MuniFin has taken another significant step in the Nordic green finance market by issuing its inaugural green bond in Swedish krona (SEK). The successful SEK 4 billion issuance represents the largest green transaction outside EUR and USD benchmarks for MuniFin.
On Tuesday, 12 November, MuniFin issued its first SEK green bond. The SEK 4 billion bond carries a fixed annual coupon of 2.4825% and matures 19 November 2029. Danske Bank acted as the sole manager for this transaction.
“We congratulate MuniFin with their SEK 4 billion 5y green bond and the first green bond for MuniFin SEK. Today’s transaction confirms the continued interest in green format from investors in an otherwise challenging market, and combined with a solid issuer it proves to be the right strategy in the current market environment”, says Bo Søndergaard, Head of SSA at Danske Bank.
This issuance follows MuniFin’s debut in the Norwegian krone market in September, where it launched its first NOK 2 billion green bond. The new SEK bond is MuniFin’s fourth ESG-labelled issuance this year.
“The Scandi market has been favourable to us this year, and we are excited to expand our green offerings into yet another currency. I want to thank all our investors and customers who make it possible for us to grow our green finance in line with our Sustainability Agenda”, says Lari Toppinen, Senior Analyst at MuniFin.
After this transaction, MuniFin is very close to reaching its 9 billion long-term funding target for the year.
Transaction details
Issuer:
Municipality Finance
Issuer Rating:
Aa1/AA+ (Stable/Stable, Moody’s/S&P)
Format:
Senior Unsecured Green Bond
Size:
SEK 4 bn
Settlement Date:
19-Nov-2024 (T+5)
Maturity Date:
19-Nov-2029
Reoffer:
MS+26.75 / 2.4825% / 100.000%
Coupon:
2.4825%, Fixed, Annual, 30/360
Listing:
NASDAQ Helsinki
ISIN:
XS2942472205
Lead Manager:
Danske Bank
Green bonds fuel Finland’s green transition
MuniFin’s green finance, funded with green bonds, is offered to select projects across Finland that are friendly for the climate and environment. Our green finance has four project categories: buildings, transportation, renewable energy and water and wastewater management.
Our USD 1 billion green bond, issued on October 8, marked a milestone tenth green bond issuance for MuniFin. We issued our first green bond in 2016 and have been pioneering green finance in Finland ever since.
MuniFin issues both green and social bonds. The total outstanding balance for these funding instruments is over EUR 4.5 billion.
“The share of green and social finance is growing at a good pace and in line with our targets. Both clients and investors are increasingly attentive to questions about sustainability. Reaching ten green bonds issued is the result of hard work and long-term development from our team: we are most pleased to be able to call ourselves pioneers of sustainable finance in Finland”, MuniFin’s Executive President, Capital Markets and Sustainability Joakim Holmström states.
In 2023, of our long-term financing 14.6% was green and 6.8% social finance. In our sustainability agenda, published the same year, we set our sights on raising the share of sustainable finance to one third by 2030.
The sustainability agenda also sets the target to reduce the emissions from financed buildings. Out of all Finland’s greenhouse gas emissions, more than 40% come from buildings and the construction industry: this means repair construction and energy-efficient construction have significant potential to help Finland in its national emission reduction targets.
“Green and social bonds are an integral part of our funding strategy, and we aim to issue at least one green or one social bond each year. These bonds have been in high demand among our investors: our latest green bond garnered the largest order book in MuniFin’s history with USD 5.5 billion”, Holmström describes.
Our issuances have received recognition also beyond Finland. In December 2023, the UK-based CMD Portal awarded MuniFin as the Best SSA ESG Bond Issuer, and as the runner-up in the Best ESG Issuer category. MuniFin has also won Environmental Finance’s Green bond of the year award on three occasions, the latest one coming in 2022.
MuniFin is Finland’s pioneer in sustainable finance
In 2016, MuniFin launched green finance for projects that are friendly for the climate and environment. We were the first Finnish financial institution to issue green bonds and offer green finance.
In 2020, we complemented green finance by launching social finance, which is offered for projects that promote equality, communality, safety, welfare or regional vitality. We were the first issuer of social bonds in Finland.
These bonds are an integral part of our funding strategy. Both green and social bonds have their own frameworks.
Nordic countries have made significant headway toward the green transition, but can they keep up with the U.S. and China? In the latest episode of MuniFin’s podcast, Chief Economist Timo Vesala invited experts to discuss the untapped potential of the green transition and how Finland stands to benefit from it.
The Confederation of Finnish Industries (EK) keeps track of investment plans relating to the green transition in Finland. Compared to last year’s figures, there has been a massive increase from EUR 150 billion to EUR 272 billion in potential investments. While not all these projects will come to fruition, Janne Peljo, Chief Policy Adviser, Climate and Biodiversity at EK, estimated that EUR 58 billion worth of projects could be realised by the end of this decade.
While Finland trails behind Sweden in green transition, Peljo underscored that the country boasts unique assets on a global scale.
“When it comes to energy-intensive investments, our core strength is the availability and affordability of clean electricity as well as a reliable electricity grid. As for hydrogen economy investments, Finland and Sweden are European superpowers in the availability of bio-CO2,” Peljo said.
EU is ramping up green transition efforts
The guests discussed the EU’s strategy to keep up with the competition from clean energy world leaders, the United States and China.
“In recent years, the green transition has been driven more by the economy and technology than political leadership. The United States and China have got a head start while the EU has been lagging in green investments. Recently, EU politicians have emphasised the need for increased competitiveness, expedited permits, and responding to capital needs”, said Jaakko Haikonen, Senior Advisor at The Finnish Confederation of Professionals STTK.
Towards the end of his presidency, President Joe Biden passed a substantial climate package that set new changes in motion. Regardless of the outcome of November’s election, U.S. leadership in clean energy is unlikely to waver substantially, given that the transition is headed by technology and industry efforts rather than politicians. Haikonen also reminded that support for clean energy transcends party lines, with Texas, a traditionally Republican state, leading all other states in this transition.
The next decade will prove crucial
Even though Finland has remarkable potential in the green transition, it is yet to be fully realised. Janne Peljo gave multiple explanations for the stagnation, such as the manufacturing downturn in Europe, inflation, and high interest rates.
To attract foreign investments, Finland is preparing tax subsidies for large industrial investments that promote the green transition. Both Peljo and Haikonen lauded the tax incentives as a much-needed tool to speed up investment decisions and acknowledged the need to ease permit processes.
“We need to expedite technically challenging industrial investments. The faster they happen, the more likely we are to succeed in attracting more of them. We can turn our dependable authorities and political system into a competitive advantage for Finland,” Peljo said.
MuniFin has released its first financed emissions report, disclosing the greenhouse gas emissions associated with its lending and investment portfolios. The report provides emissions data for 2020, 2021, and 2022, and the calculations for 2023 are ongoing.
“We are happy to disclose these calculations, and the results show that we are on the right track in reducing the emissions from financed buildings. However, the work continues and the development of reporting will proceed as part of implementing the CSRD directive”, says Mikko Noronen, Sustainability Manager at MuniFin.
MuniFin joined the Partnership for Carbon Accounting Financials (PCAF) in 2022, committing to measure and disclose the greenhouse gas emissions associated to its lending and liquidity portfolios by 2025.
PCAF is a collaborative, industry-led initiative with more than 400 members, aimed at developing and implementing a harmonised approach to assessing and disclosing greenhouse gas emissions from loans and investments. The goal is to align financial portfolios with the Paris Agreement.
Sustainability Agenda sets the direction until 2035
In October 2023, MuniFin published its Sustainability Agenda, committing to support a sustainable welfare society and promote climate-friendly and environmentally sustainable investments. The agenda includes increasing the proportion of sustainable finance in its lending portfolio and setting emission reduction targets for financed buildings.
Financed emissions represent 99% of all emissions associated with our business. By focusing on reducing these indirect emissions rather than just our direct impact, the scale of our influence is much larger.
“Our customers play a key role in achieving Finland’s climate targets. In our operations, the largest impacts are through the financing we provide to our customers. To succeed in our goals, we need to continue supporting our customers in their ambitious work towards a greener future”, Noronen concludes.
MuniFin, rated AA+, made history with its fifth benchmark of the year. The green 5-year benchmark garnered an astonishing USD 5.5 billion order book, representing the largest one ever for MuniFin.
On Tuesday, 1 October, MuniFin announced a mandate for a new USD 1 billion (no-grow) green bond with initial price thoughts in the MS+50 bps area. The demand was exceptionally strong from the outset, and the spread was tightened twice by 2 bps the following morning, setting it at +46 bps.
The books eventually closed above USD 5.5 billion, setting a record for MuniFin.
“We are excited to return to the green USD market with a 1 billion benchmark, reflecting the continuous growth of our green finance portfolio. The strong investor demand reaffirms the USD market’s strength. Thank you to our investors and joint lead managers for making this happen”, says MuniFin’s Senior Analyst Aaro Koski.
“Congratulations to the MuniFin team on a well-timed and executed USD green transaction. The depth and diversity of the order book are a testament to MuniFin’s global appeal and longstanding conventional and ESG investor bases. We are delighted to have supported them on this exercise”, said Adrien de Naurois, Joint Lead Manager on the transaction from BofA Securities.
Investor demand was driven by good-quality accounts. Central banks and official institutions took 61% of the allocations, bank treasuries took 25%, and the remaining 14% went to fund managers and insurance or pension funds. Geographically, the distribution was well diversified across EMEA (Europe, the Middle East and Africa), the Americas and Asia.
MuniFin has now completed approximately EUR 8 billion out of its 9 billion long-term funding target for the year.
Green bonds fuel Finland’s green transition
MuniFin’s green finance, funded with green bonds, is offered to select projects across Finland that are friendly for the climate and environment. Our green finance has four project categories: buildings, transportation, renewable energy and water and wastewater management.
Transaction details
Final terms, 2nd October 2024
Issuer
Municipality Finance Plc (“MuniFin”)
Issue rating
Aa1 / AA+ (Moody’s / S&P) (all stable)
Issue amount
USD 1,000,000,000.00
Pricing date
2nd October 2024
Settlement date
9th October 2024 (T+5)
Maturity date
9th October 2029
Re-offer price / yield
99.557% / 3.723%
Coupon
3.625% (semi-annual)
Re-offer spread
Mid-swaps +46bps
Spread vs benchmark
UST 3.5% Due September 2029 +16.1bps
ISIN
XS2914674408 / US62628PAG19
Joint lead managers
BofA Securities, Nomura, RBC Capital Markets, TD Global Finance
Distribution by type
Distribution by region
Comments from joint lead managers
“Municipality Finance (MuniFin) returned to the USD market with a bang, extending their curve out to Oct-2029s. The $1bn no-grow 5-year garnered a $5.5bn book, utilising their Green assets for the transaction, their first time in the USD market for 8 years. The transaction witnessed phenomenal traction and provided USD investors the rare opportunity to engage in a Munifin Green Bond. The result is a testament to Munifin’s credit quality and standing with the global investor base. Congratulations!”
Mark Yeomans, Managing Director, Public Sector DCM, Nomura
Congratulations to the MuniFin team on a very successful USD 5-Year Green transaction; reacting swiftly to print their first USD Green Benchmark since 2016. The final orderbook in excess of $5.5bn marks MuniFin’s record for a USD transaction; a reflection of the high-quality credit and a recognition of the team’s efforts on global investor engagement. RBC was delighted to be involved and it was a pleasure working with the team on this transaction.”
James Taunton, Head of Public Sector Origination, Europe, RBC
“Congratulations to the MuniFin team on an outstanding result with their 5yr USD Green transaction. The team managed to take advantage of robust execution conditions in the USD market and pick an excellent execution window resulting in a phenomenal outcome!”
Laura Quinn, Managing Director, Global Co-Head of SSA and Head of Dublin Debt Capital Markets, TD Global Finance
MuniFin is Finland’s pioneer in sustainable finance
In 2016, MuniFin launched green finance for projects that are friendly for the climate and environment. We were the first Finnish financial institution to issue green bonds and offer green finance.
In 2020, we complemented green finance by launching social finance, which is offered for projects that promote equality, communality, safety, welfare or regional vitality. We were the first issuer of social bonds in Finland.
These bonds are an integral part of our funding strategy. Both green and social bonds have their own frameworks.
MuniFin plans to complete EUR 9 billion of long-term funding this year. But what kind of projects do we finance? Join Senior Analyst Aaro Koski and Senior Manager Karoliina Kajova on their visit to Blominmäki wastewater treatment plant—one of our green finance projects powered by green bonds—and find out what to expect next.
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Read more
Before releasing the video, MuniFin issued its 4th benchmark of the year on Thursday, 22 August 2024.
Returning from a short summer break, MuniFin issued its second EUR benchmark of the year on Thursday, 22 August. The successful 5-year, EUR 1 billion benchmark attracted a high-quality and geographically diverse orderbook.
MuniFin announced a new mandate on Wednesday, 21 August 2024, and opened the books the following morning. Investor demand grew steadily, and the books eventually closed in excess of EUR 1.35 billion at 12:45 CET. The final spread was confirmed at MS+17bps.
The orderbook comprised high-quality investors, with central banks and official institutions taking 42.9% of the allocations, followed by banks at 35.4%. In terms of geography, distribution was well diversified across Europe and Asia.
“Euro benchmarks are the backbone of our funding programme. Our second EUR benchmark of the year had high investor quality, and we are pleased to have achieved our desired pricing point in 5-year maturity. Thank you to all investors who participated and our lead managers for this successful transaction”, says Antti Kontio, Head of Funding and Sustainability.
“Congratulations to the MuniFin team on another successful EUR benchmark transaction. With this trade MuniFin have reopened the post summer market for their Nordic SSA peers and have set the standard for competitive pricing and high-quality diversified demand. NatWest are proud to have been involved”, said Karen Manku, Director, SSA DCM, NatWest Markets.
With this transaction, MuniFin has now completed approximately 70% of its EUR 9 billion long-term funding target for the year.
Transaction details
Issuer
Municipality Finance Plc (“MuniFin”)
Issue rating
Aa1 / AA+ (Moody’s / S&P) (all stable)
Issue amount
EUR 1,000,000,000.00
Pricing date
22nd August 2024
Settlement date
29th August 2024 (T+5)
Maturity date
29th August 2029
Re-offer price/Yield
99.431% / 2.623%
Annual coupon
2.5000%
Re-offer spread
Mid-swaps +17bps
Spread vs benchmark
OBL 2.5% Due October 2029 +47.8bps
ISIN
XS2889897885
Joint Lead Managers
DZ Bank AG, J.P. Morgan SE, NatWest Markets N.V., Société Générale
Distribution by type
Distribution by region
Comments from Joint Lead Managers
“Congratulations to the MuniFin team for a strong return to the EUR market post summer break. DZ Bank is very proud to be part of MuniFin`s fixed rate EUR 1bn 5yr transaction which priced just 10bp back of Finland. The number and quality of investors fosters MuniFin’s reputation in the SSA market.”
Philipp Bergmann, SSA – DCM Nordics
“Congratulations to the MuniFin team for their successful return to the EUR market since January with a well-executed 5-year benchmark transaction. As the first Nordic agency issuer to access the market post-summer, the high-quality orderbook and demand underscore MuniFin’s robust credit standing and market leadership. We are delighted to be involved in this landmark transaction.”
Ioannis Rallis, Executive Director, Head of SSA DCM, J.P. Morgan
“Congratulations to the MuniFin team on another successful EUR benchmark transaction. With this trade MuniFin have reopened the post summer market for their Nordic SSA peers and have set the standard for competitive pricing and high-quality diversified demand. NatWest are proud to have been involved.”
Karen Manku, Director, SSA DCM, NatWest Markets
“With this new successful Euro 5y transaction, MunFin has not only added a new liquid benchmark to it Euro curve, it has also shown agility in picking the right window, and managed to mobilize international investors across several continents post the summer lull. The book built steadily in quality despite a pretty tight spread versus its sovereign counterpart. It confirms the strong value of MuniFin as a borrower in the international capital markets.”
Olivier Vion, Head of SSA Capital Market at Société Générale
MuniFin Group maintained steady operations in the first half of 2024 despite the challenges in the operating environment.
The Group’s net operating profit excluding unrealised fair value changes amounted to EUR 89 million, growing from the comparison period and exceeding the previous year’s figure by 9.6%. The increase in net operating profit was boosted mostly by rising short-term market rates and lower expenses than in the comparison period.
New long-term customer financing increased in January–June and amounted to EUR 2.4 billion. Long-term customer financing (long-term loans and leased assets) excluding unrealised fair value changes totalled EUR 34.3 billion at the end of June and saw an increase of 4.0% in the reporting period. The total amount of green finance aimed at environmentally sustainable investments and social finance aimed at investments promoting equality and communality increased by 15.7% during the reporting period. The ratio of green and social finance to long-term customer financing excluding unrealised fair value changes grew to 23.7%.
In January–June, new long-term funding reached EUR 4.9 billion. At the end of June, the total funding was EUR 44.5 billion. The Group’s total liquidity is very strong. The Group’s leverage ratio also remained at a strong level, standing at 12.0% at the end of June. At the end of June, the Group’s CET1 capital ratio was very strong at 102.4%.
“The first half of 2024 was marked by continued economic uncertainty and inflation concerns. The challenges in the operating environment did not affect MuniFin’s performance, and we were able to successfully carry out our core mandate of ensuring the availability of affordable financing for our customers. In the first half of the year, municipalities had slightly lower demand for financing than expected, whereas the affordable social housing sector had high financing needs”, notes Esa Kallio, President and CEO at MuniFin.
The Group also published a separate Pillar III report on risk management and capital adequacy.
Read and download the Half Year Report
Our half year report for January–June 2024 can be read and downloaded in the reports and publications section of our website.
Three months following the record-breaking USD 1.5 billion issuance in January, MuniFin returns to the USD market with another 1 billion benchmark. The 3-year bond successfully gathered a high-quality orderbook.
On Tuesday 16 April, MuniFin issued a new 3-year USD 1 billion benchmark with initial price guidance of MS+33 basis points. Investor demand continued to grow throughout the morning and books closed a few hours later in excess of USD 1.5 billion.
The bond was priced at MS +33 basis points, consistent with the initial guidance, with a coupon of 4.875%, a reoffer price of 99.708% and a re-offer yield of 4.981%. It carries a spread of 18 basis points over the CT 3 4.500% due 15 April 2027.
The final orderbook was geographically diverse with 48 high-quality accounts participating. Central banks took 57% of the allocations, followed by Banks and bank treasuries (40%), and Asset Managers, taking the remaining 3%.
“Investor demand started to accumulate after a moderate start, eventually reaching over USD 1.5 billion. We were particularly pleased with the quality of the final orderbook, as majority was allocated to central banks and official institutions. We have now successfully secured a little less than half of our funding target for the year”, says Analyst Aaro Koski.
After this transaction, MuniFin has now completed EUR 4.5 billion of its EUR 9–10 billion funding programme for 2024.
Aaro Koski, Analyst at MuniFin’s Funding and Sustainability team.
Distribution
Transaction details
Issuer:
Municipality Finance Plc (“MuniFin”)
Rating:
Aa1 / AA+ (Moody’s/S&P – both stable)
Issue Size:
USD 1 billion
Payment Date:
23 April 2024 (T+5)
Maturity Date:
23 April 2027
Coupon:
4.875%
Re-offer Price:
99.667%
Re-offer Yield:
4.996%
Re-offer vs. Mid Swaps:
+33bps
Re-offer vs. Benchmark:
CT 3 4.500% due 15 April 2027 +18bps
ISIN:
XS2807531657 / US62630CEL19
Lead Managers
J.P. Morgan SE, Morgan Stanley Co & International PLC, Nomura Financial Products Europe GmbH, TD Global Finance unlimited company
Comments from Lead Managers
Ben Adubi, Managing Director, Head of SSA, Morgan Stanley:
“Another successful outing in the USD market for MuniFin following their strong 5-year issued earlier this year. Taking advantage of the favourable move in swap spreads and recent sell-off in rates, the deal amassed a high-quality and granular orderbook with 57% of allocations to CB/OIs, which is a testament to the strength of MuniFin’s credit quality and their opportunistic funding strategy. Congratulations to the MuniFin team on a stellar start to Q2, following on from an impressive start to the year, Morgan Stanley is delighted to have been involved!”
Mark Yeomans, Managing Director, Nomura:
“Yet another strong USD outing from MuniFin; with the new 3-year benchmark complementing the 5-year issued earlier in January. MuniFin took advantage of the global back up in rates to deliver another record 4.875% coupon for investors, as witnessed in their previous 3-year from last October. The quality of the orderbook is a testament to the investor following that MuniFin enjoys as a safe haven asset and the diligent investor outreach of the entire funding team. Nomura were delighted to be a part of such an important transaction.”
Ioannis Rallis, Executive Director, Head of SSA DCM, J.P. Morgan:
“Congratulations to the MuniFin team for printing another solid USD benchmark this year! Despite uncertain geopolitical backdrop and busy pipeline in the week, MuniFin was successfully able to achieve its tightest spread vs SOFR MS (+33bps) for a MuniFin USD 3-year benchmark. The high quality of the orderbook reflected in the 57% allocation to CB/OIs is a testament to investor confidence in MuniFin’s name. We are delighted to be involved in this transaction.”
Laura Quinn, Managing Director, Global Co-Head of SSA and Head of Dublin Debt Capital Markets:
“Congratulations to the MuniFin team on a successful USD benchmark transaction, launching their first 3-year USD benchmark in 2024 and second USD benchmark this year. MuniFin secured an efficient funding window this week to ensure they could complete their USD 1 billion funding exercise. The exceptionally high-quality orderbook is a testament to MuniFin’s standing in the fixed income market.”
We have published our annual report for 2023. We have also published the impact reports on our green and social finance and the Pillar III disclosure report on capital adequacy.
The year 2023 was the fourth consecutive year marked by instability. In these uncertain times, our role as our customers’ trusted financing partner has grown even more important. At MuniFin, 2023 was a year when we put sustainability even more front and centre as we revised our strategy and published our first sustainability agenda.
The volatile operating environment did not significantly affect our performance. Our operations remained stable, and we were again able to successfully carry out our core mandate of providing affordable long-term financing for our customers.
Our long-term customer finance increased by about 10% from the previous year. Our new long-term customer financing remained on a par with 2022, totalling EUR 4.4 billion. Our profitability was slightly higher than in 2022.
The amount of our sustainable finance, i.e. our green and social finance, grew by about EUR 2 billion in 2023. Our sustainable finance products are our way of encouraging our customers to make more responsible investments. Read more about the impacts of our sustainable finance in the green and social impact reports published today.
What was the year 2023 like at MuniFin?
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