Our first visit to the green bond market

Investing in sustainable business practices is essential for transforming old business models. A more efficient and low-carbon machine usually cost more to buy than a conventional combustion engine machine. Creating sustainable production lines to replace the old ones is costly and potentially risky, and who decides what's a good enough level of sustainability?

, by Jukka Viitanen

In business, money is the ultimate indicator of success, i.e. profitability. In addition to trying to figure out sustainability costs and benefits internally, the finance market can give you an idea of how sustainable a company is.

In August 2023, NRC Group launched its first Green finance framework explaining our commitment to further develop our offering within the sustainable infrastructure sector. The framework explains how NRC Group approaches sustainability, and how it uses green finance instruments in sustainable transportation projects. It involves building, modernizing, and maintaining rail infrastructure, as well as acquiring and operating the machines we use. For NRC Group, this is nothing new, simply business as usual, but this time we had an external party evaluate our approach based on the environmental benefits. Our framework was rated Dark Green by S&P Global Ratings, which is the highest score possible on the Shades of Green scale. The governance assessment, however, achieved a level of Good. We didn´t get the top score on the governance assessment because we have limited influence over project design and the embodied emissions associated with them. As a result of the second party review, NRC Group's framework is aligned with the green bond principles . Overall, the result is impressive, but will investors be impressed with it?

Clearly, the investors found our green bond to be an attractive investment object.

Jukka Viitanen

A couple of weeks after S&P Global Ratings rated the Green Finance framework, it was time to determine the market's perception of NRC Group as an issuer of green bonds. As any other bond, a green bond is a fixed income financial instrument used to raise capital from investors. Green bonds differ from regular bonds in that they are issued by companies that are committed to financing or refinancing projects with an environmental benefit and communicate the progress transparently. Due to recent inflation and higher interest rates, the Nordic construction industry has struggled a bit, and not all green bonds have been successful. NRC Group's investor meetings attracted investors from across the Nordic, resulting in a bond that was oversubscribed twice. Clearly, the investors found our green bond to be an attractive investment object.

In our first visit to the green bond market, we can see that a sustainable approach to the business offers the company greater opportunities to engage in sustainable business transformation. As part of our core business, NRC Group is involved in the low-carbon transportation infrastructure, and the green transition is a great opportunity for us. It's often hard to see the value of sustainability for businesses, but here it was the opposite; sustainability works for businesses too.