Green Bonds Klas Eklund 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

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

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

1500 investors with AUM of USD 62 trillion aim to integrate ESG in their investment decisions

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

Incorporate ESG into ownership policies and practices 2

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

Promote acceptance and implementation of the Principles within the industry 4

Work together to enhance our effectiveness in implementing the Principles 5

Report our activities and progress towards implementing the Principles 6

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6,5 10

13

18 21

24

32 34

45

59 62

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20

30

40

50

60

70

0

200

400

600

800

1.000

1.200

1.400

1.600

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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

Renewable Energy Wind, solar etc.

Related infrastructure

Energy Efficiency Building efficiency incl. environmental certification systems

Smart Grids

Pollution Prevention and Control Waste water management

Recycling and waste-to-energy

Sustainable Management of

Living Natural Resources

Sustainable agriculture

Sustainable forest management

Terrestrial and Aquatic

Biodiversity Conservation

Protection of coastal, marine and watershed management

Nature reserve management

Clean transportation Public transportation and related infrastructure

Alternative fuel vehicles

Sustainable Water Management Infrastructure for clean and / or drinking water

Energy recovery from waste water

Eco-efficient Products,

Production Technologies and

Processes

Eco labelled and certified products

Resource efficient packaging and distribution

Climate Change Adaptation Flood protection

Disaster early warning systems

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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)

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.

Core Green Bond Principle Components

Use of Proceeds

Process for Project

Evaluation and Selection

Management of Proceeds

Reporting

Use of Proceeds: Issuer should declare the eligible

green project categories upfront, providing clear

environmental benefits.

Process of Selection: Issuer should outline the

process of selection and work to establish impact

objectives.

Management of Proceeds: Funds should be

segregated or otherwise tracked. External auditors

should verify.

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

transparency and recommended that issuers use an

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

Simplicity – Scalability 1

Governance – selection process 2

Credibility – vetting of Green 3

Traceability – earmarked account

4

Transparency – reporting 5

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Five steps

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A typical Green Bond issuance process

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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

CICERO’s Shades of Green

The Second opinions are done by scientists

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

Implementing a 2050 climate solution today

Example: Investments in renewable energy such as solar or wind Dark Green

Medium Green

Light Green

On the way to a 2050 climate solution

Example: Investments in sustainable buildings with good energy efficiency ratings

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

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

Source: Bloomberg & SEB

Second opinion providers for outstanding Green Bonds in the

market (volume) as at 31 Dec 2015

Green Bonds: Global market update Amount issuance per year and sector (USD bn) (1)

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

Regional issuance

Left: USDbn 2016 Right: Market share (2)

Currency composition H1 2015 (volume USD) Regional issuance 2016 vs 2015 (USD bn) Market growth 2014-16 / Average month-on-month issuance change

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30

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

ABS

Project

US Municipal

Corporate

SSA

2013-2016

70% CAGR

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

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50

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70

80

90

100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Avg issuance % change MoM (15/16) 2016 2015 2014

% change USD Bn

USD 88 Bn

Amount issued by currency

2007– 2016 (USDbn) (3)

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25

30

35

CN

US

SN

AT

FR

DE

NL

SE

ES

MX IN

RO

W

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

USD 46%

EUR 27%

CNY 13%

SEK 5%

GBP 3%

AUD 1%

CAD 1%

BRL 1% INR

1% OTHER

2%

USD 88 Bn

SEB and the Global Green Bond market

Source: Bloomberg

Source: Bloomberg

Top 10 Green Bond underwriters 2007- 2016 (USDbn)

Selected Green Bond issues underwritten by SEB

SEK 2,100m

3.000% fixed bond

April 2019

Joint Lead

USD 500m

0.750% fixed bond

October 2016

Joint Lead

USD 300m

0.875% fixed bond

January 2017

Joint Lead

USD 250m

1.625% fixed bond

April 2018

Joint Lead

USD 1billion

0.625% fixed bond

November 2016

Joint Lead

SEK 1,300m

1.774% / FRN

May 2016

Sole Lead

SEK 3,250m

3.500% fixed bond

November 2014

Sole Lead

USD 500m

1.750% fixed bond

February 2018

Joint Lead

USD 500m

0.750% fixed bond

Nov 2016

Joint Lead

5 year SEK 1bn/500m

2.500% / FRN

April 2019

Sole Bookrunner

5 year SEK 850m

FRN

April 2019

Sole Bookrunner

Top 10 Green Bond underwriters 2016 (USDmn)

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02468

1012141618

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5

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15

20

25

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35

40

45

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

BAML CACIB JPM SEB HSBC BoC Guotai ICBC CICC CCB

Volume Number of issues

SEB and the Nordic Green Bond market

Source: Bloomberg

Source: Bloomberg

Top Nordic Green Bond Underwriters 2007 - 2016

Selected Green Bond issues

SEK 500m

2.750% fixed bond

September 2032

Joint Lead

SEK 2,100m

3.000% fixed bond

April 2019

Joint Lead

SEK 500m

2.915% fixed bond/ FRN

October 2019

Sole Lead

USD 500m

0.750% fixed bond

October 2016

Joint Lead

USD 300m

0.875% fixed bond

January 2017

Joint Lead

USD 250m

1.625% fixed bond

April 2018

Joint Lead

USD 1billion

0.625% fixed bond

November 2016

Joint Lead

USD 550m

0.375% fixed bond

Aug 2015

Joint Lead

SEK 1,300m

1.774% / FRN

May 2016

Sole Lead

SEK 3,250m

3.500% fixed bond

November 2014

Sole Lead

USD 500m

1.750% fixed bond

February 2018

Joint Lead

USD 500m

0.750% fixed bond

Nov 2016

Joint Lead

5 year SEK 1bn/500m

2.500% / FRN

April 2019

Sole Bookrunner

5 year SEK 850m

FRN

April 2019

Sole Bookrunner

Top Nordic Green Bond Underwriters 2007 - 2016 (USD bn)

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0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

SEB Swedbank SHB Nordea Danske Bank DNB

Summary: The benefits of Green Bonds

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