Swedbank acts as structuring advisor to K2A in the development of the first Green Equity Framework
Today K2A announced the launch of its Green Equity Framework. Swedbank has acted as Sole structuring advisor, and a second opinion has been made by the independent research center, CICERO Shades of Green (“CICERO”). This will allow K2A to be the first company in the world to shade its equity, both current and future, as green.
The equity side of green financing has so far not received much attention comparing to green debt. However, as the market for sustainable bonds has increased in recent years the behaviour and investment strategies of dedicated green investors have changed. The focus has shifted from looking at green eligible assets to also consider an issuer’s overall business profile and commitment to reduce its carbon footprint when investing. This allows for a broader discussion about including equity financing in support of the climate transition.
CICERO, as a leading provider of second opinions of frameworks for green debt instruments, has expressed the need of analysing the financial impacts on equities arising from climate risks, and in response extended its Shades of Green methodology to include equites. The expanded approach does not only evaluate and shade a company’s investments, but also its revenue streams. It allows CICERO to get a better overview of a company’s current risk exposure, while also adding a forward-looking analysis of the progress in aligning its business with a low carbon and climate resilient future.
The Swedish real estate company, K2A, is the first company to use CICERO’s extended methodology as a foundation for its Green Equity Framework. K2A has also stated in its Framework how its sustainability work is aligned with the EU taxonomy. The expectation is that all new wooden and environmentally certified buildings with 20% lower energy consumption compared to new building requirements, and renovations that result in 30% lower energy consumption will be classified as sustainable according to the latest version of the EU taxonomy|1|.
“This is a natural part of K2A's sustainability strategy and a step in the transition to an economy with lower carbon dioxide emissions. The hope is that the introduction of green equity will be well received and appreciated by the market. We are proud to be pioneers in green investments and are constantly looking at how we can develop our sustainability work”, says Johan Knaust, CEO at K2A.
As a part of the process Swedbank has discussed CICERO’s methodology with a few Nordic investors. The attitude among the respondents towards the development and introduction of green equity was positive, and that CICERO’s approach has the potential to make them a leading provider of second opinions in this area as well. The reflections were mainly about the importance of using concrete quantitative parameters to follow up and measure a company’s sustainable performance as a part of the annual reporting, but also to address the EU action plan which lay the foundation for sustainable finance in the future.
“We are happy to act as structuring advisor for K2A in this matter, a role that is fully aligned with our ambition to support companies committed to reducing its carbon footprint. We believe K2A has all the prerequisites for being relevant to equity investors with a focus on the environment and reduced carbon dioxide emissions”, says Per-Åke Nyberg, Head of Investment Banking at Swedbank.
Unni Jerndal, Head of Press Office, Swedbank, ph. +46 73 092 11 80
Per-Åke Nyberg, Head of Investment Banking, Swedbank, ph.+46 70 946 78 98
|1|EU Commission,” Taxonomy: Final report of the Technical Expert Group on Sustainable Finance”, https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/200309-sustainable-finance-teg-final-report-taxonomy_en.pdf
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