NIB at Folkemødet: Green bonds contribute to climate friendly investments

On Friday 12 June, NIB arranged a panel debate on environmental bonds at Denmark’s People Meeting, Folkemødet, on Bornholm. The NIB Newsletter asked the participants how the financial markets can contribute to green growth

Connie Hedegaard, Chair, KR Foundation

It is a major challenge to direct investment flows from black projects to green projects. Green bonds could very well be a way to achieve this: Especially so if issuers of green bonds could make it very clear what kind of environmental projects the funds help finance. If properly done, I think further demand of green bonds could increase a lot.

Naturally, there are extra costs related to issuing green bonds and making sure that the projects they finance really are green. However, there is also a cost related to continuing with business as usual.

Gitte Seeberg, Secretary General, Danish branch of WWF

The financial sector obviously contributes actively to creating a green economy by shifting investments from fossil fuels to green energy. That makes sense in terms of both the climate and the economy. We have still to come up with a global climate agreement.

Luckily, businesses and cities are increasingly participating in the battle to protect the climate, and capital markets have also an important role to play, which can inspire the world’s governments to ambitious actions.

Peter Damgaard Jensen, CEO, PKA

Transforming the economy into a more sustainable direction requires massive investments. These investments cannot solely be made by public authorities. A massive amount of investments will take place within infrastructure, for instance in the energy sector. There is, therefore, a need for the financial market to deliver such investments.

In the pension sector, we are looking for long-term investments that provide stable long-term returns. Green, or sustainable, investments often qualify for such investments. PKA has therefore invested about 5 billion Danish kroner directly in offshore wind farms. We have also invested in solar energy and hydropower through funds, and in climate projects in developing countries via the Danish Climate Investment Fund along with the Danish Government and other pension funds.

Finally, we have invested approximately DKK 1 billion in green bonds, including environmental bonds issued by NIB. For PKA, it is important that our green investments are spread over products and regions that balance risk.

Jens-Christian Stougaard, Director – SRI, PensionDanmark

Investors can contribute by investing responsibly and being active owners. For PensionDanmark, responsible investing means protecting the value of our investments. We do this by including climatic, social and governance factors that may affect the value of our investments, both now and in the future.

We also take co-responsibility for some of the world’s major challenges, including climate change. We contribute by investing in renewable energy and participate in various initiatives to devise solutions to create better opportunities for investing in climate-friendly solutions. This way we also contribute to the sustainable development of the global community, of which we are a part.

However, PensionDanmark is of the opinion that excluding entire sectors whenever challenges arise is no solution. We assess individual companies and the viability of their business model, we engage in dialogue and see participation as an important tool to guide the business in the right direction.

Henrik Normann, President and CEO, NIB

NIB finances projects that improve competitiveness and the environment in the Nordic and Baltic countries. We acquire the funds for our lending by borrowing on the international capital markets. As part of this, we also issue environmental bonds to finance projects that contribute significantly to the protection of the environment and ecosystem services, especially around the Baltic Sea.

The road to a low-carbon and otherwise sustainable economy needs financing, and environmental bonds are a way for international financial institutions, such as NIB, to show investors which projects contribute to this objective.

Environmental bonds are part of NIB’s DNA due to our potential for providing climate finance to help with the transition to a low-carbon economy. We review all projects from the sustainability perspective.

We also think it is important that green bonds really are green, and that they do not come in any shades of other colors. NIB is therefore involved in developing Green Bond Principles with our partners in the International Capital Market Association.