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SEB in key role as City of Gothenburg couples sustainability to its borrowing

SEB acted as sustainability coordinator when the City of Gothenburg took the step as the first municipality in Sweden to couple climate and social goals to its financing. If the sub-goals are met, the city will receive a discount, and if not, it will pay an interest penalty.

“It is gratifying that we have been entrusted with supporting the City in the work on establishing a structure for its sustainability-linked loans. It’s a pioneering initiative in which Gothenburg is shining a spotlight on its key sustainability goals,” says Annika Lundqvist Stegborn, client executive for the City of Gothenburg at SEB.

Fredrik Block, portfolio manager for the City of Gothenburg, has been the main contact person for the City.

“We are very grateful for SEB’s groundbreaking ideas and advice for this loan,” he says. “Together we have now established ambitious annual goals for the City’s four, most important sustainability areas, and it will be very exciting to follow the progress for many years into the future. We hope we can inspire other municipalities and regions to couple their financing with sustainability work to accelerate the pace of the sustainability transition.”

Started one year ago

The work was begun a year ago in connection with the renegotiation of a three-year and five-year Revolving Credit Facility (RCF) for SEK 8bn in total. The RCF was distributed among a bank syndicate comprising the six, major Nordic banks, including SEB.

Gothenburg was the first city in the world to issue a green bond, and in connection with the renegotiation of the RCF, the City’s treasury department saw an opportunity to once again be a forerunner by coupling its borrowing to the City’s sustainability goals. This ambition was included in the City’s tender invitation to the participants in the bank syndicate.

“We decided to dedicate extra time and resources to our tender, and much to our pleasure we ended up being chosen for the role of sustainability coordinator,” says Mats Olausson, Senior Sustainability Adviser at SEB.

Good timing

The timing was right, since a year ago the City of Gothenburg adopted a new Environment and Climate Programme that included a goal to have a climate footprint that is close to zero by 2030. The City has also adopted an ambitious goal to not have any so-called particularly vulnerable areas in the City by 2025.

The starting point was thus a good one, since there were clear and defined targets to work with. It then still required extensive work on breaking down these overarching goals into a number of concrete sub-goals that are directly linked to the terms of the loan.

“Two things that are decisive when devising a structure like this is that the goals must address the material sustainability challenges, and they must be ambitious and go beyond ‘business as usual’. We were successful in this regard,” says Mats Olausson.

Four sub-goals

The sustainability-linked RCF, which has now been renegotiated and is finalised, is coupled to four sub-goals – three climate goals and one social goal.

The first goal addresses energy use in buildings and is based on the annual efficiency improvement plan drawn up by the city’s Facilities Management department. The second goal is tied to the heating utility Göteborg Energi’s goal that its own production of district heating will be fossil-free by 2025. The third goal is tied to the City’s ambition to have a fossil-free vehicle fleet by 2023.

The fourth goal – the social sub-goal – is tied to the City’s goal that by 2025 there will no longer be any areas that Swedish Police classify as “particularly vulnerable”. This, in turn, is dependent on the municipal property company Framtiden’s completion of the strategic measures that have been planned for the coming years.

All of the sub-goals include ambitious, annual targets that will be followed up every year.