Kaj Embren

The UN expects the world temperature to rise of about 2.7°C, well above the target maximum of 1.5°C to 2°C agreed upon in Paris. Even if countries manage to match this ambition with results, people in many parts of the globe still face a future of more frequent flooding, drought and storms.

Urban population growth is projected to rise globally by 1.4 million people a week until 2030. This trend is very challenging but it also provides the opportunity for mayors to out perform national governments and play key roles to implement the SDG goals.

Finance is the main deterrent for changes to reduce climate impact. National governments move slowly and control most of city finances. But mayors have began to cease the opportunity and have engaged into networks that foster collaboration and include ways to implement financial alternatives that can help circumnavigate national governments and bring independence to the local level. Green finance is one of them and the Nordic cities are leading by example.

‘Green bonds’ is a new buzz-phrase that is gaining traction. They enable governments, cities and industries to interact with the financial markets to secure the necessary levels of investment to implement renewable energy and new construction solutions among other things.

Green Bonds are new but a report publish by Climate Bonds projects that the Nordic Green Bond Market will reach between USD 250–300bn in 2018.

This projection is still shy from USD1tn estimated to be needed by 2020 to make a significant impact on climate targets.

But the Nordic cities are pushing ahead. Gothenburg is the market leader and an early adopter of green bonds, with investments largely in the renewable energy sector. Elsewhere too, cities are opening up similar projects to encourage investment in green housing, ‘smart’ transport and the internet of things (IoT) that can all increase energy efficiency. To-date, the financial investment body of Swedish Local Governments, Kommuninvest, has invested in some 80 Swedish municipalities and county councils/regions. Since Kommuninvest launched its green finance programme in June 2015, SEK 17.4 billion has been issued in green bonds, making Kommuninvest the largest Swedish issuer.


Stockholm County Council (SCC) was the first county council in Sweden to issue a green bond. The fifth green bond was issued in March 2018, at SEK 1.0 billion. The projects it funds have been laid out in the council’s green bond framework, and can be categorized as:

• Public transportation, including a target of 75% of fuel coming from biofuels.

• Buildings.

• Waste management, including recycling.

• Water management, including reducing ‘medical substances in water’.

Companies in sectors like energy utilities (Fortum Heat), real estate (Vasakronan), forestry (Sveaskog) and construction (Skanska), have been leading the market so far. The latter industry has established a certification system for climate-smart buildings, which facilitates the establishment of green bonds.

Green bonds are growing in importance, but there is a lack of easy-to-understand explanations of the different types available. So, even if you’re not a market expert, the following definitions can help identify the four varieties of green bond currently available:

1. User Proceeds Green Bond

Issued by a corporation (like Toyota, for instance) or a Development Bank (like the World Bank), the proceeds of these bonds are earmarked for green projects. The purpose and impact of the projects is spelled out in the bond documentation, which explains how the money should be used. Annual reports show how the projects have developed, and provide companies with a way to communicate their sustainability work.

2. Municipality Green Bond

This is a green bond with the same structure as the “user proceeds green bonds”, but with its own rules. It allows governments and municipalities to integrate other incentives (such as those in their tax system) into the bond’s policies.

3. Renewable Infrastructure Green Bonds

These bonds are directed towards renewable energy and other infrastructure projects. With higher risks reported for direct investment in solar or wind energy projects, such bonds usually offer a larger return on investment.

4. Asset-Backed Securities Green Bond

Here we find a multitude of green projects. This is a green asset that offers cash flow to the projects being funded, as well as providing cash flow to the holder of the green bond.


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