Nov review 3/7: Kommunalbanken's $500bn green bond funnels proceeds to Norwegian Govt-mandated local govt climate projects

The Norwegian development bank Kommunalbanken (KBN) followed swiftly behind the heels of the IFC with a $500mn bond to finance ‘climate friendly’ projects. KBN provides low cost finance to the local government sector in Norway. The eligibility criteria are determined internally, but the bond was reviewed by Oslo climate science research centre, CICERO.

 

CICERO doesn’t provide a certification of the bond, but rather a "Second Opinion" on what it thinks of the KBN criteria and it notes areas where there is some uncertainty. KBN’s eligible projects include mitigation projects (such as energy efficiency and renewable energy), adaptation projects (such as ‘climate-resilient growth’) and ‘projects relating to sustainable development’.

KBN has said it will provide investors with an annual list of the projects financed and further information about selected projects; the commitment to reporting is great.

CICERO is a highly trusted 3rd party, so we’re broadly happy – especially because KBN has taken a great step in making CICERO’s Second Opinion public (unfortunately not yet the norm with CICERO opinions tied to SEB underwriting).

But a reading of the Second Opinion does throw up a niggle, in that we’re not sure what exactly will be in the bond. There are a list of example projects, but some of them are a bit vague. The web site suggests that funds will be flowing to projects that fall under the Norwegian Governments new mandatory requirement for local governments to develop energy and climate plans. That would work – but if so this needs to be more clearly explained.