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Green finance

Green financing is traditional financing where proceeds are allocated to finance and refinance assets and projects with a positive climate and environmental impact.

Financing with a focus on sustainability and positive climate impact

Landsvirkjun has established a Green Finance Framework in line with the company’s focus on sustainability and climate action.

Why green financing?

Proceeds from Green Finance instruments issued under the framework are used to finance or refinance existing and future assets that promote the sustainable, responsible and efficient use of Icelandic natural resources to produce renewable energy. Eligible assets comprise all items on the balance sheet supporting Landsvirkjun’s renewable energy generation activities. These include the generation assets themselves, but also capitalised development costs, intangible assets such as water and geothermal rights, as well as projects under construction.

Green financing provides investors the opportunity to direct their funds to green initiatives, i.e. to support projects that have a positive environmental and climate impact. Landsvirkjun became the first Icelandic issuer of Green Bonds in March 2018 when the company issued a USD 200 million US private placement („USPP“) in Green Bond format. Landsvirkjun announced its second Green Bond issuance in September 2020 when the company issued USD 150 million in the USPP market in Green Bond format.

Landsvirkjun’s Green Finance Framework

The Green Finance Framework aligns with the four core components of the Green Bond Principles issued in 2018 by the International Capital Market Association (ICMA) and the Green Loan Principles issued in 2020 by the Loan Market Association (LMA):

1. Use of Proceeds

2. Process for Project Evaluation and Selection

3. Management of Proceeds

4. Reporting

The company obtained a second party opinion on its Green Finance Framework from Sustainalytics. The second party opinion states that Sustainalytics is confident that Landsvirkjun is well-positioned to issue green finance instruments and that the Green Finance Framework is robust, transparent and in alignment with the four components of the ICMA Green Bond Principles 2018 and LMA Green Loan Principles 2020.

Green finance framework

Reporting

Landsvirkjun emphasises fair and transparent disclosure. The Company’s Climate Account is based on the methodology of the Greenhouse Gas Protocol (GHGP)1 and has been inspected and verified by Bureau Veritas, one of the world’s leading certification bodies, using the international standard ISO-14064-3, with limited assurance. This will ensure that Landsvirkjun’s findings are consistent with emissions from its operations.

2022 Green Finance Allocation Reporting

As of year end 2022 the Eligible Green Assets amounted to USD 3,231 m. Outstanding Green Finance Instruments amounted to USD 285 m. All proceeds from the Green Finance Instruments have been allocated to the Eligible Green Assets.

Percentage of Eligible Green Assets allocated to net proceeds of Green Funding: 9%

Percentage of net proceeds of Green Finance instruments allocated to Eligible Green Assets: 100%

Deloitte, the external auditors of Landsvirkjun, have issued an assurance report on the Green Finance Allocation Report and confirmed that the preparation of the Eligible Green Assets is in accordance with the Eligibility Criteria as described in the Framework. The Green Finance Allocation Report and the Assurance Report are included in the appendix.

Green Finance Impact Reporting

See here for Landsvirkjun’s 2022 Green Finance Report

Landsvirkjun’s Green Finance climate impact is expressed as avoided greenhouse gas emissions. The avoided greenhouse gas emissions by using green and renewable energy amounted to 2.7 million tonnes CO2 equivalents on balance sheet basis.

The climate impact is shown both on balance sheet basis and pro-rata basis which is proportional to the amount of outstanding Green Finance Instruments to Eligible Green Assets on the company’s balance sheet. The avoided greenhouse gas emissions of Eligible Green Assets on balance sheet basis amounted to 2,664,328 tCO2eq or 0.825 kgCO2eq/USD in 2022, on balance sheet basis.

The Green Finance Impact Report discloses the climate impact of Landsvirkjun’s renewable energy assets for the year 2022 in line with the company’s Green Finance Framework and describes the methodology used.

More information and contact
Treasury Department
treasury@landsvirkjun.is

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