18.5.2020

Prosperity and Climate Action through Green Mortgages

The EU is aiming to be climate neutral by 2050, which will require climate action from us all. Banks in Finland have taken a step in that direction by launching the first environmentally friendly green mortgages onto the Finnish market. How will this new product effect the future of the mortgage market?

Energy Efficient Living Rewarded with Lower Interest

The goal of the Energy Efficient Mortgages Action Plan (EeMAP) funded by the EU is to develop a green mortgage for the European markets in order to encourage energy efficiency. The idea is that people who purchase an energy efficient home would be rewarded, for example, with a lower interest rate. The same incentive would be available for renovations to improve energy efficiency.

The participants in the EeMAP initiative have also set out to prove two things. They want to show that taking the energy efficiency of homes into account in mortgages creates a more sustainable future and that banks benefit when their customers invest in energy efficiency. The banks’ credit risk is lower, because the customer saves money on lower electricity bills, and energy efficiency increases the value of the home.

As green mortgages are a novel product, it is difficult to gauge how popular they will become. There is no shortage of interest however: according to a recent survey conducted by Finance Finland, nearly 60% of respondents would be willing to renovate their home to make it more energy efficient in exchange for a lower interest margin on their mortgage.

From Good Credit Practices to Sustainable Credit Practices?

Finnish law requires that lenders comply with good credit practices. Banks must treat their customers in a socially responsible way and take into account their customers’ interests.

Good credit practices have not traditionally obligated banks to assess the environmental impacts of lending, but what if a more environmentally sound approach also added to the customer’s prosperity?

As an example, let’s imagine a customer who buys a house that meets the criteria for a green mortgage. If the goals of the EeMAP initiative are achieved, a green mortgage would increase the customer’s wealth more than an ordinary mortgage. In that case, it would be in the customer’s interest for the bank to offer a green mortgage on its own initiative. The bank, for its part, would be encouraged to grant a green mortgage by the promise of better returns. Financially, everyone would win.

Fostering financial benefit and the customer’s interest would also create an external benefit in the form of the improved energy efficiency of financed homes. A more sustainable service offering could also be an asset to the bank when trying to attract new customers. Young people in particular are increasingly seeking to use their financial decisions to combat climate change and promote sustainable solutions in society. Remaining passive and relying on unsustainable processes will backfire sooner or later.

On the mortgage markets of the future, prosperity and impact will go hand in hand. By bringing these together, banks can create both financial and environmental benefits.

Latest references

We have advised S-Bank Plc in four bond transactions totalling EUR 1.45 billion that provided financing for S-Bank’s acquisition of Svenska Handelsbanken AB’s Finnish private customer, asset management and investment services operations. In 2023, we advised S-Bank in supplementing their earlier bond programme and in the issuance of two new bonds. S-Bank’s first covered bond, valued at EUR 500 million, was issued in September 2023. In addition to general corporate purposes, the purpose of the issue was to finance the acquisition of Svenska Handelsbanken AB’s Finnish private customer, asset management and investment services operations. Further, a EUR 150 million senior preferred MREL eligible bond was issued in November 2023 and the purpose of the issue was to meet the minimum requirement for own funds and eligible liabilities (MREL) and to finance the bank’s activities. In 2024, we have advised S-Bank Plc in the update of a EUR 3 billion bond programme. Under the programme, S-Bank may issue senior preferred MREL eligible notes, covered bonds and additional tier 1 capital notes. In February of 2024, we advised S-Bank in its issuance of a EUR 300 million senior preferred MREL eligible bond and on the tender offer of its EUR 220 million senior preferred MREL eligible bond maturing in 2025. The tender offer required the prior permission of the Finnish Financial Stability Authority based on Commission Delegated Regulation 2023/827 on technical standards for the reduction of own funds and eligible liabilities prior authorisation. The Stability Authority granted S-Bank a permission for repurchases of the notes. Based on the permission, S-Bank replaced the notes with own funds or eligible liabilities instruments of equal or higher quality at terms that are sustainable for the income capacity of S-Bank. The final tender offer results were announced in February 2024. In April 2024, we further advised S-Bank in supplementing their base prospectus and issue of their second covered bond of EUR 500 million. The covered bond’s maturity date is 16 April 2030.
Case published 30.7.2024
We act as the lead legal counsel in the groundbreaking case of Multitude SE’s (Multitude) proposed relocation from Finland to Switzerland. The first phase of the relocation, involving the transfer of Multitude’s registered office from Finland to Malta pursuant to SE Regulation, was successfully completed on 30 June 2024. In this connection, Multitude’s shares were removed from the Finnish book-entry system and the issuer central securities depository of the shares changed from Euroclear Finland Oy to the CSD operated by the Malta Stock Exchange. In practice, all of Multitude’s shares are now held through Clearstream. In Malta, the company is anticipated to be converted into a public limited liability company under Maltese law, following which it will seek redomiciliation from Malta to Switzerland. Given that Finnish legislation does not allow for direct relocation to a non-European Economic Area country such as Switzerland while preserving the company’s legal personality, the process necessitated a multi-jurisdictional strategy as outlined above. Our mandate encompasses advising Multitude on all aspects governed by Finnish law concerning the proposed relocation and coordinating the work of local legal counsel and various other advisors involved in the project. The process also involved a written procedure to amend Multitude’s existing subordinated capital notes and senior bonds to facilitate the relocation as well as placement of EUR 80 million senior guaranteed notes by a newly established Multitude Capital Oyj. ”The transfer to Malta marks a significant step in Multitude’s journey. This pioneering and complex process has been successfully implemented with the invaluable support of our own team and advisors. Castrén & Snellman has masterfully orchestrated the entire project, ensuring seamless coordination across multiple jurisdictions. We look forward to achieving our next step with the further relocation to Switzerland”, says Jorma Jokela, Multitude’s CEO. Multitude is a fully regulated growth platform for financial technology, employing over 700 individuals across 25 countries. Its shares are listed on the regulated market (Prime Standard) of the Frankfurt Stock Exchange.
Case published 1.7.2024
We acted as legal advisor to OP Finland Infrastructure LP in its investment in ESL Shipping Ltd, a Finnish shipping company. Varma Mutual Pension Insurance Company co-invested in the company. The investment was made against new shares in ESL Shipping, and  the EUR 45 million co-investment  corresponds to a  21.43 % holding in the company. The aim of the investment is to accelerate ESL Shipping’s green transition. ESL Shipping Ltd is a Finnish shipping company. Its main shareholder is Aspo Plc. OP Finland Infrastructure is a fund investing in Finnish infrastructure. The fund is managed by OP Financial Group. Varma Mutual Pension Insurance Company is a Finnish pension insurance company. In September 2023 the value of its investment portfolio amounted to EUR 57.5 billion. 
Case published 26.4.2024
We are acting as the legal advisor to Purmo Group Plc in Project Grand Bidco (UK) Limited’s voluntary public cash tender offer for all the issued and outstanding shares in Purmo Group. The tender offer values Purmo Group’s total equity at approximately EUR 392 million. Project Grand Bidco (UK) Limited is a special purpose vehicle incorporated and existing under the laws of England and Wales that will be indirectly owned by a consortium formed for purposes of the tender offer of certain affiliated funds of Apollo Global Management, Inc. and its subsidiaries, and Rettig Oy Ab. The consortium intends to support the development of Purmo Group with industrial expertise, and the planned tender offer is expected to accelerate the implementation of Purmo Group’s growth strategy. Purmo Group’s class C shares are listed on the official list of Nasdaq Helsinki. Purmo Group is at the centre of the global sustainability journey by offering full solutions and sustainable ways of heating and cooling homes to mitigate global warming. Purmo Group provides complete heating and cooling solutions to residential and non-residential buildings, including underfloor heating and cooling systems, a broad range of radiators, heat pumps, flow control and hydronic distribution systems, as well as smart products. The completion of the tender offer is subject to the satisfaction or waiver by the offeror of certain customary conditions on or prior to the offeror’s announcement of the final results of the tender offer. The tender offer is currently expected to be completed at the end of the second quarter or at the beginning of the third quarter of 2024.
Case published 26.4.2024