFin. The bond is quoted on the London Stock Exchange.

– MuniFin’s lending portfolio largely focuses on investments that can be described as socially or environmentally responsible. However, for the first time we can now earmark the activities funded by investors and tell them what is being achieved with their investments, says Pekka Averio, President and CEO of MuniFin, describing the significance of the Green Bond.

– The new financial instrument encourages municipalities to make sustainable decisions. The public sector makes a significant share of all purchases. Municipalities can encourage clean and energy efficient investments and boost the circular economy with their decisions, emphasises Hannele Pokka, Permanent Secretary at the Ministry of the Environment.

– The Finnish municipal sector is quickly becoming aware that environmental investments should be increased, and when initiatives are planned, broader account should be taken of their climate impact. To help the municipal sector absorb the change faster, we are offering more affordable funding for pioneering projects, Averio says.

Wide range of environmental initiatives: from Länsimetro to school buildings

MuniFin’s framework for green financing specifies the sectors of environmental investment that are eligible for the more affordable green funding. The categories included are renewable energy, public transport, sustainable buildings, water and waste water management, energy efficiency, waste treatment, and environmental management and conservation.

When we look at the projects funded so far, Länsimetro has received the most funding. Looking at the number of projects, most of them are related to sustainable construction and energy efficiency.

A lion’s share of sustainable building investments are related to school buildings. One such project is Tuupala’s wooden school in Kuhmo.

– Tuupala’s new wooden school is a national pilot project, which is also expected to become an international reference case. The completely wooden school building is energy efficient, and its district heating solution is based on bioenergy. Kuhmo is also a genuine bioeconomy success story in other respects: almost 70 per cent of energy used in the town is renewable primary energy, which is among the highest rates in the world, says Eila Valtanen, Mayor of Kuhmo.

The new Tyrnävä primary school will also be built with green funding.

– The school at Rantarousti is a wonderful example of our strategy – which is based on bioeconomy, circular economy and lifecycle efficiency – being put into practice. The new Rantarousti school will be heated with geothermal energy, and solar panels will generate some of the electricity used. The lifecycle efficiency imperative shows in the innovative space arrangements and choice of materials. Tyrnävä has decided to become a HINKU municipality, meaning that it aims at a major reduction in its carbon footprint within the next few years. The choices made for the new school support this aim, says Marjukka Manninen, Mayor of Tyrnävä.

An internationally rare feature in the assessment of MuniFin’s green funding is the fact that the projects’ suitability for the green funding framework is assessed by a group of external specialists. The total value of the green projects funded so far is approximately 400 million euros; in addition, several other investments are being considered for funding.

Further information:

Pekka Averio, President and CEO, MuniFin
tel. +358 500 406 856