Case Study: The City of Gothenburg's Green Bonds - Pioneering Municipal Sustainable Finance

The City of Gothenburg (Göteborgs Stad), Sweden's second-largest city with around 600,000 inhabitants, has long positioned itself as a global leader in urban sustainability. It has topped or ranked near the top of the Global Destination Sustainability Index multiple times (winning 2016–2023 and second in 2024), boasts one of the world's most developed district heating systems, and runs 99% of public transport on renewables (aiming for 100% fossil-free by 2030).

In this context, Gothenburg made history in October 2013 by becoming the first city in the world to issue a green bond, a SEK 500 million (approx. €45 million) six-year instrument arranged by the financial services group SEB, which was developed in collaboration with the World Bank Group and other Swedish investors. Examples of projects that have been funded include:

• Expansion of electric vehicle fleets and charging infrastructure.

• Energy-efficient renovations of schools and housing.

• Biogas production (e.g., GoBiGas plant – later reallocated when phased out).

• Tree planting and green urban spaces for biodiversity and air quality.

Key Milestones and Scale

• 2013: Inaugural issue of the world's first municipal green bond.

• By March 2016: Cumulative issuance reached approx. USD 415 million.

• 2013-2023: Total issued approx. SEK 20.5 billion (approx. €1.8 billion).

• As of 31 December 2024: Outstanding green bonds stood at SEK 32.56 billion (approx. €2.9 billion), a testament to repeated tap issuances and strong investor demand.

The programme has grown steadily, with Gothenburg regularly returning to the market (often via private placements or public taps) and attracting a broad investor base, including pension funds, insurers, and ESG-focused institutions.

How the Programme Works

Gothenburg's Green Bond Framework (first published 2013, updated multiple times – most recently aligned with EU Taxonomy where possible in 2022) follows the four pillars of the ICMA Green Bond Principles:

1. Use of Proceeds: 100% earmarked for eligible green projects across nine categories (with climate mitigation the core focus):

   
   

   • Clean transportation (e.g., electric buses, cycling infrastructure, trams).

   • Renewable energy and energy efficiency (e.g., district heating upgrades, wind/biogas).

   • Green/sustainable buildings (low-energy housing, eco-certified public buildings).

   • Pollution prevention & waste management.

   • Sustainable water & wastewater management (e.g., ultra-filtration plants).

   • Terrestrial & aquatic biodiversity (e.g., tree planting, parks).

   • Climate change adaptation.

   • Eco-efficient products/production (limited scope).

   • Non-climate environmental projects capped at 20%.

   
   

2. Process for Project Evaluation & Selection: Cross-departmental Green Bond Committee (treasury + environment experts) screens projects against the framework. External second-party opinions (e.g., from CICERO/Shades of Green) consistently rate the framework Dark Green and governance Excellent.

   
   

3. Management of Proceeds: Ring-fenced account, full allocation tracked annually (unallocated proceeds invested in short-term green assets).

   
   

4. Reporting:

   
   

   • Annual allocation reports (100% transparency on where money went).

   • Annual impact reports following the Nordic Public Sector Issuers' Position Paper on Green Bonds Impact Reporting (co-developed by Gothenburg and other Nordic entities since 2017, updated to 2024).

   • Metrics include: CO₂ avoided (typically thousands of tonnes annually), energy saved (GWh), renewable energy produced, trees planted, etc.

Why It Succeeds: Lower Costs and Strong Demand

• Investor appetite: Green bonds routinely price at or inside Gothenburg's conventional curve, delivering a modest greenium (pricing advantage) of a few basis points – effectively cheaper borrowing for the city.

• New investors: Many ESG mandates couldn't buy regular municipal debt but can buy labelled green bonds.

• No exotic structures: Same credit risk (Gothenburg holds AAA/AA+ ratings), same legal documentation – just a green label and robust reporting.

• Branding & leadership: The programme reinforces Gothenburg's reputation (e.g., UNFCCC Momentum for Change award in 2016) and creates internal collaboration between treasury and environmental departments.

Lessons for UK Cities and Devolved Government:

1. Start simple: Gothenburg began with a basic framework and refined it over time.

2. Aggregation isn't always needed: A single city with strong credit and a pipeline of eligible projects can access the market directly (though consortia like the UK's planned Municipal Bonds Agency could amplify this).

3. Cost of capital matters: Even a small greenium (5–20 bps) compounds over 20–40-year maturities, making heat networks, retrofit, and renewables viable at rates well below standard PWLB borrowing.

4. Transparency builds the market: Gothenburg's rigorous Nordic-standard impact reporting helped institutionalise investor confidence across the region.

5. No need for additionality dogma: Proceeds often refinance existing projects – the value is in signalling, attracting new capital pools, and ring-fencing funds for green priorities.

Gothenburg proves that municipal green/sustainability bonds aren't theoretical, they're a proven, scalable tool that has already mobilised billions at lower cost than conventional debt. For UK councils facing 4.5–5.2% PWLB rates, a well-structured aggregated programme (via National Wealth Fund, GB Energy, a new agency, or regional consortia) could replicate this success and finally unlock the affordable, long-term capital local net zero desperately needs.