Klas Eklund

Green Bonds January 28, 2017

Green Bonds

Green Bonds are any type of bond instrument

where the proceeds will be exclusively applied
to finance or re-finance new and/or existing
eligible Green Projects

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Green Bonds driven by investor demand
1500 investors with AUM of USD 62 trillion aim to integrate ESG in their investment decisions

Increasing number of investors sign the 6 Principles for Responsible Investments (PRI) (1)

1 Incorporate ESG(2) into investment analysis and decision making process

2 Incorporate ESG into ownership policies and practices

3 Seek appropriate disclosure on ESG by entities in which we invest

4 Promote acceptance and implementation of the Principles within the industry

5 Work together to enhance our effectiveness in implementing the Principles

6 Report our activities and progress towards implementing the Principles

Number of signatories Assets under management (USDtn) (right axis)

70
1.600 62
59
60
1.400

1.200 45 50

1.000 40
34
32
800
24 30
600 21
18
20
400 13
10
6,5 10
200

0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Unpri.org
(1) PRI is an investor driven initiative in partnership with UNEP Finance Initiative and the UN Global Compact
(2) ESG=Environmental, Social & Governance 2
What kind of projects?
Energy efficiency and renewables) are driving the market at the moment. Some areas are excluded
despite low environmental impact (e.g nuclear power is low-carbon but not Green Bond eligible)
 Renewable Energy
 Energy Efficiency
 Pollution Prevention and Control
 Sustainable Management of
Living Natural Resources
 Terrestrial and Aquatic
Biodiversity Conservation
 Clean transportation
 Sustainable Water Management
 Eco-efficient Products,
Production Technologies and
Processes
 Climate Change Adaptation
 Wind, solar etc.
 Related infrastructure
 Building efficiency incl. environmental certification systems
 Smart Grids
 Waste water management
 Recycling and waste-to-energy
 Sustainable agriculture
 Sustainable forest management
 Protection of coastal, marine and watershed management
 Nature reserve management
 Public transportation and related infrastructure
 Alternative fuel vehicles
 Infrastructure for clean and / or drinking water
 Energy recovery from waste water
 Eco labelled and certified products
 Resource efficient packaging and distribution
 Flood protection
 Disaster early warning systems
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Where is Green Bond money used?

Source: Climate Bonds Initiative. The State of the Market in 2016

The Green Bond Principles – a voluntary guideline
A consortium of major banks in 2014 developed a set of voluntary guidelines called the Green Bond
Principles, “GBP”. These are continuously updated.

Use of Proceeds: Issuer should declare the eligible

green project categories upfront, providing clear
environmental benefits.
Use of
Process of Selection: Issuer should outline the Proceeds
process of selection and work to establish impact
objectives.

Management of Proceeds: Funds should be

Process for
segregated or otherwise tracked. External auditors Core Green Project
should verify. Reporting Bond Principle Evaluation and
Components Selection
Reporting: Issuers should report at least annually on
projects and where feasible, the impact of the specific
investment.

External Review: The GBP encourage a high level of Management of

transparency and recommended that issuers use an Proceeds
external review to confirm the alignment of their Green
Bonds with the key features of the GBP.
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Five pillars of the Green Bond framework

1 Simplicity – Scalability

2 Governance – selection process

3 Credibility – vetting of Green

4 Traceability – earmarked account

5 Transparency – reporting

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Five steps

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A typical Green Bond issuance process
1. Internal decision to finance Green Projects with Green Money
 Who is the internal driver: treasury – sustainability – management?
2. Prepare a Green Bond Framework - define what is green
 Can/will financial and environmental divisions must join forces?
 Volume vs. quality, broad and comprehensive or narrow and quick, level of specification?
3. Establish a process for selecting eligible projects
 Integrate environmental competence in the decision process
 If needed, in-source adequate environmental competence
4. Secure verification - get a Second Opinion
 Choice of Second Opinion provider – most demanding/quickest/cheapest?
 Chance to adjust Framework based on critical feedback from external, environmental experts
5. Safeguard monitoring by establishing an earmarked account for proceeds/allocation
 Practical but prudent
6. Commit to transparency with regards to use of proceeds
 How much impact reporting can the issuer commit to?
 Additional work or synergies with other reporting and communication?
7. Coordinate communication, internal as well as external
 Press release, web page and intra net, add in business paper, conferences and events
8. Prepare the transaction to maximize beneficial impact
 Maximize investor diversification, road show, maturity etc.
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 Quality assurance through Second opinions
Second opinion providers for outstanding Green Bonds in the
 The Second opinions are done by scientists market (volume) as at 31 Dec 2015

within climate research

 CICERO (Center for International Climate and
Environmental Research in Oslo) has
introduced “Shades of Green” for their Second
opinions to enhance transparency around their
evaluation
 CICERO remains the largest second opinion
provider to Green Bond frameworks in the
market Source: Bloomberg & SEB

CICERO’s Shades of Green

Dark Green Implementing a 2050 climate solution today

Example: Investments in renewable energy such as solar or wind

On the way to a 2050 climate solution

Medium Green
Example: Investments in sustainable buildings with good energy efficiency ratings

Short-term gains but not a long-term climate solution

Light Green Example: Energy efficiency improvements in industry that result in short-term reductions of
greenhouse gas emissions but do not shift away from a fossil fuel-based economy

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 Green Bonds: Global market update
Amount issuance per year and sector (USD bn) (1) Regional issuance Amount issued by currency
Left: USDbn 2016 Right: Market share (2) 2007– 2016 (USDbn) (3)
100
USD 88 Bn
90 35 40% AUD CAD BRL INR
ABS 1% 1% 1% 1%
80 30 35% GBP OTHER
Project 3% 2%
70 30% SEK
US Municipal 2013-2016 25
60 5%
Corporate 25%
70% CAGR 20
50
SSA 20%
40 15 CNY USD
15% 13% 46%
30
10
10%
20
5 5%
10
EUR
0 0 0% 27%

FR

MX
IN
ROW
US
SNAT
CN

DE
NL
SE
ES
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Market growth 2014-16 / Average month-on-month issuance change Regional

Currencyissuance 2016 vs
composition H12015
2015(USD bn) USD)
(volume
USD Bn % change
100 120%
90 USD 88 Bn
100%
80 80%
70
60%
60
40%
50
20%
40
0%
30
20 -20%

10 -40%
0 -60%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg issuance % change MoM (15/16) 2016 2015 2014

Source: SEB analysis based on Bloomberg data (See BNEF Bloomberg Terminal Guide (2016) for Green Bond definitions, methodology and inclusions/exclusions)

Notes: (1) ABS = Asset Backed Securities; SSA = Sovereign, Supranational and Agency (2) *Excludes USD 5bn of Bloomberg relabelled where currency N/A; SNAT = Supranational issuer; ROW = Korea,
Poland, Norway, Japan, Australia, Canada, Brazil, Croatia, Finland, Turkey and Italy (3) OTHER in order of volume = NOK, ZAR, JPY, TRY, NZD, CHF, MXN, IDR, RUB, COP, PEN, HUF, PLN, MYR
SEB and the Global Green Bond market
Selected Green Bond issues underwritten by SEB Top 10 Green Bond underwriters 2016 (USDmn)
Volume Number of issues

8.000 45

7.000 40

6.000 35
30
5.000
25
4.000
20
3.000
15
2.000 10
USD 1billion USD 500m SEK 3,250m USD 250m 1.000 5
0.625% fixed bond 0.750% fixed bond 3.500% fixed bond 1.625% fixed bond
November 2016 October 2016 November 2014 April 2018 0 0
Joint Lead Joint Lead Sole Lead Joint Lead BAML CACIB JPM SEB HSBC BoC Guotai ICBC CICC CCB

Source: Bloomberg

Top 10 Green Bond underwriters 2007- 2016 (USDbn)

18
5 year SEK 850m 5 year SEK 1bn/500m USD 500m
FRN 2.500% / FRN 0.750% fixed bond
SEK 2,100m 16
3.000% fixed bond
April 2019 April 2019 Nov 2016
April 2019
14
Sole Bookrunner Sole Bookrunner Joint Lead
Joint Lead 12
10
8
6
4
2
SEK 1,300m
USD 300m
USD 500m 0
1.774% / FRN 1.750% fixed bond
0.875% fixed bond
May 2016 February 2018
January 2017
Sole Lead Joint Lead
Joint Lead

Source: Bloomberg

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SEB and the Nordic Green Bond market
Selected Green Bond issues Top Nordic Green Bond Underwriters 2007 - 2016 (USD bn)

16,0
14,0
5 year SEK 850m 5 year SEK 1bn/500m 12,0
FRN 2.500% / FRN
April 2019 April 2019 10,0
Sole Bookrunner Sole Bookrunner
8,0
6,0
4,0
2,0
SEK 500m USD 500m USD 300m USD 250m
2.915% fixed bond/ FRN 0.750% fixed bond 0.875% fixed bond 1.625% fixed bond 0,0
October 2019 October 2016 January 2017 April 2018
Sole Lead Joint Lead Joint Lead Joint Lead SEB Swedbank SHB Nordea Danske Bank DNB
Source: Bloomberg

Top Nordic Green Bond Underwriters 2007 - 2016

USD 1billion USD 550m USD 500m

SEK 2,100m
0.625% fixed bond 0.375% fixed bond 0.750% fixed bond
3.000% fixed bond
November 2016 Aug 2015 Nov 2016
April 2019
Joint Lead Joint Lead Joint Lead
Joint Lead

SEK 500m SEK 1,300m SEK 3,250m USD 500m

2.750% fixed bond 1.774% / FRN 3.500% fixed bond 1.750% fixed bond
September 2032 May 2016 November 2014 February 2018
Joint Lead Sole Lead Sole Lead Joint Lead

Source: Bloomberg

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Summary: The benefits of Green Bonds

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