• 25 Feb

    Green bonds for sustainable investments at local level


    Örebro Municipality is actively working to reduce the climate footprint of its financial operations. Located in the Region of Örebro (Covenant of Mayors Coordinator), it was the first municipality in Sweden which, in 2014, decided to divest - that is, to withdraw its investment from the fossil industry. They reinvested it locally, in sustainable businesses and contributed to green finance by issuing green bonds.

    The objective of Örebro municipality's asset management is to gradually reduce the carbon footprint and become carbon neutral by 2030. The municipality does not make investments in fossil energy any more. The new investment policy foreseen that, when selecting investment options, consideration must be given to how they can contribute to achieve the goals in Agenda 2030 in the long term. 

    The green investment projects play an important part in the achievement of the goals set by the municipality's environmental program, that consider construction, mobility, nature, waste and water sectors. This program includes Örebro municipality's environmental policy goals, which are based on national objectives.

    Örebro municipality has issued three green bonds, with a total value of SEK 1,750 million (around 161 thousand EUR), to finance climate-smart and ecologically sustainable investments. In 2017, green bonds accounted for 12 per cent of the municipality's total debt.

    Results
    Thanks to this new asset management policy, the carbon footprint in the municipality's asset management in 2017 was 51% lower than before. Through the work on green finances, the municipality wants to push the financial industry to reduce the carbon footprint of their investment portfolios. Since the work started, they noticed that financial products are now more focused on the Agenda 2030 objectives. 

    Örebro Municipality is also one of the parties in a Nordic partnership on green bonds. In the framework of this collaboration, a number of public sector actors have produced  common guidelines for reporting on the environmental benefits of green bonds. This document illustrates how to calculate and report on the carbon dioxide reduction. Örebro Municipality's report 2018 follows these guidelines and shows that thanks to the green bonds, as of the end of December 2017, 24 639 tons of carbon dioxide emissions have been avoided.

    Challenges

    The financial market has a major development work to do to ensure that the calculations of carbon dioxide emissions provide a fair picture of the asset management's climate footprint.The calculation of emission from equity funds largely consists of estimates: data from many companies is missing and measurement methods for fixed income funds are completely lacking. Furthermore, calculations are not comprehensive, e.g. there are no calculations for the indirect emissions of the operations. That makes it difficult to draw any more far-reaching conclusions about how Örebro municipality's portfolio contributes to a low-carbon society based on these measures.

    Lessons learned

    The main lesson learned by Örebro municipality is that a close cooperation and a continuous dialogue with the municipal companies and their environmental and energy experts is a must, if you want such initiatives to work. Another key element is to ensure a follow-up process on the activities.

    Picture credits: rjcoxCC BY-NC-ND 2.0