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Iceland’s Sovereign Sustainable Financing Framework

The Ministry of Finance and Economic Affairs has issued a Sovereign Sustainable Financing Framework and been awarded a CICERO Dark Green rating by CICERO Shades of Green, a globally recognised second opinion provider. The score indicates that the projects to be financed support the long-term vision of a low-carbon future and climate resilient future. For its social projects, CICERO gave a positive commentary. The framework enables the Government to finance its activities, including by issuing sustainable, green, blue, and/or social bonds in Iceland and abroad.

Bjarni Benediktsson, Minister of Finance and Economic Affairs:

It is extremely gratifying to see this goal become a reality. We have long had our eye on opportunities for sustainable bond issues, and investors’ interest has grown year by year. An important factor is that the terms on such issues are becoming more and more favourable, and it is highly likely that sustainable financing will be not only a hallmark of quality for our fiscal policy, but also a way for us to enjoy favourable terms for a strong performance, including on climate issues. This is a welcome development and a true watershed.

The interest of issuers and investors for sustainable financing has grown rapidly all over the world in the past decade. There has been a widespread awakening in the financial industry and the general public about the relationship of finance and the climate, environment, and social challenges. This has been reflected in rapidly growing interest in sustainable financing and investments. Bonds issued under this sustainable financing framework provide funding for certain defined Treasury expenditures, which fall into three categories:

  1.  Green projects (climate and environmental issues), such as infrastructure for bicycles and electric bicycles, the energy transition of vehicles and infrastructure, green buildings, natural disaster preventions, adaptation to the circular economy, wetland reclamation, etc.
  2. Blue projects (climate and environmental issues relating to the ocean, seafood, and related sectors), such as electrification of harbours, energy transition for ships and ferries, a sewage treatment initiative, etc.
  3.  Social projects, such as social housing, patient care, job creation including COVID-related expenditures in support of society and the economy, etc.

The Government has set clear objectives for sustainability and has taken on international commitments concerning climate action, as well as signing a memorandum of understanding on sustainable development with the financial system. The objective of the climate action plan is to ensure that Iceland meets both the targets under the Paris Agreement and its own ambitious target of achieving carbon neutrality by 2040.

One facet of the Government’s climate action plan is sustainable financing, which entails exploring the feasibility of sustainable financing and broadening the group of investors for its conventional borrowings. The Treasury’s increased need for credit in the coming years provides an opportunity to obtain sustainable financing without compromising debt management objectives concerning a deep, active market, and regular issuance.

In 2020, the Minister of Finance and Economic Affairs appointed a work group to explore the possibilities for sustainable Treasury financing. Among the group’s tasks was to define and create this sustainable financing framework. The Framework, which is based on international standards and benchmarks, has received a CICERO Dark Green rating, the highest possible, for the green and blue projects to be financed. The social projects have received positive commentary, and the governance practices for sustainable financing received a “good” rating.The opinion and commentary from CICERO – Shades of Green reflect the Government’s ambitious long-term environmental and climate objectives, as well as the hard work and progressive thinking invested in the preparation of the framework.

Other countries that have received opinions from CICERO Shades of Green are: Indonesia (medium green), Kenya (medium green), Hungary (medium green), and Sweden (dark green).


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