The Role of Sustainable Bonds in Helping Drive Sustainability Transition, Both in the Nordics and Globally

Authored by Maria Simon, Director, Product Development of ESG Data Products

Sustainable bonds – green, social and sustainability bonds – have taken on an increasingly important role. Globally, the popularity of these fixed-income instruments has grown, as investors and asset managers seek opportunities to finance projects that can have a positive impact and bring about change to current business models.

In 2024, the issuance of sustainable bonds worldwide once again reached a billion-dollar volume, which is still a fraction of the entire bond market in 2024. Nevertheless, the issuance of sustainable bonds is an important market signal, as companies often choose these instruments to demonstrate their commitment to set sustainability goals.

The Market for Sustainable Bonds in the Nordic Countries

The year 2024 was a record year for corporate bond issuances in the Nordic markets, for both traditional and sustainable bonds. The Nordic and Baltic sustainable bond markets continue to grow. The markets grew by 75% in terms of newly listed instruments, and the total volume increased by 18% to €74.4 billion. Sustainable bonds now represent 36% of all new listed bonds in 2024 on Nasdaq's Nordic and Baltic exchanges, compared to 31% the previous year. Most of the sustainable bonds issued in the Nordic and Baltic markets are aimed at environmental projects, while the share of social bonds remains small. An exception is the Finnish company Sanoma Oy, which was the first company in Finland to issue a social bond on Nasdaq Helsinki's sustainable bond market last year.

Source: Nasdaq, 2024

Focus on Sustainable Bonds from an SDG Perspective

Globally, green bonds cover the largest part of the sustainable bond market, but there is some variation between different sectors.

The United Nations Sustainable Development Goals (SDGs) play a central role in helping investors and issuers understand the impact of green investments, while also providing context for bond returns.

According to our analysis in 2024, the dominant SDGs focus on sustainable cities and communities (SDG 11), climate action (SDG 13), and affordable and clean energy (SDG 7). Investments in these sustainable development goals often focus on projects that improve energy efficiency and build "green buildings" that utilize renewable energy.

For social sustainable development goals, the main focuses are SDG 1 (No Poverty), SDG 10 (Reduced Inequalities), and SDG 3 (Good Health and Well-being). These projects promote the socio-economic status of people in various ways, such as investing in the well-being of children and youth and services for people with disabilities.

The Role of Sustainable Bonds for Investors and Issuers

Sustainable bonds are an effective tool for companies to finance impactful projects, align with ESG goals, and build trust with investors, whilst also promoting global sustainable development efforts. Investors, on the other hand, seek opportunities to finance projects that promote sustainable development, such as developing clean energy infrastructure, improving education, and advancing equality. At the same time, they want to ensure that the companies they invest in are committed to their ESG goals. Transparency is also an essential part of responsibility. From this perspective, sustainable bonds are a viable investment option.