Banks are also looking at their own books, as regulators prepare to test in a few years the industry’s ability to withstand potential shocks from climate-related losses. In Denmark, the supervisor already has stepped up stress tests for banks, making agricultural loans amid an increased risk of droughts.
Nordic countries are ahead of the pack when it comes to pursuing ESG goals through public policy. It was also SEB AB that arranged the world’s first ever green bond, back in 2008.
The Stockholm-based bank was among 137 financial institutions that earlier this week joined a campaign to pressure high carbon-emitting companies to reduce emissions in line with keeping the global temperature increase to 1.5 degrees.
And so far this year, issuance in the Nordic region of green, social and sustainability bonds is outpacing other markets, at 7% of the total compared with a global figure of 4%, according to data compiled by Bloomberg.
Among ESG products that are likely to see growth is transition financing, Johan Torgeby, SEB’s chief executive officer, said at a sustainable finance conference on Wednesday. Such financial innovations can help push companies toward change, he said.
The Issuers
Companies issuing stocks and bonds are asking for help. That includes figuring out how to live up to international reporting standards, such as those set by the Task Force on Climate-Rated Financial Disclosures, Michaelsen at Nordea said.
“People on both sides of the table” are “almost equally confused,” he said.
Despite the confusion, it’s clear investors aren’t losing interest in ESG. What’s more, the demand for greater transparency is set to filter through to all kinds of funding.
Michaelsen says investors increasingly want to know what a company plans to use the proceeds of a bond sale for, “even if it’s not a green bond transaction.”
--With assistance from Sydney Maki.