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Central government debt management – Sustainability and Finnish Government Bonds

Sustainability and Finnish Government Bonds

The sustainability of a sovereign state is built on the environmental, social and governance policies of its government. Finland is by many metrics a global forerunner in sustainability and ranks high especially in governance comparisons. In this section, we have gathered environmental, social and governance factors that describe the Finnish society.

Our approach to sustainability is holistic, focusing on government level targets and performance and recognising the social nature of budget spending. The focus of our funding strategy is on the liquidity of the benchmark bond curve, and thematic bonds are currently not part of the strategy.

Climate Neutral Finland 2035

The Government of Finland has set an ambitious target to make Finland climate neutral by 2035, and carbon negative soon after that. Finland aims to be the world’s first fossil-free welfare society. From a global perspective, Finland is well prepared for climate change. The ND-Gain Matrix (2020)  by University of Notre Dame places Finland as the 5th least vulnerable country in the world to the negative impact of climate change, and 5th most ready country to adopt to climate change. However, to achieve the climate neutrality target, many decisions on climate policy, taxation and legislation must be made.

Social Equality and Wellbeing

Finland is a highly equal society with a comprehensive social security system, small income differences and skilled labour force. In international comparisons, Finland continuously ranks high on the measures of mutual trust and social cohesion. In 2021, Finland topped the global ranking of The World Happiness Report for the fourth year running, thus being declared the happiest country in the world even amidst pandemic.

Finland’s key challenge is the demographic change that reduces labour force and weakens the economy’s growth potential. The longer-term outlook for the Finnish economy is subdued also by rather weak labour market productivity and, in Nordic comparison, modest employment rate.

To address these challenges, the Finnish government is committed to a set of structural reforms. This section highlights some of the most important reforms through which the government seeks higher labour market participation and a more inclusive society. Key reforms cover employment, education, health and social care services and the social security system.

Sound Governance

Finland ranks high in many indicators and international comparisons focusing on sound governance and institutional strength. Governance factors have typically been Finland’s strength and a positive driver for Finland’s credit ratings. The quality of Finland’s governance is based on transparent and effective government, respect for the rule of law, control of corruption and political stability among other things.

Finland’s sound governance and high-quality institutions are also reflected on the business environment which ranks high globally. Additionally, Finland’s economy compares well with its international peers on its competitiveness.