Green bonds and sustainable business models in Nordic energy companies

As green bonds continue their dynamic growth trajectory to finance the transition to a more sustainable future, a gap in the literature remains on how companies have overcome internal barriers to successful green bond issuance. This case-based study analyzes how five Nordic energy companies have successfully surmounted internal barriers to issuing green bonds by leveraging their sustainable business models. The findings show a number of antecedental features of sustainable business models prior to green bond issuance including: a focus on environmental betterment as part of the mission and strategy; investments into assets that provide an environmental benefit and a divestiture of those that do not; the active pursuit to reduce CO₂ emissions through R&D; and, strong governance mechanisms. Throughout the process of issuing green bonds, companies introduce changes to their sustainable business models, most notably, green finance frameworks and additional governance practices. As a result of the green bond issuance, reinforcing choices and consequences emerge to create virtuous cycles. In turn, the virtuous cycles support environmental objectives and foster more economic and environmental value for the company, investors, and society. Our study offers a process-based theoretical outline of how sustainable financing can make a business model more sustainable by removing internal barriers and strengthening company strategy, asset choices, and governance.