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Green bonds in Sweden and Norway: What are the success factors?

Asbjørn Torvanger, Aaron Maltais, Iulia Marginean

Transition to a low-carbon economy to achieve the Paris Agreement goal requires substantial investments. The green bond market shows good potential to help mobilize financial sources towards sustainable investments. In this paper, we compare the uptake of green bonds in Norway and Sweden from 2013 till 2019, with the aim to understand what drives the green bond market. Our study is one of the first comparative analyses specifically designed to explain differences in green bond uptake between two similar financial markets. The analysis can help us to identify factors that are transferable to other countries and that therefore can be important for facilitating the growth of green bonds in different markets. Data shows that there has been a faster growth in issuances in Sweden than Norway, and especially for the corporate sector and municipalities. When interviewing experienced green bond market participants in Norway and Sweden, we find that likely explanations are a business culture and financial institutions more focused on sustainability in Sweden, as well as a larger and more diversified corporate sector. In Norway, green bonds uptake may have been hampered by competition with high yield investments in oil & gas and shipping, a ‘green’ energy sector that considers green bonds to be superfluous, and many municipalities that are too small for green bond issuance. The experience from Sweden indicates that other countries wanting to facilitate uptake of green bonds should emphasize leadership on sustainability, collaboration between green bond issuers and investors, and active communication, high visibility, and thorough disclosure of sustainable finance activities

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