By Beate Sonerud, Climate Bonds Initiative policy analyst
Örebro, a Swedish municipality, has issued a SEK750m (cUS$104m) green bond. The bond has 5-year tenor and is rated AA+ by S&P. The bond was developed with SEB. Investors included SPP, AMF, Carnegie, Cliens and Länsförsäkringar Jönköping.
Örebro’s Green Bond Framework, on which CICERO provided a second opinion, sets out that proceeds will finance the municipality’s environmental programme, which includes projects in climate change mitigation and adaptation. However, up to 20% of the proceeds can also go to non-climate environmental investments.
The range of projects included in the green eligibility framework is broad: Renewable energy, energy efficiency, sustainable transport (only non-fossil fuel based transport – nice!), waste management (re-use, recycling, restoration of contaminated sites), water management (secure drinking water supply, water quality, reduced eutrophication, recycling and biodiversity) and green buildings. Wider, non-climate focused, green investment projects can include nature conservation, toxic pollution reduction, sustainable buildings with densification, health promoting accommodation and surroundings, increasing green values.
We like that Örebro focuses on both climate mitigation and adaptation – at this stage, we need both.
Örebro’s green building criteria does not follow common standards like LEED, BREEAM or Miljöbyggnad (a Swedish green building standard), but instead sets its own hard energy performance targets: Max 55 kWh/m2/yr for new public buildings, 65 kWh/m2/yr for residential housing, and redevelopment and renovation projects must achieve at least 20% energy efficiency improvements. According to CICERO’s second opinion report, these efficiency performance criteria are “(…) very good energy wise compared to the highest levels in the standardized frameworks, e.g. Miljöbyggnad Gold.”
What we would like to see though, which the CICERO report doesn’t give us, is what these absolute energy targets imply in terms of percentage reductions in energy use, and how this relates to emissions. After some digging around we found that Örebro’s building criteria provide a 28-39% reduction in energy use, compared to the baseline of requirements under the Swedish building code for new buildings not heated by electricity (90kWh/m2). That is moving towards the sort of deep cuts in emissions we need to see in the built environment. However, a caveat here is that it is not clear from Örebro’s and CICERO’s reports whether the buildings to be financed will be heated by electricity or not – if they are, the building code baseline is 55kWh/m2 and there would be no energy use reductions beyond the building code. We wouldn’t expect this to be the case, but to be sure, we need more granularity in the reporting.
We like that Örebro’s green building criteria focused on energy efficiency. In the future, it would be good to have these energy performance targets translated to emissions reductions. See our proposed green property standards for more details.
In terms of procedures, Örebro’s green bond follows best practice: They will publish financed projects on their website, as well as publishing (and making public!) an annual investment report, and funds from the green bond issuance have an earmarked account.
Örebro’s bond follows the issuance of another Swedish green muni bond just last week, and the first Norwegian corporate bond a couple of weeks ago – keep it up Scandinavia!
