Nordea debut takes green bonds to new pricing records

Nordea took green bonds to a new tight with the launch of a EUR500m five year senior unsecured green debut on Monday that achieved pricing some 4bp through the Swedish group’s regular issuance and the lowest spread on any five year senior unsecured benchmark in a decade.

Leads BNP Paribas, HSBC and Nordea launched the EUR500m (SEK4.78bn) no-grow five year deal after a four day roadshow last week, opening books with initial price thoughts of the 25bp over mid-swaps area. Guidance was revised to 20bp plus or minus 2bp, will price within range, and the paper was re-offered at 18bp over mid-swaps on the back of around EUR1.3bn of demand.

“The transaction represents the tightest spread for a euro senior unsecured green bond to date,” said Nordea, “which is driven by the unique combination of Nordea’s strong credit quality, the strength of Nordea’s green bond framework and the oekom second opinion.

“It is also the tightest spread offered on a five year senior unsecured issue in a decade.”

The lead managers also saw the pricing as equivalent to around 4bp through Nordea’s on-the-run secondary curve.

Over 100 accounts participated in the deal and 72% was allocated to dedicated green investors, with Nordea saying this highlights strong diversification versus the traditional senior unsecured investor base.

Asset managers took 53%, insurance companies and pension funds 23%, central banks 13%, and banks 11%. France was allocated 27%, the Nordics 22%, Germany and Austria 15%, the Benelux 13%, the UK and Ireland 13%, and others 10%.

The issuer said the green bond is a natural step in the process to manifest its increased level of ambition in the sustainability area, after it last year set up a business ethics and values committee chaired by CEO Casper von Koskull, appointed a new head of sustainability, and set new sustainability goals.

“I am delighted to see a very tangible effort that shows our commitment to deliver on our sustainability agenda and work towards a greater good in line with our purpose,” said von Koskull after the green bond issue.

The bond’s proceeds will be used to finance assets that have been selected according to the issuer’s green bond framework, which meets the Green Bond Principles. Oekom research provided a second party opinion and verification of the assets, giving an overall “positive” evaluation.

The green bond asset portfolio includes at launch categories including renewable energy, green buildings, and pollution prevention and control, while others that are allowed but not represented initially include energy efficiency, clean transportation, and sustainable management of living natural resources (such as sustainable forestry and agriculture). The portfolio totalled EUR807m at as of 1 June.

“From a sustainability point of view, this variety (of use of proceeds) is also considered positive as economic diversity is fostered,” said oekom.

Nordea itself has a company rating of C (Prime status) from oekom, an ESG score of 89 (out of 100) from Sustainalytics, and an MSCI ESG rating of A (in a AAA to CCC range). Oekom’s rating puts Nordea in 17th place out of 250 companies it rates in the financials/commercial banks and capital markets sector.

“In all key issues, Nordea achieved a rating that was above the average for the sector,” it said. “A very significant outperformance was achieved in ‘sustainable investment criteria’ and ‘business ethics’.”

Nordea is rated Aa3/AA-/AA- by Moody’s, S&P and Fitch.

ABN AMRO