Page 117 - ITU-T Focus Group Digital Financial Services – Executive Summary

Green bond issuance can sometimes be accompanied by specific marketing initiatives to promote the climate
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awareness of the issuer. Also, prior to issuing a green bond, the issuer usually looks for a second opinion to
increase investors’ confidence on the quality of the issuance. For the City of Gothenburg’s green bond
framework, the second opinion was provided by Cicero (Center for International Climate and Environmental
Research - University of Oslo), whereas Sustainalytics evaluated the Mexico City green bond framework.
The management of the Green Bond framework requires engagement and collective efforts from various
levels of public administration. Setting up a monitoring, reporting and verification structure likely requires
the most cooperation between different government entities. For example, the City of Gothenburg’s
Environment Administration oversees monitoring and reporting regarding the implementation of the
Environmental Program (of which the Green Bond framework is part of) and the Climate Strategy. The
projects funded by the City of Gothenburg’s Green Bond Program are publicly reported including an annual
investor letter that is available on the city’s home page. Publishing project-level information allows the public
to access information on how the proceeds are invested; for instance, providing a list of projects financed
and some additional information on some examples of projects, which have already been implemented.

2.3 Results

The green bond’s underlying projects contribute to the City of Gothenburg’s sustainability agenda as well as
to the well-being of the city’s residents. Through the issuance of green bonds, the City of Gothenburg has
supported investments in a variety of sustainable city projects such as a large-scale production of biogas by
gasification, zero emission electric cars for the city’s administrative offices and companies, energy efficient
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housing, and water treatment using the largest ultrafilter ever built in Scandinavia.
Issuance of green bonds allow small-scale environmental projects to get funded by including them as part of
a larger pool of projects, and can give cities additional positive visibility. For example, in the case of City of
Gothenburg, green bonds together with the city’s strategic climate program were the reasons why
Gothenburg was voted “Swedish Climate City of the Year” by WWF in 2015.
In addition to the benefits created by the projects financed through green bonds, the green bonds as such
also help spread the city’s financial risks by diversifying the sources of funding. Instead of relying completely
on tax money, cities can tap into additional sources of finance, and access low-cost capital needed for
infrastructure investments by issuing green bonds. Green bonds also allow cities to access new investors
compared to mainstream bonds.

3 Conclusions

Many cities that have been actively participating in environmental initiatives and implementing sustainable
projects, are taking the next logical step towards sustainability by including their finances in their
environmental agenda.

Although the City of Gothenburg issued its first green bond in September 2013, COP21 results further
encouraged the city to create funding flows through the issuance of green bonds. One of the elements of the
Paris climate agreement’s urges the creation of financing flows that would support the “below 1.5 degrees’”
scenario, and this will certainly be reflected in the emerging interest in city green bonds.

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18 Providing a second opinion refers to the process of an independent evaluator assessing the mechanisms or
framework the issuer has in place for evaluating and selecting eligible projects. The evaluation can also assess the
use of proceeds, management of proceeds, and reporting, as well as their alignment with the International Capital
Market Association’s (ICMA) Green Bond Principles (http://www.icmagroup.org/Regulatory-Policy-and-Market-
Practice/green-bonds/green-bond-principles/).
19 UNFCCC, Gothenburg Green Bonds Sweden,
http://unfccc.int/secretariat/momentum_for_change/items/9935.php (accessed on January 12, 2017).

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