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Bond spotlight

Nordea SLLB: driving for a sustainability-linked future

Written by Josephine Richardson

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In June 2022, Nordea, a Nordic bank headquartered in Helsinki, published its Sustainability-Linked Loan Funding Framework.

The structure designates capital to fund Sustainability-Linked Loans (SLL) on Nordea’s balance sheet, subject to eligibility criteria, and so is called a “Sustainability Linked Loan Bond” (SLLB).

In September 2022, Nordea issued SEK2.8bn and NOK1.3bn under the framework, split across three-year and five-year maturities. In August 2023, a €1bn three-year bond was priced, tripling the total volume of SLLBs outstanding. The large euro-denominated deal in 2023 has drawn greater attention to the framework’s structure.

We believe that this is an innovative development for the sustainability-linked debt market, offering sustainability-linked investment opportunities to Financial Institution Group (FIG) investors, a group who traditionally have not been able to get such exposure.

Also, the eligibility of an SLL must be verified by an external review, and so this structure serves to increase scrutiny. Lastly, however, the pricing seems not to have been that compelling for Nordea.

It is reported to have required an 8bp concession, and one month on, it is still trading in line with grey bonds, with green bonds significantly tighter. For the product to grow, pricing benefits for issuers are needed to offset the ongoing management costs.

About the author

Josephine Richardson

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

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