MuniFin looks to finance municipal energy companies to strengthen the security of supply

MuniFin’s funding is guaranteed by the Municipal Guarantee Board (MGB). On 7 September 2022, the MGB decided to submit a notification to the European Commission seeking for permission to use funding guaranteed by the MGB to grant loans to energy companies controlled by Finnish municipalities. This arrangement will strengthen Finland’s security of supply by ensuring that energy companies are able to keep operating despite the unusual circumstances. If the Commission accepts the arrangement, MuniFin can grant loans directly to the energy companies.

The Municipal Guarantee Board (MGB) will submit its notification to the European Commission in cooperation with MuniFin and the Ministry of Economic Affairs and Employment. The current circumstances in the energy markets have led to a situation where the supply of energy has fallen substantially, leading to sharply increasing collateral requirements on derivatives used by energy companies. This severely endangers the continuity of their operations.

MuniFin has already announced that it stands ready to quickly start providing financing for municipalities that own energy companies to ensure the continuity of energy production. So far, EU rules on state aid have mostly prohibited MuniFin from directly financing energy companies operating in competitive markets. Financing of municipal energy companies will be established based on MuniFin’s standard business model, and thus possible loans to energy companies will still require a 100% municipal guarantee, as is required for any other company loans by MuniFin.

“The spiralling collateral requirements in the electricity market and the reduced energy supply have together created a crisis and given rise to a need to ensure the availability of essential services for citizens. Under the circumstances, we consider the proposed arrangement to be in accordance with competition laws”, says Esa Kallio, MuniFin’s CEO.

Measured by its balance sheet, MuniFin is one of Finland’s largest credit institutions. It has been able to continue its international funding operations also under exceptional circumstances, for example during the start of the Russian war on Ukraine, the COVID pandemic and the financial crisis.

MuniFin has never recognised any final credit losses in its customer financing. The purpose of banks’ international capital regulation is to minimise the risks related to banking operations. MuniFin’s CET1 capital exceeds the ECB’s requirements by more than six times.

“It is difficult to estimate how long the Commission will take to process the notification. The timeline will also depend on whether the MGB or MuniFin will be required to provide further information”, Kallio notes.

MuniFin’s funding is guaranteed by the Municipal Guarantee Board (MGB), a public law institution operating under the Act on the Municipal Guarantee Board (487/1996). The MGB’s members consist of all municipalities in mainland Finland.

MuniFin joins United Nations Global Compact

Global Compact is the world’s largest corporate responsibility initiative. The Compact’s ten principles of corporate responsibility bind companies to obligations related to human rights, working conditions, the environment, and anti-corruption. 

“In our business we have strived to prove that finance can really steer societal development in a positive direction. Global Compact is our way to show that we are committed to continuous development of corporate and environmental responsibility. The networking opportunities it provides will also help us gain further knowledge in this field”, says Esa Kallio, president and CEO at MuniFin. 

MuniFin has been a forerunner of sustainable finance in Finland by introducing the first green and social finance products in the country. This has also been noticed internationally. For example, MuniFin ranked 28th in the ESG risk assessment of nearly a thousand banks by Sustainalytics, the world’s largest independent provider of ESG research and ratings. 

“Responsible business is long-term work, and stakeholders’ expectations on corporate responsibility are always growing. That is why we will keep self-evaluating and seeking the most important targets for development for our customers”, Kallio states. 

Lenita Toivakka, executive director at Global Compact Network Finland, welcomes MuniFin to the network. “We’re happy to have an experienced and significant promoter of reponsibility such as MuniFin onboard. Our network gives them access to initiatives and programs to drive responsibility and sustainable growth even further”, she comments.  

Global Compact Network Finland now includes more than a hundred companies. 

MuniFin is also a member of the Finnishcorporate responsibilty network FIBS and Finland’s Sustainable Investment Forum Finsif. It is also a Climate Bonds Initiative partner and a WWF certicified Green Office.

MuniFin celebrates the issuing of Finland’s first social bond – rings opening bell at Nasdaq Helsinki

In addition to being the first social bond issued by a Finnish entity, MuniFin’s debut social bond also claims the title of the first Nordic social bond in the SSA category. The 15-year EUR 500 million product was met with overwhelming investor demand, and the bond, issued on September 3rd, was overbooked by nearly four times. 

With its introduction of the social finance product, MuniFin aims to encourage investments that have a notably strong impact and bring about wide-ranging social benefits. The first projects to receive financing within the MuniFin Social Bonds Framework were announced in June. These projects involve schools, hospitals and healthcare centers as well as housing for people with special needs. 

Social bonds expand MuniFin’s range of sustainable finance products. The company has been an active green bond issuer for four years and it is now expanding the offering into social bonds. 

Click here to watch a recording of the opening ceremony at Nasdaq Helsinki (Presentations in Finnish)

 Read more:  
 MuniFin leads the way by issuing the first Nordic SSA Social Bond 

Nasdaq Helsinki welcomes Municipality Finance as its First Social Bond Issuer 

Nasdaq Helsinki welcomes Municipality Finance as its First Social Bond Issuer

On 10 September 2020, Nasdaq announced that Municipality Finance Plc has listed its inaugural social bond on the Nasdaq Sustainable Debt Market at Nasdaq Helsinki. The bond notional is EUR 500 million with a maturity of 15 years, explicitly guaranteed by the Municipal Guarantee Board. MuniFin’s issuance is the first social bond listed on Nasdaq Helsinki and the first social bond issued by an SSA (Sovereigns, Supranationals, Agencies) issuer in the Nordic countries.

MuniFin has been an active green bond issuer for four years and is now expanding the offering into social bonds. The proceeds of the social bond issue will finance projects that fall into one of the three categories of social housing, welfare and education and they promote equality, sense of community, wellbeing and vitality of regions and/or municipalities. The first financed projects include schools, hospitals and health care centres and housing for people with special needs.

– We are extremely proud to be in the forefront of Nordic and European sustainable finance. Even if all of our financing is aimed at building and developing the Nordic welfare state, social finance is a flagship product that highlights the wide-ranging effects that municipal and non-profit housing investments have both on individuals and the society as a whole, said Esa Kallio, President and CEO at MuniFin.

– The investor response for our inaugural social bond was overwhelmingly positive. This is a strong testimony that the financial markets want to actively transform societies and make them more sustainable.

– With the help of issuers such as MuniFin, we have in recent years seen Nasdaq develop into an important hub for sustainable investments in Europe with more than 230 bonds listed on Nasdaq´s Sustainable Debt Market. Following many international firsts, such the first green corporate bond by Vasakronan and first city bond issued by Gothenburg, Sweden, we are especially happy to see continued leadership coming from the Nordic region, said Ann-Charlotte Eliasson, Head of European Debt Listings and Sustainable Bonds at Nasdaq.

– We are excited to welcome MuniFin, a Finnish pioneer in sustainable finance, as our first social bond issuer in Finland, said Henrik Husman, President of Nasdaq Helsinki.

– MuniFin was also our first green bond issuer in 2018, and we have now five sustainable bonds listed on Nasdaq Helsinki. We look forward to seeing additional issuers following this trend.

Source: Nasdaq Helsinki