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Municipality Finance Plc / Kuntarahoitus Oyj (in Finnish)

MuniFin

Municipality Finance Plc, or MuniFin, is the second largest financial institution in Finland and the only one specialised in the financing and financial risk management of the Finnish public sector.

Lobbying Activity

Response to EU Standard for Green Bond

27 Sept 2021

We thank for the opportunity to comment on the draft Regulation on European green bonds. We support the initiative and applaud the leadership of the European Commission, however we have some concerns with the formulation of the draft Regulation. We recommend that the following be considered (detailed response attached): 1. Offer certainty that issued EuGBs will not lose their status at any point of their maturity due to changes in the EU Taxonomy and delegated acts as well as ensure that EuGBs can finance (refinance) a portfolio of use of proceeds that were Taxonomy aligned at the time of creation, i.e. when they were added into the green use of proceeds portfolio. We suggest that issuers be able to keep vintages of taxonomies in their use of proceeds portfolios i.e. full grandfathering of use of proceeds even if the taxonomy or delegated acts change. To facilitate transparency, it could be a requirement to disclose which taxonomy vintages are included in the portfolio. It is also important to have a level playing field between different types of issuers e.g. bond-by-bond issuers vs. portfolio approach issuers. Therefore, it is troubling that the draft Regulation’s Recital 11 mentions that certain types of issuers can apply the technical screening criteria applicable when the European green bond was issued until the maturity of the bond, while others cannot. The green bond issuance date as a cut-off date for assessing Taxonomy alignment is not functional for portfolio approach issuers, as bonds are not linked to specific assets. 2. Define financial asset and debt more clearly to make sure definition includes also financial leases in addition to loans. 3. Clarify what the implications are if issuers can be both sovereigns and financial undertakings. If some local government funding agencies and public credit institutions fall under the definition of ‘sovereigns’, ensure that all do to secure a level playing field. 4. Ensure that green loans/leases that have been granted to finance assets or activities mentioned in Article 4(2) of the draft Regulation qualify as use of proceeds of EuGBs that credit institutions issue. Also, it should be ensured that the level of diligence/verification required by the credit institution be consistent with the diligence requirements the sovereign would have to fulfill as if it had chosen to issue a EuGB instead of financing the activity via a green loan, including the timing of allocation reporting/verification etc. so that it would be consistent with the issuance activities of the credit institution. 5. Enable the conversion of existing green bonds and green use of proceeds portfolios to EuGBs and connected portfolios. 6. Clarify the use of the factsheet and impact report document for portfolio approach. 7. Clarify in the Regulation and its annexes that an EuGB factsheet can be used for several EuGB issuances. Ensure that the Regulation does not require project level information or environmental impacts in the factsheet, as these are presented in allocation and impact reports post issuance. 8. Ensure that the time limits for the publication of the reviewed allocation report and the post-issuance review be more aligned with the schedule for financial reporting, i.e. around 90 days. Align the time limits in the Regulation that guide the schedules relating to a) sending the allocation report for post-issuance review, b) the preparation of the post-issuance review and c) the publication of the reviewed allocation report and post-issuance review. 9. Further clarify the term ‘total amortised value’. 10. Clarify which requirements apply to issuers not subject to Prospectus Regulation 11. Align the Regulation with best practice according to which portfolio approach issuers usually report annually at year end the outstanding amount of green bonds and the outstanding amount of use of proceeds assets. 12. Include ‘fixed assets’ in Article 6(2). 13. Clarify that value of EuGB means ‘face value’.
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Response to Climate change mitigation and adaptation taxonomy

18 Dec 2020

MuniFin is grateful for the possibility of providing feedback. We are positive towards the Taxonomy as a tool to define and promote sustainable activities. However, we have a number of concerns: • We fear the current draft risks undermining not only our own ability to contribute to the sustainable finance market but also considerably slowing down its harmonization (via the EU Green Bond Standard). • We fear that the project owners (our customers) will opt for traditional funding requiring less disclosure, as the current DNSH criteria are too onerous and costly to comply with. • We suggest DNSH criteria should be simplified. DNSH should refer to National or EU legislation; compliance should mean project owners confirm legislation is respected. A credit institution should verify compliance only if it receives indications on non-compliance. • Regarding DNSH assessment, the principle of proportionality (in terms of company size, investment size, risk profile etc.) should apply, in accordance with risk mgt practices. • Liability for fulfilling Taxonomy requirements and for accuracy of data should be on the project owner (our customer), clarification on this matter is needed. Criteria that requires ex-post data gathering is unwelcome; it results in increased administrative burden and is contrary to current market practice. Construction and Real Estate • The methodologies and thresholds of NZEB and EPC classes vary significantly between EU countries. Due to this, the TSCs result in large variations to the eligible share of the building stock from one country to another, without reflecting actual differences in environmental performance among the building stocks. • In Finland, only ~3% of new apartment buildings fulfill the NZEB –20% requirement in Section 7.1. • We suggest to modify criteria for Section 7.1 so that: i.) Alignment is made by fulfilling one of the following: either NZEB-requirements for new buildings -20% or EPC class A; ii) GWP is limited to the A1-A5 stages of the life cycle; iii) Climate adaptation assessment requirements apply only for relevant risks; iv) Requirements for circular design are postponed; v) Restrictions for building on forest land are limited to regions where forest is scarce. • We suggest to modify the TSCs for Section 7.7 so that alignment is made by fulfilling one of the following: either EPC class A, or NZEB-requirements for new buildings -20% or top 15% of building stock in relevant subcategory. • Guidance should be provided on when to apply 7.1 and when 7.2 and their TSCs should be harmonized. • The requirements for material recovery rate and water appliance efficiency are significantly higher than current market practice. Where there are relevant EU directives and policies, which are sufficiently ambitious in scope, we recommend using these as opposed to introducing specific requirements, like testing for thermal integrity of buildings, which is not common in Finland. Energy • Bioenergy fulfilling requirements for sustainability and GHG-savings of RED II should be classified as a sustainable activity, and not as only transitional. Criteria for biomass should follow RED II as regards GHG-savings and the 20 MW-limit not to administratively over-burden small operations. Waste water treatment The front-to-end net zero energy demand for wastewater collection and treatment systems is extremely demanding, even in the Nordics and particularly when introducing more stringent treatment requirements. This will unqualify investments which are highly necessary, but where energy efficiency is not the main purpose. If the threshold for the front-to-end net zero energy demand is kept, then it should be clearly defined. Transport • Vehicles operating on biofuels fulfilling GHG-savings and sustainability requirements according to RED II should be accepted. Energy efficiency • LED light installation should be accepted.
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Meeting with Mette Toftdal Grolleman (Cabinet of Commissioner Jonathan Hill) and Kommuninvest i Sverige AB

26 May 2016 · CRR/CRD; Leverage Ratio