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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

Our climate account is based on the methodology of the Greenhouse Gas Protocol (GHGP), which is a leading international corporate standard for accounting and reporting greenhouse gas emissions. Our climate account has been reviewed by external auditors, making Landsvirkjun the first Icelandic company to invite external auditors to review its climate account. This means that our scope 1, 2, and 3 GHG emissions data as stated in this report has been reviewed and verified by Bureau Veritas, an international company specialized in testing, inspection and certification, to the ISAE 3000 Revised assurance standard (limited level).

2020 Allocation and Impact Report

Landsvirkjun publishes annual Allocation and Impact Reports in accordance with the Green Finance Framework. These reports can be found below.

As of year end 2020 the Eligible Green Assets amounted to USD 3,612 m. Outstanding Green Finance Instruments amounted to USD 250 m. All proceeds from the Green Finance Instruments have been allocated to the Eligible Green Assets.

Climate impact of the Eligible Green Assets

See here for Landsvirkjun’s 2020 Climate Account

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.

Landsvirkjun engaged KPMG as an external consultant to prepare the Annual Impact Report. The Impact Report quantifies the climate impact of the Eligible Green Assets and the pro rata effect of the outstanding Green Finance Instruments and describes the methodology used. Key results of the Impact Report are presented in the table below.

The avoided CO2 emissions by electricity generation using green and renewable energy amounts to 2.7 million tons CO2 equivalent. As a comparison Iceland’s net greenhouse gas emissions (excluding ETS and LULUCF) amounts to approximately 3 million tons CO2eq. The avoided emissions in 2020 per USD of outstanding Green Finance Instruments amount to 0.8 kg CO2 eq.

More information and contact
Treasury Department
treasury@landsvirkjun.is

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