Green Bonds investor presentation - Version: May 2019 - Kommuninvest
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Version: May 2019
Green Bonds investor
presentation
Agenda/contents
• Introduction
• Green Bonds issuance
• Green Loans programme
• Impact reporting
• Appendix
2
Sweden and sustainable development
• First UN conference on the human environment in Stockholm 1972 – the beginning of the global
environmental movement.
• Current national agenda – adopted by the parliament – based on generational goal, 16 quality
objectives and 24 milestone targets. Sweden aims to be among world’s first fossile-free welfare
nations.
3
Role of municipalities
Drive Swedish green efforts, through investments
& procurement, regulatory supervision, and responsibility
for city planning and local infrastructure.
Investment Municipal- Local govt
>90 % of focus on Real ities repr. >40% sector accounts Transparency
municipalities estate, of the pop. have for >50% of all & reporting
with green Infrastructure, signed EU public sector stimulates
targets Energy, Water Covenant of investment in development.
and Sewage Mayors Sweden.
4
Local government investments on the rise
SEK Billion
180
Distribution of municipal investments, 2017
160
140 Real estate
Residential property
120
Infrastructure
100
Water and sewage
Energy
80 Other
60
40
Investment drivers
20 • Population growth
• Ageing infrastructure
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
• Changing demographics
Municipalities Municipality owned subsidaries Regions
• Increased urbanisation
5
Green investments drive demand for Green loans
• Green loans offered to clients since 2015:
- Current portfolio commits funding for >250 green
investment projects in 115 Swedish cities and regions
• Sweden’s largest issuer of green bonds:
- USD 600m green bond (matured 04/2019)
- SEK 5bn green bond (05/2020) *
- USD 500m green bond (06/2021)
- SEK 3bn green bond (12/2021)
- SEK 3bn green bond (12/2023)
- SEK 3.5bn green bond (3/2024)
Strong potential pipeline, due to investment
trends and green aggregation model * Decline in outstandings explained by redemption of
inaugural USD 600m Green Bond in April 2019
6
ESG ratings profile*
Rating Category Peer group comparison
B- Prime Top-5 out of 78 issuers rated
AA n/a n/a
51 / 100 Average n/a
28 / 100 Neutral Ranked #10 out of 20 banks
* As of 30 April, 2019
7
Green Bonds issuance
Recent Green Bonds issuance
May 2017, USD 500m April 2018, SEK 3bn October 2018, SEK 3bn March 2019, SEK 3.5bn
Geographic distribution Geographic distribution Geographic distribution Geographic distribution
Nordics
Sweden
Central Europé
Denmark
Americas Sweden Sweden
Netherlands
Other Europé Other Europé
UK Finland
MEA Norway
Other Europé
Asia
Investor type distribution Investor type distribution Investor type distribution Investor type distribution
Central banks &
official inst.
Fund managers Fund managers Pension funds /
Asset managers Insurance
Pensions Asset managers
Pensions &
Banks
Insurance Insurance
Banks Banks
Pension funds & Banks
ins. comp. Other
Insurance
9
Kommuninvest Green Bonds Framework
Adhering to the four pillars of the Green Bond Principles
1. Use of Proceeds 2. Project Evaluation and Selection
Investment projects undertaken by Swedish local i) Project identification and verification by the
governments that promote the transition to a low- environmental and treasury functions in
carbon and climate-resilient society. Kommuninvest’s member municipalities/county
councils;
ii) screening and pre-approval by
3. Management of Proceeds Kommuninvest’s Lending department;
Earmarked account for proceeds. Lending to Eligible iii) review and final approval by consensus vote in
Projects precedes Green Bond issuance. the Kommuninvest Green Bonds Environmental
Committee.
4. Reporting Assurance:
i) Annual investor impact report regarding green
i) Second opinion on framework from Cicero
bond issuance and Eligible Projects;
ii) Annual sustainability reporting. ii) Assurance report by auditors according to
SNT4400
102nd opinion from Cicero (March 2018)
Renewable energy
Wind Dark green Energy efficiency in energy systems Medium to Dark green
Solar Dark green Clean transportation Medium green
Hydro Dark green Waste management Medium green
Bioenergy and biogas Medium green Green buildings Medium green
Geothermal Dark green Water management Dark green
Excess heat Dark green Adaptation measures Dark green
Conversion from fossil to renewable Dark green Environmental management Dark green
“Overall, Kommuninvest’s Green Bond framework and environmental policies provide a progressive, clear and sound framework for
climate‐friendly investments. The framework lists eligible categories of projects that are supportive of the objective of promoting a transition to
low‐carbon and climate‐resilient growth and is supported by a strong governance structure.
Kommuninvest puts strong emphasis on environmental competence in their selection of eligible loans. .. This welcomed governance element is
of particular importance since the framework covers many eligible project categories, some with a broad scope.”
Center for International Climate and Environmental Research (Cicero), 27 March 2018
11Impact and assurance reporting
Impact report, with project information and expected climate impact Assurance report on the use of Green Bond Proceeds
2016 2017 2018
All reports available online, see Green Bonds section at kommuninvest.se
12Management of proceeds
• Green bond proceeds are earmarked for climate mitigation or adaptation projects or other
environmental sustainability purposes, in accordance with Kommuninvest’s Green Bonds Framework.
• Volume of committed green loans should always exceed total green bonds issuance. Independent
assurance by Kommuninvest’s auditors.
High-quality &
conservative: at least 90
% of the reserve must
be eligible for central
Total Liquidity bank pledging. On 31
Dec 2018; 86% of
Guideline: Green Bonds
issuance not to exceed funding reserve reserve in AAA-assets.
disbursements to
Eligible Loans. Lending
portfolio
SRI/ESG & Portfolio Eligible
Green Eligible
mainstream matching Loans
Bonds Projects
investors
13Plan for Green Bonds
• Strategic Green Bonds issuance in SEK and USD
- Ambition to build yield curves in both SEK and US
- Support strategic objective of 50% funding in SEK
• Issuance volume determined by green lending
- Total outstandings in Green Bonds capped at 100% of total disbursed Green Loans
- Expected issuance frequency: 3-4 times per year.
• No duration matching
- Funding to be shorter than economic life of Green loan projects
• Green lending and green bonds issuance important component in Kommuninvest’s
future growth
14Green Loans programme
Green loans for eligible investments
Projects may include:
• Bioenergy • Biogas from waste
• Geothermal • Hydro
• Solar • Wave
• Wind • Wind
16Eligible Loans portfolio, 30 April 2019
* Planned, under
construction, or, at
cut-off date, max. 9
months has passed
since completion
Number of
approved
projects:
251
17Origination process
Eligible Projects
Swedish local government investment projects which promote the transition to
low carbon and climate resilient growth. Eligible Projects shall be:
• part of applicant’s systematic environmental work;
• be related to the national or regional environmental goals;
• target mitigation or adaption to climate change, or environmental mgmt.
Eligible Loans
• Loan application must be signed by
applicant’s Finance and Environmental
departments
Green Bonds • Screening and pre-approval by
• Majority of Green Bonds proceeds to new Kommuninvest’s Lending department
projects (on-going, planned or completed • Quarterly: Eligible Projects reviewed
max 9 months before issue). and finally approved by consensus vote
• Guideline: total Green Bonds issuance not in the Kommuninvest Green Bonds
to exceed total disbursements to Eligible Environmental Committee.
Loans.
18Environmental Committee reviews projects
Areas of Expertise
• Energy and climate strategy
• Urban development and planning
• Waste management and circular
economy, ecological economics
• Environmental management
• Environmental engineering
• Sustainability reporting
Tasks
• Audit and final approval of Green Loan
applications
• Advisory board
• Review and decide on Green Loan reporting
• Review and approve Impact Reporting
Members: Sara Pettersson, City of Gothenburg (until April 2019); Susanne Arneborg, Municipality of Borås; Björn • Participate in development of Green Bonds
Söderlundh, Kommuninvest; Hanna Ryman, Municipality of Örebro; Andreas Hagnell, Swedish Association of Local framework
Authorities; Marta Fallgren, Region Uppsala. The Committee also includes Daniel Nyqvist and Ann Sörman from
Kommuninvest. As of April 2019, Lisa Järner, City of Mölndal, replaces Sara Pettersson..
19Sustainability criteria
All projects must: Additional requirement for Green buildings and energy efficiency
1. Residential multi-family buildings: New or existing buildings with at least 15
Promote the transition to a low-carbon and per cent less energy use per square metre and year than required by
applicable regulation (Swedish Building Regulations (BBR 25)).
climate-resilient society
2. Non-residential buildings: New or existing buildings with at least 20 per cent
Be part of the systematic environmental work less energy use per square metre and year than required by applicable
regulation (Swedish Building Regulations (BBR 25)). New buildings are
in the applicant municipality or county encouraged to also have a minimum certification of either 1) LEED gold, 2)
council/region BREEAM very good, 3) Environmental Building (Miljöbyggnad silver), 4) the
Nordic Swan Ecolabel, 5) EU Green Building, 6) Feby-12 (Mini-energy
building), or other certification of similar ambitions; however this is not a firm
Be related to Sweden’s national environmental requirement.
objectives, or to regional environmental goals
3. Major renovations of buildings leading to a reduced energy use per square
metre per year of at least 30 per cent or compliance with applicable
Target either mitigation of climate change, regulations (Swedish Building Regulations (BBR 25)).
adaptation to climate change, or be a project
related to environmental management in other 4. Energy efficiency measures in partial systems of existing buildings leading to
at least 30 per cent less energy use.
areas than climate change.
20Impact reporting
Impact from financed projects as of year-end 2018*
SDG Kommuninvest Energy savings, MWh p.a. Renewable GHG emissions savings, Increased Increased Floor area
project category energy tCO2e p.a. waste water in Green
generation, capacity, treatment buildings,
MWh p.a. tonnes capacity, sq.m.
p.e.
Avoided Reduced Avoided Reduced
Renewable energy 3,032,220 634,446
Green buildings and
24,046 9,851 1,807** 3,903 1,012 1,051,374
energy efficiency
Residential buildings 389,836
Non-residential 475,052
Other 186,486
Energy efficiency in
110,845 21,796
energy systems
Clean transportation 651
Waste management 583 7,100
Water and wastewater mgmt. 861,685
Climate change
adaptation
TOTAL IMPACT 24,046 MWh 120,696 MWh 3,032,220 MWh 638,932 tCO2e 23,458 tCO2e 7,100 tonnes 861,685 p.e. 1,051,374
* Impact calculated according to the share financed by Kommuninvest Green Loans
** For informational purposes, the green benefit of renewable energy generation in green buildings has already been accounted for as avoided energy consumption
22Reporting according to Nordic position paper
i. Impact is based on the share
financed and amounts
disbursed and outstanding
ii. We distinguish between
reduced and avoided
emissions
iii. Same emission factor applied
for all electricity projects
Extract from Kommuninvest Green Bonds Impact Report 2018
23Impact reporting for Green buildings
Calculation principle Building regulation requirements (BBR 25),
Annual climate impact = emissions produced or energy consumed zone Västra Götaland
by an equivalent investment if minimum standards were followed
– emissions produced or energy consumed by the project after the Residential buildings: 85 kWh/sq.m.
investment has been completed. Non-residential buildings 80 kWh/sq.m.
Annual climate impact (CO2e) | Project #383, the Mars block in Trollhättan Financed portion
Heat consumption of reference building in MWh * baseline emissions factor Investment cost, SEK mn 443
for heat consumption + electricity consumption of reference building in MWh 1,076*58 + 336*380
* baseline emissions factor for electricity consumption (kg CO2e) Disbursed Green Loans to
230
Subtotal (annual emissions for reference building, tCO2e per year) 189 project, SEK mn
- (minus) Total GHG emissions
57
Heat consumption of project building in MWh * baseline emissions factor for avoided, tonnes CO2e
heat consumption + electricity consumption of the project building in MWh * 749*58 + 234*380
baseline emissions factor for electricity consumption (kg CO2e) Green Loan share, % 52%
Subtotal (annual emissions for project building, tCO2e per year) 132
Reported GHG emissions
30
Total GHG emissions avoided from the project, tCO2e 57 avoided, tCO2e
24Impact reporting for Renewable energy
Calculation principle
Annual climate impact = emissions produced or energy
consumed by the project in a baseline scenario – emissions
produced or energy consumed by the project after the
investment has been completed.
Annual climate impact | Project #345, windpower in Solberg area, Skellefteå Financed portion
Annual production of renewable energy in MWh * baseline Investment cost, SEK mn 466
emissions factor (kg CO2e) 253,000 * 380
Disbursed Green Loans to
450
Subtotal (annual emissions in alternative scenario, tCO2e) 96,140 project, SEK mn
- (minus) Total GHG emissions 96,140
avoided, tonnes CO2e
Annual production of renewable energy (MWh)* project
253,000 * 0
emission factor (kg CO2e) Green Loan share, % 97%
Subtotal (annual emissions for project, tCO2e) 0
Reported GHG emissions
Total GHG emissions avoided from the project, tCO2e 92,839
96,140 avoided, tCO2e
25Full methodology and project information online
• Impact report (pdf)
• Project-by-project
reporting (xls)
26Appendix
Revised frameword, adopted 7 March 2018
1) Adjustments in Green buildings category
Green buildings: residential 15% better than BBR 25;
Framework 7 Mar 2018 Framework 12 Jan 2016
non-residential 20% better than BBR 25 (previously
25% lower
Residential multi-
15%than
better BBR 21)
than BBR 25 25% lower than BBR 21
family buildings
Non-residential Nominal requirement on energy25%
20% better than BBR 25
use ~as before
lower than BBR 21
buildings
Energy efficiency in green buildings: Min.new requirement
35% lower energy use,
Min. 30% lower energy use, or
of min. 30%
Major renovations efficiency gains (previously
reaching BBR 25 requirements.
35%
or reaching BBRand
21
requirements..
25%)
Energy efficiency in
Energy efficiency
partial systems inenergy
Min. 30% lower municipal
use operations: clarification
Min. 25% lower energy use
on min. 30% efficiency gains
2) Commitment to report along Nordic position paper guidelines
3) Clarification on fossil energy content (see next slide)
28Fossil energy restrictions
• Kommuninvest does not approve investment projects that lead to
a lock-in of fossil energy-based infrastructure. Peat is treated as a
fossil energy source.
• Maximum share of fossil energy content in project,
if waste is NOT INCLUDED in energy mix 10 percent
• Maximum share of fossil energy content in project,
if waste is INCLUDED in energy mix 20 percent
• Maximum share of fossil energy content in public
transport 20 percent
29All projects are located in Sweden
Applicable legislation and guidelines
• EU Law
• The Swedish Environmental Code (Miljöbalken)
• Sweden’s 16 environmental quality objectives: miljomal.se
• Applicable municipal/county council environmental policies
• OECD Guidelines for Multinational Enterprises
For Kommuninvest sustainability perspective and indicators:
kommuninvest.se/sustainability
30Fossil reduction vs fossil-free (1/2)
View on Fossil energy – fossil reduction vs fossil-free The Swedish energy system – a background
Sweden’s energy system uses a very low proportion of fossil fuels, especially in the production of
electricity and district heating. The total share of renewables in the energy system, at over 50 percent,
The overall aim of the Kommuninvest Green Bonds framework is to contribute to the transition to low- is the highest in the European Union. In addition, Sweden has a large proportion of nuclear power for
carbon and climate-resilient growth, through projects that address mitigation of climate change, electricity generation, at about 40 percent. Fossil energy is mainly used in the transport sector and for
adaptation to climate change or environmental management in other areas than climate change (the industrial processes.
latter max 30% of volume).
A particular Swedish feature is that half of the energy used for heating purposes is supplied by district
In its Second Opinion, Cicero points to the fact that some of Eligible projects may include fossil energy heating. The expansion of district heating and its conversion from fossil fuels to biomass and waste is
to a non-negligible extent (over 10-20%). This applies to the framework categories Renewable energy, the main factor behind Sweden’s reduced fossil CO2 emissions by some 25 percent since 1990.
Energy efficiency in energy systems and Public transportation and sustainable transportation.
Why we allow a small share of fossil energy in district heating (max. 10 %)
The framework has a broad scope, as it is aimed at supporting climate and environment initiatives
In the district heating sector, a fossil energy component sometimes cannot be completely avoided.
across Sweden’s local government sector, all over Sweden. The projects address sectors of society with
Fossil energy may be required to start up processes, to use for peak energy at times of extreme energy
great impact on CO2-emissions, but which are not totally CO2-free.
demand and for back-up purposes. District heating is a flexible energy system capable of extracting
We will not approve investment projects that lead to a lock-in of fossil energy-based infrastructure. energy from various types of energy sources and waste. We only accept projects with positive climate
However, we may approve projects with a component of fossil energy if the project enables the impact, e.g. a reduced carbon footprint, and which uses a limited amount of fossil energy (max 10
transition to a climate-neutral infrastructure and similar solutions, whilst reducing climate impact. percent).
Impact analysis and impact reporting is an absolute requirement for projects partly encompassing fossil
energy to a non-negligible extent (over 10-20%). We favor using waste for energy extraction as a resource-efficient and more climate-positive solution
than landfill and other permanent deposits. However, waste often includes fractions of plastics, which
The Environmental Committee is responsible for assuring that any project that includes a fossil according to international standards is regarded as fossil energy. Therefore, fossil waste incineration
component to a non-negligible extent will have significant positive climate and/or environmental will not be accepted as a major component of eligible projects. (In general, maximum 10 per cent fossil
impacts. component).
Our views on fossil with regards to the project categories listed above is outlined in this paper. A
complete exclusion of fossil energy from any project is virtually impossible to achieve, since fossil POSITION PAPER ON FOSSIL DATED 5 FEBRUARY 2016
energy is often embedded in components, building materials and energy production equipment, even
in solar cells.
31Fossil reduction vs fossil-free (2/2)
We view peat as a non-renewable energy source. A possible exception is peat whose extraction can question for national regulation and market. It is thus problematic to completely exclude fossil
be shown to reduce methane leaking emissions from peat bogs. Such peat could be tolerated as components.
climate positive.
If vehicles are part of the application, they generally should be powered by renewable fuels. Fossil fuel
Kommuninvest also benefits from operating in a country where systems and regulations regarding buses (i.e. diesel and hybrid) can only be approved if the municipality/county council shows that the
waste sorting and smoke gas purification are highly developed. investment:
• reduces total Greenhouse Gas emissions by promoting public over private transportation more for
Why some energy efficiency projects may include fossil energy the same cost than a solution based on green fuel-only buses; or
We support energy efficiency measures because they lead to a reduction in energy use, thereby • includes a plan to use a substantial portion of green fuels (for example biodiesel) in these buses;
contributing to a reduction in CO2 emissions. The principal way for property owners to reduce climate and
impact is to make energy use more efficient. The focus of the projects will be on energy reduction, • includes impact analysis and impact reporting.
however the energy supply, which will generally not be a part of the project, may include a fossil
energy component. Given the increasingly interconnected electricity system in the Nordic region and Given that few municipalities and regions operate their own bus fleets, such projects are expected to
Europe1, it is difficult for property owners to completely exclude fossil components in the energy mix. be limited in number.
Property owners that are supplied with district heating also have limited opportunity to influence the
energy mix. The share of renewables in the energy system is mainly a task for national and EU Impact analysis and reporting required
regulation. The framework clearly specifies that a project that includes fossil energy to a non-negligible extent will
only be approved if an impact analysis shows that there will be significant positive climate and/or
Why public transport and sustainable mobility projects may include fossil energy environmental impact and impact reporting afterwards is required. The individual loan application
We support public transport-related projects in order to increase the use of such systems, thereby should state why fossil components are part of the energy mix. The above will ensure a high
reducing car use and hence the use of fossil energy. However, in the support of a build-up of public environmental standard in execution.
transport infrastructure, for example, we generally cannot be certain that this infrastructure will only
be used by transport vehicles that run on renewable energy. This usually is outside the scope of the 1) The Swedish electricity mix is approximately 60 g CO2 per kWh. This can be compared with about 100 g CO2 per
kWh for the Nordic electricity mix; 1000 g CO2 per kWh for coal-generated electricity and nearly 400 g CO2 per kWh
project.
for gas condensation, a common form of electricity generation in Europe. As electricity markets in the Nordic region
and Europe become increasingly interconnected, it is not entirely clear how to assess the environmental impact.
Further, fuel mixtures for renewables often include minor fossil components, this generally is the case Furthermore, the share of renewable electricity in Sweden and Norway are regulated with green certificates rather
for both biodiesel, ethanol, bio-methane and electricity. The actual shares of renewables is often a than by individual buying of certified renewable electricity.
32Winner of UN climate award 2017
• Kommuninvest green finance model (“Green Finance and The
Aggregation of Swedish Local Government Investments
Projects”) awarded the UN Momentum for Change Climate
Solutions Award 2017.
• Ceremony at COP 23 climate conference in Bonn, Germany, on
14 Nov, with Umeå Municipality and Kommuninvest present.
• Award recognizes innovative, concrete and scalable initiatives
from around the world.
• Winners in Financing for Climate-Friendly Investment category
showcase activities that “promote low-carbon growth and
highly resilient communities through the use of innovative unfccc.int
financing mechanisms.”
33Contacts
Christian Ragnartz Ulrika Gonzalez Hedqvist
Head of Debt Management Senior Funding Officer
+46 (0)70 607 38 34 +46 (0)10 470 88 82
christian.ragnartz@kommuninvest.se ulrika.hedqvist@kommuninvest.se
Tobias Landström Marcus Waineby
Deputy Head of Debt Management Senior Portfolio Manager
+46 (0)10 470 88 83 +46 (0)10 470 88 63
tobias.landstrom@kommuninvest.se marcus.waineby@kommuninvest.se
Björn Bergstrand Pelle Ekestubbe
Head of Sustainability/Senior IR Manager Senior Portfolio Manager
+46 (0)10 470 87 31 +46 (0)10 470 88 62
bjorn.bergstrand@kommuninvest.se pelle.ekestubbe@kommuninvest.se
34fornamn.efternamn@kommuninvest.se www.kommuninvest.se Kommuninvest Kommuninvest
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