ESG in treasury portfolio
NIB favours issuers with business models that support sustainable development. We have therefore set a target rate for holdings in the liquidity bond portfolio for sustainable bonds, which are green- social, sustainable- or sustainability-linked bonds as defined in the principles and guidelines published by International Capital Markets Association (ICMA). Other labelled sustainable bonds, such as those under the EU green bond standard (EUGBS) will be considered when available.
At the end of 2024, the share of sustainable investments in our liquidity bond portfolio was 13.9%, exceeding the target of 12.5%. We aim to reach 15% by end of 2025.
Portfolio characteristics
Sustainable bond investments are conducted as part of the normal liquidity portfolio investments, and they follow the same portfolio guidelines concerning credit, liquidity and ESG requirements as the rest of the liquidity portfolio. However, given that sustainable bond market issuance is very much concentrated to the SSA issuer sector, the portfolio asset characteristics differ slightly from the rest of the liquidity portfolio.
Impact reporting
As the share of sustainable investments has increased in recent years, our investments to sustainable bonds have enabled issuers to mobilise capital for sustainable projects and to achieve the impacts targeted in their sustainable bond frameworks.
Where possible, NIB has started to report those impacts which our investments have enabled. Although issuers of sustainable bonds are committed to report the impacts, there are challenges with the available data. Those are, among other things, the wide range of various KPIs, differences in reported units and the fact that reporting standards are not unified from one issuer to another. There is also a lag period of one year for the impact reporting by the issuers. Furthermore, most of the recently issued sustainable bonds have not yet generated impact as the projects they finance are often at such an early stage in their lifecycle.
While impact data is provided by the issuers, it is collected, classified, and assessed by an independent sustainability adviser, MainStreet Partners. The contribution of each investment to the KPI’s is prorated based on its average holding period within the portfolio over the year. MainStreet Partners’ proprietary methodology is outlined, at a high level, in the methodological note.
Enabled impacts per EUR 1 million invested, in 2023
NIB has decided to report the impacts by using the five most commonly used KPI’s. For comparison reasons, all values are intensity based, per one million euro invested and includes impacts enabled in year 2023. Absolute impacts are thus achieved by multiplying the intensity based reported impacts values by portfolio size of EUR 1,143 million, which was the nominal size of the holdings as of 31.12.2023. For sustainable bonds acquired in 2023, NIB’s time-based approach accounts only for the portion of the annual impact corresponding to the period the bond was held in the portfolio.
Investments in sustainable bonds issued during 2024 are excluded from the report as those will be reported in the following year after all impacts reports for 2024 have been published by the respective issuers.
Three quarters of NIB’s sustainable bond holdings are allocated to the five use of proceeds categories shown below, with green buildings being the single largest category.
The majority of the in-scope exposure is aligned with the EU taxonomy, of which 7.0% was aligned to enabling activities and 12.6% aligned to transitional activities.
Portfolio remains well diversified in terms of geography, with France representing the largest country by use of proceeds, followed by Finland and Sweden.
In terms of the distribution and frequency of sustainable development goals (SDG), SDG 11, Sustainable cities and communities, is the most frequent in NIB’s portfolio.
Liquidity management
The Bank’s target is to ensure a sufficient level of liquidity to be able to continue disbursing new loans and fulfil all its payment obligations for at least one year ahead, without additional new funding.
Risk management
NIB’s risk management takes into account risk-bearing capacity, willingness to take risks, and minimum quantitative requirements for capital, leverage and liquidity.
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Environmental bonds
The proceeds of NIB Environmental Bonds are used for the Bank’s environmental lending.
Investments in bonds
We invest in bonds to complement ordinary lending and support the development of the capital markets.
About us
NIB is the international financial institution of the Nordic and Baltic countries.