Credit Market Comment - insights.nordea.com

Market UpdateCredit Research

24 September 2021

Credit Market Comment

Another look at green bond premiums

The increasing focus on ESG and higher green bond issuance prompted us to look at the green bond relative spread levels and relative performance in a study published in January this year (A closer look at green bond premiums). In our follow-up on the current situation, we conclude that green EUR bonds still tend to be tighter than ordinary bonds when looking at the same issuer. The difference remains less pronounced in SEK, where it could even be argued that there is a premium for non-green bonds. We also conclude that while green bonds seem to have performed more strongly than ordinary bonds during the COVID-19 risk-off session in March 2020, the subsequent trend and current spread levels suggest some underperformance versus the overall market.

Green bonds still tighter in EUR IG, still opposite in SEK IGWe have made a follow-up to our January 2021 comparison of secondary market bond spreads for corporate IG issuers with both green and ordinary bonds outstanding with comparable maturities. The results confirm that in EUR A and BBB, green bonds tend to be relatively tighter than ordinary bonds, although this has become somewhat less pronounced (~55% of issuers compared to ~60% in January 2021). In SEK IG (19 issuers), there still seems to be a tilt towards green bonds trading somewhat wider than ordinary bonds on a relative basis, although this has been reduced somewhat.

Non-green bonds tighter right now, but green bonds less volatile Looking at the secondary market spread development over the volatile past 18 months, we conclude that green bonds saw somewhat less spread widening when compared to ordinary bonds from the same issuers during the COVID-19 risk-off session. This was also the case when comparing to spread curves representing the rating category as such. Based on our data, this was most pronounced in the BBB category, while the trend in the A category was less evident. We believe this reflects a broader investor base and higher liquidity potential in green bonds, a feature that will likely increase in importance going forward. The subsequent trend has been more favourable for ordinary and overall bond spreads, resulting in the current situation with something of a premium for non-green bonds.

Nordea Markets - AnalystsRickard Hellman, Head of Credit Research Business Services and Debt Collectors +46 10 156 59 71 [email protected]

Andreas Zsiga, Chief Analyst Industrials and Utilities +46 10 156 59 85 [email protected]

GREEN BONDS TIGHTER IN EUR, LESS SO IN SEKBuckets of issuers in terms of difference between green and ordinary bonds in terms of percentage point spread difference in distance to the reference curve

0% 20% 40% 60% 80% 100%

Jan-21

Sep-21

Jan-21

Sep-21

Jan-21

Sep-21

> 15 pp tighter 5-10 pp tighter Small difference (+ 5 pp to - 5pp) 5-10 pp wider > 15 pp wider

SEK: Green bond premium share has increased to 27% of the sample (23%)

EUR BBB: Green bond premium share decreased to 53% of the sample (57%)

EUR A: Green bond premium share decreased to 55% of the sample (63%)

Source: Nordea estimates

GREEN BOND PREMIUM IN EUR BBB, LESS SO IN EUR A, BUT OVERALL BONDS TIGHTER IN EACH CATEGORYCurrent spread curves

0

10

20

30

40

50

60

70

80

10Y 12Y

EUR A Green currentlyEUR A Non-green currentlyEUR A Overall currently

0

10

20

30

40

50

60

70

80

10Y 12Y

Source: Bloomberg and Nordea estimates

IMPORTANT INFORMATION AND DISCLOSURES AT THE END OF THIS REPORT

https://research.nordea.com/api/openreportfileapi?id=649746

Credit Research24 September 2021

Our approach to estimating green bond premiumsGiven the ever-increasing focus on sustainable investments and green bonds, we think it is relevant to explore if there are any secondary market spread differences between green and ordinary bonds. Below we outline our approach to assessing this. We focus on issuers in the EUR Corp A and BBB and SEK Corp A and BBB categories, and senior unsecured bonds.

Our approach to estimating systematic differences in green and ordinary bond spreads We aim to explore the extent to which there is any spread difference between green and ordinary bonds. The challenge in such a comparison is how to cope with spread differences that result from differences in maturities and credit quality. In order to deal with this, we have applied the following approach (see also explanatory chart to the right):

We compare senior unsecured green and non-green ("ordinary") bonds from the same issuer, matching the maturities to the greatest extent possible. We identify the bond spread for each bond, and calculate the spread difference (in basis points) to a reference spread curve at the relevant maturity for the bond. For both green and ordinary bonds, we calculate their average difference to the reference curve in terms of basis points and percentage of the reference bond spread. By making similar comparisons for several issuers, we can explore whether there are any systematic differences between green and ordinary bonds across a broader range of issuers.

The scope of this study is EUR and SEK corp bonds in the A and BBB categoriesIn this initial stab at an assessment, we focus on EUR and SEK Corp A and BBB and SEK Corp. This is because there is a sufficient number of green issuers to make a comparison meaningful, with spreads high enough to reveal measurable differences (compared, for example, to SSAs and financials). The selection has been made in the following way:

Senior unsecured bonds labelled green by Bloomberg have been extracted using the SRCH function. These bonds have been matched with non-green senior unsecured bonds from the same issuer with roughly the same maturities in the respective currency (a number of green issuers were excluded during this process because there were no matching bonds). The bonds (green and non-green) were mapped against our interpolated fair spread curve for the respective currency and rating level in order to reveal a common denominator. We have excluded bonds and issuers where there is a significant difference in maturity between green and non-green (with non-green very short), where bonds in scope are small and/or illiquid, and where the issuer is unrated (with some exceptions).

COMPARING THE GREEN AND ORDINARY BOND SPREADS - A HYPOTHETICAL EXAMPLE Explanatory example of our approach to comparing green and ordinary bond spreads in individual names

Source: Nordea estimates

2


EUR Corp A: Clear tendency for tighter green bonds; maturity differences suggest shift to sustainable financing Our analysis of EUR Corp A category issuers, which includes a fairly small sample of 22 issuers, suggests that green bonds are tighter than ordinary non-green bonds in most cases (14 out of 22), even if the difference is limited in some cases. In terms of spread, the difference is fairly limited at below 10 bp, but given the tight spread levels, the impact in percentage point terms is considerable. We note that the proportion of clearly tighter green bond spreads relative to non-green has reduced to 55%, from 64% in our survey in January 2021.

Comments on the EUR A category The spread differences are relatively modest at up to 10 bp, reflecting the generally tight EUR A curve, similar to the results of our January survey.This also means that the difference in percentage point terms of reference bond curve spreads is fairly high in some cases (>20 pp), but is typically around 10 pp.

EUR A CATEGORY SPLIT DIFFERENCESBuckets of issuers in terms of green and ordinary bonds' percentage point spread difference in distance to the reference curve

0%

5%

10%

15%

20%

25%

30%

35%

40%

> 15 pp tighter 5-10 pp tighter Small difference (+5 pp to - 5pp)

5-10 pp wider > 15 ppp wider

Jan-21 Sep-21

Green bonds clearly tighter 55% (64% in Jan 2021)

Green bonds clearly wider 23% (18% in Jan 2021)


EUR CORP A: A CLEAR TENDENCY FOR A GREEN PREMIUMGreen bond/ordinary bonds' difference in average distance to reference curve for specific issuers in bp and percentage of reference curve spread (%), and difference in average maturity (years)

-20

-15

-10

-5

0

5

10

-80

-60

-40

-20

0

20

40

Average difference pp of reference curve Average difference spread from reference curve Difference average maturity (RHS)

Non-green bonds are shorter

Green bondsare tighter

Green bondsare shorter

Non-green bondsare tighter


3


A few illustrative examples from the EUR A categoryBelow, we provide a few illustrative examples, plotting green and ordinary bond spreads for individual issuers.

BASF AND DEUTSCHE WOHNEN

BASGR 0.875 25BASGR 0.75 26

BASGR 0.25 27

DWNIGY 1.5 30

BASGR 1.5 30

DWNIGY 0.5 31

DWNIGY 1.625 31

BASGR 3 33

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10 12 13 14 15Yrs to Workout


EVN AND SWISSCOM

SCMNVX 1.75 25

SCMNVX 1.125 26 SCMNVX 0.375 28

EVN 4.125 32 EVN 0.85 35

0

10

20

30

40

50

60

70

80

90

100

0 1 2 3 4 5 6 7 8 9 10 12 13 14 15Yrs to Workout


AIR LIQUID AND SCHNEIDER ELECTRIC

SUFP 0.25 24

SUFP 1.841 25

SUFP 0.875 26

SUFP 1 27

AIFP 0.625 30

AIFP 0.375 31

AIFP 0.375 33

0

10

20

30

0 1 2 3 4 5 6 7 8 9 10 12 13 14 15Yrs to Workout

Source:Bloomberg and Nordea estimates

FINGRID AND FLUVIUS

FINPOW 3.5 24

SUFP 1.841 25

FINPOW 1.125 27

FLUVIU 0.25 28

FLUVIU 2.875 29

FLUVIU 0.25 30

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10 12 13 14 15Yrs to Workout


ICADE AND SCHIPOL

ICADFP 1.75 26

LUCSHI 2 26

LUCSHI 0.375 27

ICADFP 1.5 27

ICADFP 1.625 28

LUCSHI 2 29 LUCSHI 1.5 30

LUCSHI 0.875 32

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10 12 13 14 15Yrs to Workout


RED ELECTRICA AND VESTEDA

REESM 1.125 25

VESTNL 2 26

REESM 1 26REESM 1.25 27

VESTNL 1.5 27

REESM 0.375 28

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10Yrs to Workout


4


EUR Corp BBB: Clear tendency for tighter green bonds – maturity differences suggest shift to sustainable financing Our analysis of a significant sample of EUR Corp BBB category issuers (45 issuers compared to 34 in our January 2021 report), suggests that green bonds are tighter than ordinary non-green bonds in most cases (28 out of 45), even if the difference is small in some cases. In terms of spread, the difference is typically moderate at 5-15 bp, but given the tight spread levels, the impact in percentage points relative to the reference curve spread is similar to the one we observed in EUR Corp A.

Comments on the EUR BBB category The spread differences are moderate, at 5-15 bp.This also means that the difference in percentage points relative to the reference bond curve spreads is fairly high in some cases (>20 pp), but typically in the 10-15 pp range.We note that the group of issuers for which green senior unsecured bonds are wider than for ordinary senior unsecured includes several real-estate-related names. This implies that bond curves for these names are fairly steep compared to the reference curve.

EUR BBB CATEGORY SPLIT DIFFERENCESBuckets of issuers in terms of green and ordinary bonds percentage point spread difference to the reference curve

0%

5%

10%

15%

20%

25%

30%

35%

40%


5-10 pp wider > 15 ppp wider

Jan-21 Sep-21




EUR CORP BBB: A CLEAR TENDENCY FOR A GREEN PREMIUM, REAL ESTATE WITH BIG DIFFERENCES BETWEEN MATURITIES LESS COMMONGreen bonds/ordinary bonds: difference between reference curve for specific issuers and reference curve spread (both in bp and pp), and difference in average maturity (years)

-16

-12

-8

-4

0

4

8

-200

-150

-100

-50

0

50

100

Average difference pp of reference curve Average difference spread from reference curveDifference average maturity (RHS)






5


A few illustrative examples from the EUR BBB categoryBelow, we provide a few illustrative examples, plotting green and ordinary bond spreads for individual issuers.

SKF AND STORA ENSO

SKFBSS 1.625 22

STERV 2.125 23SKFBSS 1.25 25

STERV 2.5 27

STERV 2.5 28

SKFBSS 0.875 29

STERV 0.625 30 SKFBSS 0.25 31EUR High

0

25

50

75

0 1 2 3 4 5 6 7 8 9 10Yrs to Workout


SATO AND VATTENFALL

SATOYH 1.375 24

SATOYH 1.375 28

EUR High

0

25

50

75

100

0 1 2 3 4 5 6 7 8 9 10Yrs to Workout


CITYCON AND NE PROPERTY

NEPSJ 2.625 23

CITCON 2.5 24

NEPSJ 1.75 24

CITCON 2.75 25

NEPSJ 1.875 26

CITCON 2.375 27

NEPSJ 3.375 27

CITCON 1.625 28

EUR High

0

25

50

75

100

125

150

0 1 2 3 4 5 6 7 8 9 10Yrs to Workout


PHILIPS AND VODAFONE CATEGORY

VOD 1.75 23

VOD 0.5 24

PHIANA 0.75 24PHIANA 1.375 25

VOD 1.125 25

PHIANA 0.5 26

VOD 2.2 26

VOD 0.9 26PHIANA 1.375 28

EUR High

0

10

20

30

40

50

0 1 2 3 4 5 6 7 8 9 10Yrs to Workout


ENGIE AND TERNA CATEGORY

ENGIFP 0.375 23

TRNIM 1 23ENGIFP 0.875 24

ENGIFP 0.875 25

TRNIM 0.125 25

ENGIFP 1 26TRNIM 1 26

ENGIFP 2.375 26

ENGIFP 0.375 27ENGIFP 0.375 27

TRNIM 1.375 27ENGIFP 1.75 28

ENGIFP 1.5 28ENGIFP 1.375 29

ENGIFP 0.5 30

TRNIM 0.375 30

EUR High

0

25

50

75

0 1 2 3 4 5 6 7 8 9 10Yrs to Workout


UNBAIL-RODAMCO AND VW

ULFP 2.5 24ULFP 0.875 25ULFP 1 25

ULFP 1.125 25ULFP 1.375 26

VW 1.5 26

VW 2.25 26

ULFP 1 27

ULFP 0.625 27VW 1.875 27

VW 2.25 27

VW 2.625 27

VW 3.375 28

VW 0.875 28

VW 3.25 30VW 1.25 32

EUR High

0

25

50

75

0 1 2 3 4 5 6 7 8 9 10 12Yrs to Workout


6


SEK Corp A and BBB: Less pronounced difference between green and ordinary bondsOur analysis of SEK Corp A and BBB category issuers*, which includes a fairly small sample of 19 issuers, suggests that there is a tendency for green bonds to trade relatively wider than ordinary bonds. In five cases, green bonds are trading considerably tighter than ordinary bonds. We think that several of the issuers in question have a limited share of green bonds in their total outstanding volumes. In three of the cases, there was no noticeable difference between green and ordinary bonds. Our sample includes 11 issuers with green bond spreads that are relatively wider compared to ordinary bonds, but we note that maturity differences are fairly significant for Swedish names. Furthermore, we think that the fairly flat slope of the reference curve used exaggerates the spread difference for green bonds in the sample.

Comments on SEK A and BBB categorySpread differences tend to be moderate at 10-15 bp (note: Swedish spreads are typically wider than EUR spreads).Given that SEK spread levels tend to be higher than EUR spreads (especially for BBB), this also means that the difference in percentage points versus the reference bond is contained.Some of the issuers demonstrating a high difference between green and ordinary bonds (e.g. Arla, Electrolux, Telia, Ellevio and Corem) have a low share of green bonds outstanding, which also tend to be longer than the non-green bonds.

SEK A AND BBB CATEGORY SPLIT Differences in buckets of issuers for green and ordinary bonds: Spread difference versus reference curve (pp)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


5-10 pp wider > 15 pp wider

Jan-21 Sep-21



Source: Bloomberg and Nordea estimates "

SEK CORP A AND BBB: A CLEAR TENDENCY TOWARDS A GREEN PREMIUM Green bond/ordinary bonds difference in distance to reference curve for specific issuers (bp), percent of reference curve spread (bp and pp), and difference in average maturity (years)

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-40

-30

-20

-10

0

10

20

30

40

50

Average difference pp of reference curve Average difference spread from reference curve Difference average maturity (RHS)





Note: We are agnostic in terms of rating agencies (accepting Investment Grade ratings from S&P, Moody's, Fitch, Nordic Rating Agency and Scope alike), and we include unrated Swedavia, Arla and Trelleborg in the sample given that their bonds trade at spread levels comparable to Investment Grade rated peers


7


A few illustrative examples from the SEK categoryBelow, we provide a few illustrative examples, plotting green and ordinary bond spreads for individual issuers.

STATNETT AND WILLHEM

WILHEM 0.34 23STATNE 0.518 23

WILHEM Float 9/3/23WILHEM 1.103 23

STATNE 1.105 23

WILHEM 1.49 24

WILHEM Float 1/16/24

WILHEM 0.32 24

WILHEM Float 9/20/24

WILHEM 0.979 25

WILHEM Float 5/4/26 WILHEM Float 9/21/26

WILHEM 0.763 26

0

25

50

75

0 1 2 3 4 5 6 7Yrs to Workout


BALDER AND SCA

BALDER Float 1/19/23BALDER Float 2/6/23

BALDER Float 1/15/24

BALDER Float 3/6/24

BALDER Float 6/5/24


BALDER Float 4/8/25

SCABSS Float 9/23/25SCABSS 0.75 25


SCABSS 1.125 27

SCABSS 1.375 28

SCABSS Float 6/21/28

0

25

50

75

100

125



ARLA AND TELIA

ARLA 1.507 23

TELIAS 3.625 23

TELIAS Float 11/8/23

ARLA 1.575 24 TELIAS 1.125 25

ARLA Float 7/17/26SEK High

0

25

50

75

100



ELECTROLUX AND SWEDAVIA CATEGORY

ELTLX Float 3/27/23

SWEDAV 0.25 23

ELTLX 1.103 24 ELTLX Float 11/19/24

SWEDAV 0.89 25

SWEDAV 1.21 25

SWEDAV Float 6/18/25SWEDAV 0.635 25

SWEDAV Float 2/18/26

SWEDAV Float 5/18/26

0

25

50

75



ELLEVIO AND TRELLEBORG

TRELB Float 5/4/23ELLEVI Float 2/28/24

TRELB Float 10/17/24

TRELB Float 3/8/27 ELLEVI 1.728 27

SEK High

0

25

50

75

100



COREM AND FASTPARTNER

FPARSS Float 5/30/22


COREA Float 2/27/23

COREA Float 11/27/23


COREA Float 4/29/24

FPARSS Float 5/27/25FPARSS Float 6/22/26


SEK High

0

25

50

75

100

125

150

175

200

225

250

275

300



8


Aggregated performance trends: Still a "greenium" in EUR BBB, less evident in EUR ALooking at the spread development over the volatile past 18 months, we conclude that green bonds saw somewhat less spread widening when compared to ordinary bonds from the same issuers during the COVID-19 risk-off session. Based on our data, this was most pronounced in the BBB category, while the trend in the A category was less evident. Since then, the difference has been significantly reduced. There is still a greenium in EUR BBB, while it appears this has evaporated in EUR A.

Green and ordinary bond curves allow comparisons of broader performance

Having looked at individual issuer bond spreads, we now turn to an aggregated analysis, comparing a broader universe of green and ordinary bonds in order to study differences in performance. In order to isolate the green bond effect, we use the same bond sample as we used to analyse spread differences between green and ordinary bonds in individual names.We develop curves for green and ordinary bonds, respectively, and look at the curve and tenor development over the course of 2020-21.

EUR A: LIMITED DIFFERENCES TODAY, MORE IN MARCH EUR Corp A green and ordinary bond spread curves (bp)

0

10

20

30

40

50

60

70

1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 12YEUR A Green currently EUR A Green Dec 2020

EUR A Non-green currently EUR A Non-green Dec 2020


EUR BBB: SIGNIFICANT DIFFERENCES REMAIN, TIGHTER GREENIUMEUR Corp BBB green and ordinary bond spread curves (bp)

0

10

20

30

40

50

60

70

80

90

1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 12Y

EUR BBB Green currently EUR BBB Green Dec 2020

EUR BBB Non-green currently EUR BBB Non-green Dec 2020


Limited difference in EUR A, but a clear difference in EUR BBB

Looking at the individual names, we note that the spread difference between green and ordinary bonds tends to be limited for EUR A corporates.This is also reflected in the curves, but we argue there is a difference and that there was a tendency towards greater differences during the March 2021 risk-off session.In the case of EUR BBB corporates, our curves suggest that there is a considerable difference, which increased further during the Q1 spread-widening bout.Currently, there seems to be some greenium in EUR BBB, but perhaps even a slight premium for non-green bonds in the EUR A category.

LIMITED DIFFERENCE IN EUR A, NON-GREEN CURRENTLY TIGHTER5 and 7-year curve point spread at end of month for EUR A green and ordinary bonds from same issuers (bp)

-20

0

20

40

60

80

100

120

140

EUR A Green 5Y EUR A Green 7YEUR A Ordinary 5Y EUR A Ordinary 7YDifference 5 year Difference 7 year


GREEN BONDS CLEARLY OUTPERFORM IN EUR BBB5 and 7-year curve point spread at end of month for EUR A green and ordinary bonds from same issuers (bp)

-50

0

50

100

150

200

EUR BBB Green 5Y EUR BBB Green 7Y EUR BBB Ordinary 5Y

EUR BBB Ordinary 7Y Difference 5 year Difference 7 year


9


Comparison to non-green issuers: No current 'greenium', but green issuers outperformed in the COVID wideningLooking at the spread development over the past 18 months, we conclude that the green bond issuers in our sample saw markedly less widening when compared to the broader market during the COVID-19 risk-off period in March 2020. Based on our data, this was evident both in A and BBB categories. The current differences are limited, and bond spreads for green issuers are even wider than broad rating category curves.

Comparing green bond issuers to the overall market

Having looked at green bond spread differences compared to ordinary bonds for the same issuers, we now turn to a comparison of green bond issuers with the overall market. We have respective curves for green and ordinary bonds (same issuers) and have looked at the curve and tenor development over the course of 2020. These curves and the spread development are compared to Bloomberg's corporate BVAL curves.

EUR A: GREEN ISSUERS OUTPERFORMED IN MARCHEUR Corp A: Green and ordinary bond spread curves (same issuers) and Bloomberg BVAL spread curve (bp)

0

10

20

30

40

50

60

70

1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 12Y

EUR A Green currently EUR A Green Dec 2020EUR A Non-green currently EUR A Non-green Dec 2020EUR A Overall currently EUR A Overall Dec 2020


EUR BBB: GREEN ISSUERS MORE RESILIENT IN MARCHEUR Corp BBB: Green and ordinary bond spread curves (same issuers) and Bloomberg BVAL spread curve (bp)

0

10

20

30

40

50

60

70

80

90

1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 12Y

EUR BBB Green currently EUR BBB Green Dec 2020EUR BBB Non-green currently EUR BBB Non-green Dec 2020EUR BBB Overall currently EUR BBB Overall Dec 2020


Marked difference in March 2020, green issuers currently wider

When looking at the curve and spread levels, we note that bonds from green bond issuers performed more strongly during the COVID-19 risk-off session in March 2020. This is evident in both EUR A and BBB.Currently, the green bond issuer spread curves are wider than the overall market in EUR A (shorter end) and also in EUR BBB, although less so than in the A category (longer end).

EUR A 5-YR: A CLEAR DIFFERENCE IN THE COVID-19 RISK-OFF SESSIONEUR Corp A: Green and ordinary bond spread curves (same issuers) and Bloomberg BVAL 5-year spreads (bp)

-60-40-20

020406080

100120140160

EUR A Green 5Y EUR A Ordinary 5Y EUR A Overall

Diff. Green/Ordinary Diff. Green/Overall


EUR BBB 5-YR: GREEN ISSUERS OUTPERFORMED IN MARCHEUR Corp BBB: Green and ordinary bond spread curves (same issuers) and Bloomberg BVAL 5-year spreads (bp)

-50

0

50

100

150

200

EUR BBB Green 5Y EUR BBB Ordinary 5Y EUR BBB Overall

Difference green/ordinary Difference green/overall


10

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Risk information The risk of investing in certain financial instruments, including those mentioned in this document, is generally high, as their market value is exposed to a lot of different factors such as the operational and financial conditions of the relevant company, growth prospects, change in interest rates, the economic and political environment, foreign exchange rates, shifts in market sentiments etc. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. Past performance is not a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. When investing in individual shares, the investor may lose all or part of the investments.

Conflicts of interest Nordea, affiliates or staff in Nordea, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the publication or report. To limit possible conflicts of interest and counter the abuse of inside knowledge, the analysts of Nordea Markets and Equity Sales & Research are subject to internal rules on sound ethical conduct, the management of inside information, handling of unpublished research material, contact with other units of Nordea and personal account dealing. The internal rules have been prepared in accordance with applicable legislation and relevant industry standards. The object of the internal rules is for example to ensure that no analyst will abuse or cause others to abuse confidential information. It is the policy of Nordea that no link exists between revenues from capital markets activities and individual analyst remuneration. Nordea and the branches are members of national stockbrokers' associations in each of the countries in which Nordea has head offices. Internal rules have been developed in accordance with recommendations issued by the stockbrokers associations. This material has been prepared following the Nordea Conflict of Interest Policy, which may be viewed at www.nordea.com/mifid.

Distribution restrictions The securities referred to in this publication or report may not be eligible for sale in some jurisdictions. This research report is not intended for and must not be distributed to private customers in the UK or the US or to customers in any other jurisdiction where restrictions may apply.

This publication or report may be distributed in the UK to institutional investors by Nordea Bank Abp London Branch of 6th Floor, 5 Aldermanbury Square, London, EC2V 7AZ, which is under supervision of the European Central Bank, Finanssivalvonta (Financial Supervisory Authority) in Finland and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom. Details about the extent of our regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request.

Nordea Bank Abp (“Nordea”) research is not “globally branded” research. Nordea research reports are intended for distribution in the United States solely to “major U.S. institutional investors,” as defined in Rule 15a-6 under the Securities Exchange Act of 1934. Any transactions in securities discussed within the research reports will be chaperoned by Nordea Securities LLC (“Nordea Securities”), an affiliate of Nordea and a SEC registered broker dealer and member of FINRA. Nordea Securities does not employ research analysts and has no contractual relationship with Nordea that is reasonably likely to inform the content of Nordea research reports. Nordea makes all research content determinations without any input from Nordea Securities.

The research analyst(s) named on this report are not registered/qualified as research analysts with FINRA. Such research analyst(s) are also not registered with Nordea Securities and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. This publication or report may not be mechanically duplicated, photocopied or otherwise reproduced, in full or in part, under applicable copyright laws.

Nordea Bank Abp Nordea Bank Abp, filial i Sverige Nordea Danmark, Filial af Nordea Bank Abp, Finland

Nordea Bank Abp, filial i Norge

Nordea Markets Division, Research Visiting address: Aleksis Kiven katu 7, Helsinki FI-00020 Nordea Finland

Nordea Markets Division, Research Visiting address: Smålandsgatan 17 SE-105 71 Stockholm Sweden

Nordea Markets Division, Research Visiting address: Grønjordsvej 10 DK-2300 Copenhagen S Denmark

Nordea Markets Division, Research Visiting address: Essendropsgate 7 N-0107 Oslo Norway

Tel: +358 9 1651 Fax: +358 9 165 59710

Tel: +46 8 614 7000 Fax: +46 8 534 911 60

Tel: +45 3333 3333 Fax: +45 3333 1520

Tel: +47 2248 5000 Fax: +47 2256 8650

Reg. no.: 2858394-9 Satamaradankatu 5 Helsinki

Bond recommendation definitions Attractive: The spread of the instrument is more than 5% above the indicated fair spread

Fair: The spread of the instrument is within +/- 5% of the indicated fair spread

Expensive: The spread of the instrument is more than 5% below the indicated fair spread

All research is produced on an ad hoc basis. The recommendation will not be updated, and the recommendation is only valid the day it is published.

Nordea does not, either explicitly or implicity, express any opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, nor of an issuer of such, which constitutes or shall be understood as a ‘credit rating’ as defined in Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on Credit Rating Agencies.

Distribution of bond recommendations

Recommendation Count % distribution

Attractive 336 41%

Fair 302 37%

Expensive 174 21%

Total 812 100%

As of 1 July 2021

Distribution of bond recommendations (transactions*)

Recommendation Count % distribution

Attractive 71 44%

Fair 44 29%

Expensive 46 27%

Total 161 100%

As of 1 July 2021

** Companies under coverage with which Nordea has ongoing or

completed public investment banking transactions

In the two tables above, due to changes in recommendation definitions

(as of 14 June 2019). The recommendation distributions according to

the old recommendation structure will be presented until sufficient

recommendations are issued to make meaningful distributions. For a

definition of the old recommendation structure see

https://research.nordea.com/compliance

Market-making obligations in shares or derivatives and other significant financial interest Nordea has market-making obligations in Aspo, Assa Abloy, Boliden, Danske Bank, DNB, DSV, Equinor, Gjensidige Forsikring, Kinnevik, Norsk Hydro, Novo Nordisk, Skanska, Telenor and Vestas Wind Systems.

Nordea has no market-making obligations in other companies in the coverage universe.

Investment banking transactions Nordea has over the previous 12 months been lead or co-lead manager in a public disclosed offer of financial instruments issued by: A.P. Møller - Mærsk, ABB, Aker ASA, Aker Horizons, Aker Solutions, Aktia Bank,Alma Media, Altera Shuttle Tankers, Ambu, Anora, AqualisBraemar LOC, Arla, Avance Gas, Axactor, Bakkafrost, Balder, BankNordik, Bavarian Nordic, BEWi, Bilia AB, BW Ideol, Cargotec, Castellum, Catella, Caverion, Chr. Hansen, Cibus, Cint Group, Citycon, Corem, Danske Bank, Dometic, DSV, Eidsiva Energi, Energi Danmark, Epiroc, EQT AB, Ericsson, Essity, Euronav, European Energy, Fabege, Fasadgruppen, Fastator, Felleskjøpet Agri, Finnair, Fintoil, Fjord1, FLSmidth, Frontmatec, Frøy ASA, Genova, GN Store Nord, Golar LNG Partners LP, Gränges, Grieg Seafood, Heimstaden Bostad, Hemnet Group, HKScan, Hoist Finance, Host Property AB, HusCompagniet, ICA Gruppen, iLOQ, Industrivärden, Inission, Jyske Bank, K2A, Kemira, Kojamo plc, Konecranes, Kungsleden, Lundbeck, Lyse, Magnolia Bostad, Mekonomen, Mölnlycke, Musti Group Oyj, Neles, Neptunia Invest, Nilfisk Holding, Nimbus Group, NKT, Nordea Bank, Nordkraft, NorgesGruppen, Norway Royal Salmon, NP3, NRC Group, Oatly, OBOS BBL, Odd Molly, Odfjell SE, Offentliga Hus, Olav Thon Eiendomsselskap, Orbit, Orkla, Ørsted, Outokumpu, Pandora, Pierce Group AB, Pihlajalinna, Puuilo, Rettig, Ringkjøbing Landbobank, Sagax, SalMar, Sanoma, Sbanken, SBB, Scandic Hotels, Scania, Scatec, Sdiptech, Småkraft, Sonans Holding AS, Spar Nord Bank, Sparebank 1 Ostlandet, Sparebanken Møre, Sparebanken Øst, Sparebanken Sør, Sparebanken Vest, SSAB, Stendörren, Stillfront, Storebrand, Swedavia, Telia Company, Thon Holding, TietoEVRY, Topdanmark, Transcom, Trianon, Tryg, Trym, UPM-Kymmene, Valmet, Vasakronan, Vattenfall, Velliv, Verisure Holding, Verkkokauppa.com, Vitec Software Group, Wallenius Wilhelmsen, Wästbygg Gruppen, XXL Asa, YIT, Zealand Pharma and Zengun.

Analyst shareholdings Nordea equity and credit research analysts do not have any holdings in the companies they cover.

Material interest held by an issuer in shares issued by Nordea Sampo owns 15.9% in Nordea (as of end-December 2020).

Nordea ESG rating methodology For a description of the methodology used in our proprietary ESG ratings, please refer to https://research.nordea.com/esg-methodology.pdf

Completion date: 24 September 2021, 11:00 CET

https://research.nordea.com/esg-methodology.pdf

https://research.nordea.com/esg-methodology.pdf

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Credit Market Comment - insights.nordea.com