Client stories

MuniFin raises further funds for social projects with €500 million tap

We’re delighted to have again supported MuniFin, acting as Joint Bookrunner on a €500 million tap of their existing 2035 Social Bond.

Connecting everyone with a brighter energy future

Municipality Finance Plc, ‘MuniFin’ (rated Aa1 / AA+, stable outlook by Moody’s/S&P) is one of Finland’s largest credit institutions. Established in 1989 for the purpose of developing the Finnish welfare state, MuniFin offers lending exclusively to Finnish municipalities, their majority-owned companies, municipal federations, and non-profit housing organisations.

The financial institution, which is owned by Finnish municipalities, the public sector pension fund Keva and the Republic of Finland, is a pioneer in sustainable financing: it is the first bank in Finland to offer green finance for environmentally-friendly projects and was the first Finnish issuer of green bonds. Equally, MuniFin is the first Nordic ‘Sovereign, Supranational and Agency’ (SSA) public sector credit institution to offer social finance for domestic projects that promote equality, communality, safety, welfare or regional vitality.

Both, their green and social bonds have their own frameworks and project portfolios. The Green Bonds Framework was originally published in 2016 and updated in 2019, and MuniFin’s Social Bond Framework, which divides projects into the categories ‘Social Housing Projects’, ‘Welfare Projects’ (healthcare, sports, and culture) and ‘Education Projects’, followed in February 2020.

 

Additional tranche attracts high number of ESG investors

After supporting MuniFin last year with their 2030 Green Bond in the role as Joint Lead manager, the Nordic SSA again turned to NatWest to advise, in the same role as previously, on a €500 million tap to the existing Social Bond.

Welcoming the straightforward format and pricing of MuniFin’s additional tranche – instead of issuing a new Social Bond – investors submitted orders of more than €1.6 billion when order books opened. Despite a significant final tightening, with the tap pricing with a ‘Socium’1 of approximately 2 basis points (bps) and a coupon of 0.05%, final books closed almost three times oversubscribed.

The deal attracted a diverse, high-quality investor base across Europe, with 75% placed with dedicated ESG accounts – this marks the highest ESG investor allocation so far for MuniFin sustainable debt issuances. A total of 43 investors participated in the transaction. Asset managers took the bulk with a 43% allocation, followed by a 31% allocation to central banks and 24% to bank treasuries.

With the new tranche, the aggregate notional amount of MuniFin’s Social Bond is now €1.1 billion.

 

Sustainability really pays off

Kerr Finlayson, Head of FBG Syndicate, NatWest, commented: “We congratulate MuniFin on the fantastic outcome of their second venture into the Social market. The transaction was met with the solid investor support that the MuniFin name always delivers, with a multiple-times oversubscribed book, and pricing 1 bp inside fair value. The successful outcome today highlights investors’ commitment to MuniFin and the important work they do to improve social well-being in Finland.”

Caroline Haas, Head of Climate and ESG Capital Markets, NatWest, said: “Municipalities and credit institutions such as MuniFin play a crucial role in the transition to sustainable economies by supporting new infrastructure and ensuring communities are not left behind. We’re proud to have supported MuniFin in the past with their first Green Bond as well as recently with their first Social Bond, and now with this additional tranche, which will make a real difference by providing funds for social housing, welfare and education projects.”

Antti Kontio, Head of Funding and Sustainability at MuniFin, said: “We are extremely pleased with the outcome. The exceptionally high interest among ESG investors and a meaningful greenium, or should we say socium, of around 2 bps shows that sustainability really pays off.”

The idea that issuers are able to obtain a cheaper cost of funding by issuing debt with a specified ‘use of proceeds’ that have positive social impacts; an adaptation of the term ‘greenium’

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