In Pursuit of Green Municipalities

In pursuit of green

An exploratory research of green bonds in the transition towards sustainability in Swedish municipalities

Jönköping, May 2021

BACHELOR THESIS WITHIN: Business Administration

NUMBER OF CREDITS: 15 ECTS

PROGRAMME OF STUDY: Sustainable Enterprise Development AUTHORS: Sam ter Woort, Lucia Tydén, Casper Johansson TUTOR: Guénola Nonet

Acknowledgements

“The best years of your life will be those spent at university” is an expression that has followed us along our lives and one that naively, was difficult to fully understand. Now having had studied a triennial at the university of Jönköping, and if truth be told, that phrase does not sound so uncanny anymore. An opportunity was provided to us to live, study and be part of a vibrant student community in the wonderful city of Jönköping. For this matter, we wished to contribute with our acquired sustainability expertise to the place we can always call home.

A big acknowledgement followed with an immense gratitude has to be expressed to our tutor, Guénola Nonet, for guiding us throughout this project and for giving us insightful feedback all along. Following, we want to thank Mark Edwards giving us a helping hand in the initial stage of the project and Ziad El-Awad for his advice in the research methodology process. Along this line we want to show appreciation and thank Otto Hedenmo for his engagement in insightful discussions and his support with his research expertise. We thank Andreas Olsson for his mentoring, his enthusiasm linked to the topic, for providing us with the needed contacts and for whom without his help the research would have taken a completely different route.

We wanted to give a warm thank you to all the interview participants, for whom this study would have been impossible to conduct without their input and assistance. A last thank you is sent to our friends and family for their love and support all these past months.

Jönköping 2021-05-21

Bachelor Thesis in Business Administration

Title: In pursuit of green municipalities: An exploratory research of green bonds in the transition towards sustainability in Swedish municipalities Authors: Sam ter Woort, Lucia Tydén, Casper Johansson Tutor: Guénola Nonet Date: 2021-05-21 Key terms: Green bonds, green finance, municipalities, sustainability transition

Abstract

Background: Entering a new geological epoch where humans are the main force shaping of the biosphere, have forced an immense stress onto society and the Planet with regards to sustainability. The United Nations and the Paris Agreement have strongly emphasized the urgent need to allocate finance onto urgently mitigating climate change. The financial sector has confronted this challenge through providing sources of finance to meet sustainability requirements. Thus, green bonds emerge as an instrument aimed to cooperate in the transition towards advancing sustainability.

Purpose: Given the ambiguity of green bonds impacts on environmental sustainability, this study explores the contributions of green bonds towards a fruitful transition towards sustainability. Being crucial stakeholders in the transition towards sustainability, these contributions have been examined in the context of Swedish municipalities

Method: To examine the contributions of green bonds in the given context, an exploratory research was conducted using a multiple case study design. Five municipalities, two investors and a municipal funding agency were interviewed though semi-structured interviews. A thematic analysis was performed on the empirical data. First, a within-in case analysis was conducted following a cross-case analysis allowing to find emergent and common patterns.

Conclusion: The green financial instrument does not appear to be a main driver of sustainability, nor does it have a significant influence on the environmental impact of the municipalities’ investment projects. Nevertheless, the study finds that green bonds contribute to advancing sustainability in municipalities through three main areas: Financial impetus, organizational effects and structure and requirements. Thus, the municipalities studied provide evidence that green bonds grant a small reduction in the cost of capital, produce organizational effects like increasing collaboration between the environmental and financial department and enhances transparency through its structure and requirements.

Table of Contents

1 CHAPTER: INTRODUCTION ...... 1

1.1 BACKGROUND ...... 1 1.2 PROBLEM DISCUSSION ...... 3 1.3 PURPOSE OF THE RESEARCH ...... 4 1.4 RESEARCH QUESTION ...... 4 1.5 DELIMITATIONS ...... 4 1.6 TERMINOLOGY ...... 5

2 CHAPTER: FRAME OF REFERENCE ...... 7

2.1 SUSTAINABILITY AND SUSTAINABLE DEVELOPMENT...... 8 2.1.1 SUSTAINABILITY WORLDVIEWS AND ECONOMIC APPROACHES ...... 8 2.1.2 DOUGHNUT ECONOMICS ...... 9 2.1.3 PLANETARY BOUNDARIES ...... 9 2.1.4 SUSTAINABLE DEVELOPMENT GOALS ...... 10 2.1.5 SDGS IN MUNICIPALITIES ...... 10 2.2 FINANCE AND SUSTAINABILITY ...... 11 2.2.1 GREEN FINANCE ...... 11 2.3 GREEN BONDS ...... 12 2.3.1 THE CONCEPT AND FUNCTION OF GREEN BONDS ...... 12 2.3.2 ADVANTAGES AND DISADVANTAGES OF GREEN BONDS ...... 14 2.3.3 FOR INVESTORS ...... 15 2.3.4 THE GREEN PREMIUM...... 15 2.4 GREEN BONDS AND SUSTAINABILITY ...... 16

3 CHAPTER: METHODOLOGY ...... 19

3.1 RESEARCH PARADIGM ...... 19 3.2 RESEARCH APPROACH ...... 20 3.3 METHODOLOGICAL CHOICE ...... 21 3.4 RESEARCH DESIGN ...... 21 3.5 TIME HORIZON ...... 22 3.6 DATA COLLECTION ...... 23 iii

3.7 SAMPLING METHOD ...... 23 3.8 INTERVIEWS ...... 24 3.8.1 SEMI-STRUCTURED INTERVIEWS ...... 25 3.9 DATA ANALYSIS ...... 26 3.10 QUALITY OF RESEARCH ...... 29 3.10.1 CREDIBILITY ...... 29 3.10.2 TRANSFERABILITY...... 30 3.10.3 DEPENDABILITY ...... 31 3.10.4 CONFIRMABILITY ...... 31 3.11 ETHICAL CONSIDERATIONS...... 32

4 CHAPTER: EMPIRICAL FINDINGS ...... 33

4.1 CASE A: GOTHENBURG MUNICIPALITY ...... 33 4.2 CASE B: JÖNKÖPING MUNICIPALITY ...... 34 4.3 CASE C: VAGGERYD MUNICIPALITY ...... 36 4.4 CASE D: BORÅS MUNICIPALITY ...... 37 4.5 CASE E: SKÖVDE MUNICIPALITY ...... 38

5 CHAPTER: ANALYSIS ...... 42

5.1 CASE A: GOTHENBURG MUNICIPALITY ...... 42 5.2 CASE B: JÖNKÖPING MUNICIPALITY ...... 44 5.3 CASE C: VAGGERYD MUNICIPALITY ...... 45 5.4 CASE D: BORÅS MUNICIPALITY ...... 46 5.5 CASE E: SKÖVDE MUNICIPALITY ...... 48 5.6 COMPARISON AND SYNTHESIS ...... 50 5.6.1 FINANCIAL INCENTIVES ...... 51 5.6.2 COOPERATION...... 51 5.6.3 COMMUNICATION AND AWARENESS ...... 52 5.6.4 STRUCTURE AND REQUIREMENTS ...... 53 5.7 AREAS OF CONTRIBUTION ...... 54

6 CHAPTER: CONCLUSION ...... 56

7 CHAPTER: DISCUSSION ...... 58

7.1 THEORETICAL CONTRIBUTION ...... 58 7.2 STRENGTHS AND LIMITATIONS ...... 59 7.3 PRACTICAL IMPLICATIONS ...... 59 7.4 SUGGESTIONS FOR FUTURE RESEARCH ...... 60

8 REFERENCES...... 61

9 APPENDICES ...... A

9.1 APPENDIX A: INTERVIEW QUESTIONS FOR THE MUNICIPALITIES ...... A 9.2 APPENDIX B: INTERVIEW QUESTIONS FOR KOMMUNINVEST ...... B 9.3 APPENDIX C: INTERVIEW QUESTIONS FOR LÄNSFÖRSÄKRINGAR ...... C 9.4 APPENDIX D: INTERVIEW QUESTIONS FOR REGION JÖNKÖPING ...... D 9.5 APPENDIX E: GDPR THESIS STUDY CONSENT FORM ...... E 9.6 APPENDIX F: CODES, THEMES AND AGGREGATE DIMENSIONS ...... F

Figures

Figure 1 The project categories for the investment projects funded by green bonds (Kommuninvest, 2021) ...... 13 Figure 2 The 'Research' onion by Saunders et al. (2019)...... 19 Figure 3 Overview of the data analysis process...... 29 Figure 4 Areas of contribution ...... 55

Tables

Table 1 Interview information of the five municipalities...... 26 Table 2 Interview information of the three external experts ...... 26 Table 3 Codes, themes and aggregate dimensions of Borås municipality ...... 27 Table 4 Municipalities and study participants overview ...... 33 Table 5 Comparison of the aggregate dimensions of the five municipalities ...... 50 Table 6 Comparison of the aggregate dimensions of the external experts...... 50

1 Chapter: Introduction

In this chapter, the researchers introduce the reader to the subject of the research by explaining the study’s background, problem discussion, purpose of the research, research questions, delimitations, and terminology.

1.1 Background

Since the dawn of our time our planet has been everchanging. In the last 10 000 years it is been our fortune to live in a period of stability, a geological era called Holocene, which provided humanity the conditions to thrive. However, since the industrial revolution humans started to have a global impact on planet Earth, which could disrupt these favorable conditions (Rockström et al., 2009b). This is referred to as the Anthropocene, which describes a geological era, where humans became a global geological force shaping the biosphere. As a matter of fact, human activity is affecting the biosphere, which could jeopardize the supporting system for life on Earth (Steffen et al., 2011). Some of our planetary boundaries have been transgressed, which threatens to cause unacceptable environmental change. A commonly known one is climate change. While it is a crucial planetary boundary, it is unwise to neglect the large number of other biophysical subsystems that are affected by human activity (Rockström et al., 2009a). To stress the severeness of the situation, the Intergovernmental Panel on Climate Change (IPCC, 2018) has established an urgent need to reduce greenhouse gas emissions, as the rising global temperature could have detrimental effects on human and natural systems (IPCC, 2018).

As a response, in 2015, 196 countries signed the Paris agreement with a long-term goal to keep global temperatures below 2°C and preferably less than 1.5°C, compared to pre-industrial levels (United Nations, 2015a). Additionally, the global sustainable development goals (SDGs) were developed, which aim at balancing the social, economic and environmental goals and which, provide an important guidepost in reaching for environmental sustainability (UNDP, 2021). Both the UN SDGs and the Paris agreement emphasize the importance of allocating financial resources for

mitigation and adaptation purposes (United Nations, 2015a; UNDP, 2021). In fact, in order to reach the climate targets, large investments would be needed to phase out the use of fossil fuels while increasing the production of renewable energy. One estimate from the (OECD, 2017b) shows that USD 6.9 trillion need to be invested in low carbon alternatives per year in the next 15 years to make our economy climate compatible. Undoubtably, large investments from the private and public sector are needed to fund this transition (Banga, 2019). The gap between the demand for infrastructure and the projected spending has been estimated between USD 39 to 51 trillion. The sustainable infrastructure gap differs by the income class of the country. To give an example, for upper-middle income countries the demand is 2,5 times higher than the projected investment (Bielenberg et al., 2016).

This enormous financial gap is evident, and the transition into a low carbon economy is not deemed possible without the support of the private financial sector (Sullivan, 2014). Therefore, the financial sector has addressed the need by establishing green finance, a financial product that aims at funding the efforts to meet the global environmental challenge (Migliorelli & Dessertine, 2020). Debt is currently financing the largest share of infrastructure investment (OECD, 2017a). Hence, due to the need to transition capital from high-carbon to low-carbon investments, an urge to find an accessible source of finance emerges that meets sustainability requirements of risk- return investments (Nassiry, 2018). Several green financial products have emerged in recent times like green bonds or climate bonds, green asset-backed securities, green loans, green funds, green project financing operations and green indices. The green bonds market is currently the largest and the most important innovation within green finance (Migliorelli & Dessertine, 2020). Green bonds are a debt instrument that provide funds to assets and projects that are green and climate friendly (Climate Bonds Initiative, 2018). Green bonds typically fund projects and assets within energy efficiency, pollution prevention and control, sustainable management of living natural resources, land use and green buildings (ICMA, 2018). This green financial instrument has been used by different actors in society like banks, large companies, governments and municipalities (Banga, 2019).

Sweden is one of the largest green bond issuers (Banga, 2019). In fact, the City of Gothenburg won the UNFCCC’s Momentum for Change award because of their green

bond program which intends to fund projects that mitigate climate change and support sustainability initiatives based on the green bond’s framework (Nassiry, 2018). The municipal sector is one of the largest issuers in Sweden (Kommuninvest, 2021), and as society becomes rapidly urbanized, cities and municipalities develop into a critical pillar in minimizing climate risks and mobilizing low-carbon and climate-resilient investments (Nassiry, 2018).

1.2 Problem discussion

Green bonds is still a nascent field of research, as the first green bond was only issued in 2007 by the European Investment Bank (EIB) (Banga, 2019). Previous studies have not acknowledged in detail the wide range of contributions to advancing environmental sustainability that green bonds might have. They have focused more on the financial aspect, whether green bonds provide a cheaper source of finance due to a negative premium associated with the green label of the bond (Gianfrate & Peri, 2019). On the other hand, investors and issuers have pointed out that green bonds could also have other indirect or secondary effects on their environmental sustainability, for example raising their sustainability ambitions (Maltais & Nykvist, 2020). More recently, there seems to be an awareness amongst scholars with regards to additional contributions towards sustainability that do not solely encompasses the financial aspect. Such recognition has been approached by investigating the role of green bonds in reaching UN SDG goals and lowering carbon emissions (Lagoarde- Segot, 2020; Sartzetakis, 2020; Tuhkanen & Vulturius, 2020). In fact, a recent study has shown that after issuing green bonds, firms had a lower environmental footprint (Flammer, 2020). Given the ambiguity regarding the influence green bonds have towards environmental sustainability, there is a need to conduct a study that further investigates how green bonds could contribute to a fruitful transition towards sustainability. The study focusses predominantly on the contributions towards environmental sustainability, nonetheless, it acknowledges the interdependency with the social and financial pillars of sustainability.

Furthermore, to fund the transition to a less carbon intensive and more sustainable economy, large investments are needed from the public sector. (Banga, 2019). Within

the public sector, municipalities are substantial actors regarding climate change and sustainable transition (Carvalho, 2018), as they are responsible for a large variety of public services and infrastructure like building hospitals, schools, housing, waste management and water and energy supply (Sveriges Kommuner och Regioner, 2020). By being responsible for this infrastructure and these services, the municipal sector is thereby also responsible for a large share of the investments in reaching a sustainable society (Kommuninvest, 2021).

As municipalities are a critical stakeholder with regards to mitigating climate change and are large issuers of green bonds, more research has been deemed necessary on green bonds within municipalities. This highlights the opportunity to investigate further the wider range of contributions of green bonds in municipalities on advancing sustainability.

1.3 Purpose of the Research

Considering what has previously been mentioned, the purpose of the study is to explore, identify and understand the contributions green bonds provide in advancing sustainability within Swedish municipalities and its public sector. Hence, being conducted as an exploratory research, it is within the purpose of the study to embrace a wide scope of contributions.

1.4 Research question

The research is guided by the following research question:

o How do green bonds contribute to advancing sustainability in municipalities in Sweden?

1.5 Delimitations

As this is a nascent field of research, the study will adopt an exploratory approach. This includes investigating both the contributions of the financial spectrum of the

bond and the added value it provides by being “green”. It is to note, that the study will only investigate the contributions of green bonds, and not the impact of green projects with regards to sustainability in municipalities. Given the purpose of green bonds, the study will focus on the contributions of green bonds to the environmental aspects of sustainability, however acknowledging the interconnectedness of the social, economic, and environmental aspect.

As mentioned in the problem discussion, the study’s point of convergence has been limited to the public sector at the municipal level in Sweden. It will therefore not examine the role of green bonds in relation to sustainability as a whole but focused on the chosen context. Hence, the study is restricted to Swedish municipalities on account of the data collection which has been acquired from Swedish organizations and Swedish municipalities.

1.6 Terminology

Sustainability - “The concept of sustainability explores the relationship among economic development, environmental quality and social equity” (Rogers et al., 2012).

Sustainability awareness - “... Fully understand, recognize, and implement the concept of sustainability” (Herremans & Reid, 2002).

Sustainability development - “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland, 1987).

Green Bonds - “Are a debt instrument that fund assets or projects that are green and climate friendly” (Climate Bonds Initiative, 2018).

Green Finance - “A strategic approach to incorporate the financial sector in the transformation process towards low-carbon and resource-efficient economies, and in the context to adaptation to climate change” (GIZ, 2011).

Worldviews - “Is a set of assumptions about physical and social reality that may have powerful effects on cognition and behavior” (Koltko-Rivera, 2004).

Greenwashing – It refers to the practice of falsely promoting environmental efforts of an organizations and making the organization look more environmentally friendly than it is. (Becker-Olsen & Potucek, 2013).

2 Chapter: Frame of reference

In this chapter an analysis of existing literature on sustainability and green financing is presented. This analysis has been systematically collected in order to communicate the knowledge necessary for the progression of the study to be fruitful.

The first part of the frame of reference builds a thorough understanding on the topic of sustainability including worldviews, introducing concepts like the doughnut economics and the SDGs, and putting sustainable development in the context of cities and municipalities. Thereafter, it will review literature on green bonds, introducing the concept, illustrating its advantages and disadvantages, and looking into the recent research of green bonds and sustainability. The different sections will provide initial insights into the relationship between green bonds and sustainability.

The frame of reference for this study contains both relevant theories and previous research. Therefore, the first part of the frame of reference is to a large extent guided by the relevant models and theories related to sustainability. The frame of reference is a result of a systematic review of literature, which summarizes, analyses, and synthesizes the existing literature. A funnel approach was employed for the literature review to move from the broader to the narrower subject fields. The literature review utilizes peer-reviewed articles and takes special notice of articles published in the last 5 years, articles with a high number of citations and articles published in highly ranked journals. However, due to the nascent state of the research field, these were not applied as exclusion criteria, but merely to guide the focus to the most relevant articles. Other sources of the frame of reference were academic books and official websites. The literature review was a process of two months, which in the initial stage served the purpose to establish a relevant research purpose and then later to guide and provide a background for the study.

For a more global view on the research topic and to introduce core theories the search engine Google scholar and Primo from Jönköping University's library were utilized. When reviewing specifically the literature linking sustainability to finance, the search was performed in one of the prominent journals in the field called “Journal of 7

sustainable investment & finance”. Since green bonds are rather new as a financial instrument, articles are mostly recent and there is a manageable number of articles. On that account, the database Scopus was used to filter all the peer-reviewed articles that contained “green bonds” or “green bond” in their title, keywords or abstract. This resulted in 214 results, which were sorted after the most cited ones, and subsequently reviewed to select the most relevant ones to create the sections on green bonds. Other keywords used in the different databases and search engines were “green finance”, “sustainable finance”, “green bonds municipalities”, “sustainable cities”, “finance and sustainability”, “doughnut economics” and “planetary boundaries”.

2.1 Sustainability and sustainable development

Sustainability as a term originates from ecological sciences, which describes the conditions that an ecosystem needs to endure over a longer period of time (Holden et al., 2014). This concept of sustainability was only used later to describe the relationship between the economic, social and environmental aspects that are all substantial to achieve sustainability. The three components environmental, economic and social are referred to as the triple bottom line (Rogers et al., 2012).

The Brundtland report (1987) is a source often used when attempting to define sustainability and sustainable development. The report also named “Our Common Future”, is recognized as the first report that defines sustainable development as a concept and bringing it to the public sphere. It was issued by the Brundtland commission, which aim it was to bring together countries for a united sustainable development. The Brundtland report (1987) defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their needs”.

2.1.1 Sustainability worldviews and economic approaches

Sustainability can be looked at from an anthropocentric and ecocentric worldview, which describe how humans relate to the natural environment. The ecocentric worldview emphasizes the intrinsic value of nature and the anthropocentric only the value that nature provides for humans (Gagnon Thompson & Barton, 1994). These

worldviews are also classified into strong and weak sustainability (Hussen, 2018). Weak sustainability allows substitutability of natural and human-made capital and transfers of resources between generations, whilst strong sustainability, takes into account the scientific laws of thermodynamics and recognizes the environmental limits to economic activities (Landrum, 2018).

Economics materializes as a main tool to eradicate global poverty, as well as becoming a catalyst of sustainability for the planet. Nonetheless, traditional economics has yet been reluctant to embed sustainability as a foundational actor within the spectrum of economics. A great extent of traditional economic theories are based on 19th century economists that follow a neo-classical worldview, hence believing that the natural ecosystem is exogenous to the human economy (Raworth, 2017). This results in disregard of the environmental threshold, Earth’s assimilative capacity and emphasizing profit over social or environmental sustainability as verification of prosperity within the economy.

2.1.2 Doughnut economics

Doughnut Economics is a compass constructed of social foundations and ecological boundaries. The essence of the doughnut framework is to increase resilience thinking by depicting critical ecological boundaries where society must not reach beyond and illustrating basic rights of life where there should be no shorts-falls in order to reach a dynamic balance within the framework (Raworth, 2017). In essence, the economy will ensure true sustainability only if it is positioned within the ecological and social boundaries (Stopper et al., 2016). The Doughnut Economic Framework draws on the notion of the Planetary Boundaries supported and developed by Rockström et al. (2009a).

2.1.3 Planetary Boundaries

Planetary boundaries refer to the level set or determined by humanity emphasizing that society would reach a dangerous level (Rockström et al., 2009a). Thus, surpassing a threshold could potentially force irreversible consequences on the planet, as it holds a level of uncertainty of potential outcomes due to society’s actions. There are nine current planetary boundaries in which climate change and ocean acidification prevail (Rockström et al., 2009a). The concept of Planetary Boundaries is one developed for 9

the purpose of setting limits for humanity’s deterioration capacity on Earth. These boundaries recognize the set of principles from the school of ecological economics. Thus, emerging the urge to prioritize natural capital in order to fulfill the goal of intergenerational equity amongst other targets (Hussen, 2018).

2.1.4 Sustainable development goals

The sustainable development goals (SDGs), which are part of the United Nations Agenda 2030, were created as a guide to tackle poverty, protect the environment and ensure peace and prosperity (UNDP, 2021). Previous to the SDGs the Millennial development goals (MDGs) were used, which consisted of 8 goals that focused more on the social and economic development of societies (Bebbington & Unerman, 2018). Whereas the SDGs consider the triple bottom line of human wellbeing, which is the social, environmental and economic sustainability (Sachs, 2012). They consist of 17 goals with 169 targets, which provide a conceptualization of sustainable development (United Nations, 2015b). The Stockholm Resilience Center interpreted the SDGs by creating the wedding cake model, which groups together the goals into nature, economy and society and layers it like a wedding cake (Obura, 2020). It wants to illustrate how the economy and society depends on and are embedded in the biosphere (Rockström & Sukhdev, 2016).

2.1.5 SDGs in municipalities

Simultaneously, in Sweden, a vast proportion of sustainable initiatives and activities take place in municipalities. Nonetheless, sustainability objectives vary depending on the municipal size, resources, employment patterns and municipal administrations. Thus, a bigger municipality may emphasize clear detail of their sustainable objectives due to having enough strategic resources and capital to conduct such planning system whilst a smaller municipality may have limited funding and guidance. Therefore, a need to provide smaller municipalities with resources to deal with sustainability initiatives is crucial in the process to support sustainable development at the local level (Keskitalo & Liljenfeldt, 2012).

With regards to Jönköping County, the municipality has created a set of objectives in line with Agenda 2030 and the 17 Global Goals in its course to achieve becoming a surplus-energy county, establishing sustainable consumption and production and 10

moving towards achieving the 1.5 degrees target from the Paris Agreement (Jönköping County, 2020).

2.2 Finance and sustainability

The financial sectors’ interest in sustainability has been growing and scholars have increasingly been examining the relationship between finance and environmental sustainability. The relationship can be studied in a number of different ways (de Carvalho Ferreira et al., 2016), examples include the environmental, social and governance criteria in finance (Friede et al., 2015), impact investments and responsible investments (Hebb, 2013) and climate finance (Kawabata, 2019). Further, the financial sector’s engagement to contribute to sustainability can be observed by the number of different financial products that are aimed at sustainability that were launched, including socially responsible investment, environmental and carbon finance, microfinance and social impact bonds (Wiek & Weber, 2014).

2.2.1 Green finance

Green finance, one of the financial products that aim at sustainability (Wiek & Weber, 2014), has received increased attention due to the recognition of the importance of environmental protection, the focus on sustainability and climate change and the development of the SDGs (Akomea-Frimpong et al., 2021). Green finance is a broad term describing the financing of efforts dedicated to the global environmental challenge (Migliorelli & Dessertine, 2020). To avoid confusion, it is to note that sustainable finance, environmental finance, climate finance and green investments are all terms that refer to green finance (Akomea-Frimpong et al., 2021). Despite many internationally recognized actors attempting to provide a definition, green finance still lacks a universal definition (Migliorelli & Dessertine, 2020). The German government defines green finance as “a strategic approach to incorporate the financial sector in the transformation process towards low-carbon and resource-efficient economies, and in the context to adaptation to climate change” (GIZ, 2011). The Paris agreement and the SDG framework are useful in defining the objective of green finance. Green finance can be seen as a financial instrument to achieve the climate targets and the environment-related SDGs (Migliorelli & Dessertine, 2020). This rationale has also 11

been acknowledged by the United Nations development program (UNDP), as they launched the UNDP SDG Finance Taxonomy in 2020 to provide key indicators to assess investments projects’ contribution to the SDGs (Nedopil Wang et al., 2020).

2.3 Green bonds

2.3.1 The concept and function of green bonds

Throughout the literature review it becomes apparent that the literature body around green bonds is still in an early stage of development. While this could be explained by the green bond market still being in its infancy (Gilchrist et al., 2021), green bonds are one of the most important innovations in the area of green finance (Migliorelli & Dessertine, 2020). The non-governmental organization (NGO) Climate Bonds Initiative (2018) defines green bonds as a debt instrument that funds’ assets or projects that are green and climate friendly (Climate Bonds Initiative, 2018). The main actors in the bond market are the issuers (they borrow the money), the underwriters (they are responsible for the public issuance and distribution of the bond), the external reviewers (they check whether the green bond follows the standards and guidelines) and the investors (they buy the bonds to receive return) and other market intermediaries and index providers (Cochu et al., 2016). Just like conventional bonds, green bonds raise capital based on the risk profile of the issuer and the interest rate. It provides both the opportunity to finance new projects or assets or to be used for refinancing purposes (EU TEG on sustainable finance, 2019). A large amount of capital is needed to fund climate change mitigation and overall transition towards sustainability, green bonds aim to provide a mean to mobilize private capital and has been primarily designed to appeal to institutional investors, as they have a large asset base (Reichelt, 2010). The first green bond was issued in 2007 by the European Investment Bank (EIB), which was then followed by the World bank. The green bond market has since then, been growing from 1 billion USD in 2007 to 221 billion USD certified green bonds in 2017. Organizations issuing green bonds include municipalities, national governments, large companies and banks (Banga, 2019).

The definitions and requirements on green projects that are financed by green bonds, provide the basis to develop a credible green bond market, which attempts to avoid

“greenwashing” (OECD, 2017a). Therefore, the International Capital Market Association (ICMA) created the Green Bond Principles (GBP), which are voluntary process guidelines that aim at ensuring the integrity of the green bond market. These principles are mainly aimed at the issuers and focus on the use of proceeds, the project evaluation and selection, the management of proceeds and the reporting. According to the GBP the green projects should help to achieve environmental targets within climate change, natural resource conservation, biodiversity conservation and pollution prevention and control. Hence, some proposed eligible project categories from GBP are renewable energy, energy efficiency, pollution prevention and control, sustainable management of living natural resources and land use and green buildings (ICMA, 2018). Many green bond issuers, like for instance the municipal funding agency Kommuninvest, base their green bond framework and guidelines on the GBP. To exemplify, figure 2 displays Kommuninvest’s project categories for the investment projects that can be funded with green bonds (Kommuninvest, 2021). To further establish credibility in the green bond market, the Climate Bonds Initiative (2019) has created a standard and taxonomy to label bonds that contribute to addressing climate change. More recently, the EU commission created a technical expert group on sustainable finance and a taxonomy called the EU Green Bond Standard (GBS) to further develop the green bond market (EU commission, 2019).

Figure 1 The project categories for the investment projects funded by green bonds (Kommuninvest, 2021)

2.3.2 Advantages and disadvantages of green bonds

For issuers

For issuers the use of green bonds can provide reputational benefits, where for instance, provides credibility for its sustainability strategy (OECD, 2015). Flammer, (2021) examined different rationales for issuers to engage in the green bond market and found that the main rationale for corporations to issue green bonds is to signal a credible commitment to the environment. The study showed that “greenwashing” and a benefitting from a lower cost of capital was not a rationale to issue green bonds (Flammer, 2021). Further, green bonds can lead to a more diversified investors base, which could make the investor less prone to demand fluctuations. Another advantage is that green bonds have been associated a lower bond volatility in the secondary market (OECD, 2015).

In many cases green bonds enjoy high investors demand, which provides the issuer with the opportunity to increase the bond size (OECD, 2015). Additionally, this oversubscription can also lead to more advantageous loan terms for the issuer (Gianfrate & Peri, 2019). A commonly cited disadvantage of green bonds is the additional transaction cost. This results from increased administration, and certification, reporting and verification associated with issuing green bonds (OECD, 2015). The high costs associated with the external review procedures and the reporting have been identified as some of the barriers for the development of the green bond market (EU TEG on sustainable finance, 2019). However, Gianfrate & Peri (2019) argue that despite that green bonds come at an initial higher transaction cost, green bonds are overall more financially convenient due to the lower interest rate it provides. The existence of such a premium is still debated and will be discussed in the following section, as it has been taking up much of the attention on the research around green bonds (MacAskill et al., 2021).

As much as green bonds are associated with reputational gain, they may also represent a reputational risk (OECD, 2015). This could be the case if the projects financed are subject to “greenwashing”. Further, the different requirements for accessing financial markets, like for instance being rated by a credit rating agency, could be barriers to engaging in the green bond market. This is the case for many municipalities, for which these barriers inhibit the financing from green bonds, despite having a need for a green 14

project (Carvalho, 2018). In the context of Swedish municipalities, this issue has been addressed by Kommuninvest by offering municipalities green loans that they then combine into an aggregated portfolio in order to issue green bonds for the municipalities (UNFCCC, 2021).

2.3.3 For investors

For investors an advantage is that they are in a better position to evaluate the financial benefits against the environmental benefits. Further, many institutional investors have Environmental, Social and Governance (ESG) requirements, that they can fulfill by investing in green bonds. The increased information about the projects that are funded with the bonds, provides several benefits. It increases transparency, improves risk assessment and the dialogue about sustainability related issues provides a more complete credit profile of the issuer. The small and nascent bond market, which translates into a less liquid market, and the small bond sizes are limitations of green bonds from the investor’s perspective. The lack of unified standards and the voluntary nature of green bonds can represent a risk to the reputation and the green integrity (OECD, 2015). This also translates into that issuers and investors are in doubt about which assets and expenses can be financed with green bonds (EU TEG on sustainable finance, 2019).

2.3.4 The green premium

As mentioned in the previous section on advantages and disadvantages of green bonds, the potential advantage of a green premium associated with green bonds has been studied by a large number of scholars (Gianfrate & Peri, 2019; Hachenberg & Schiereck, 2018; Nanayakkara & Colombage, 2019; Partridge & Medda, 2020; Sheng et al., 2021; Zerbib, 2019). The green premium, also called “greenium” in the literature, refers to investors accepting lower yields for a green bond than for a conventional bond with similar characteristics (MacAskill et al., 2021). As this would reduce the cost of capital for issuers it could be a potential motivation for issuers to engage in the green bond market (Flammer, 2021). Since there has been a large number of studies on the green premium with different outcomes utilizing various methodologies, there is no common consensus about the existence of a green premium (MacAskill et al., 2021). For instance, a study conducted in China by Sheng et al. (2021) showed evidence

for a green premium for state-owned enterprises. Contrary, a study by Karpf & Mandel (2017) on green US municipal bonds, suggested that the market rather penalizes the green bonds compared to conventional bonds.

A reduced cost of capital is an incentive for issuers to raise capital through green bonds, while investors have the opportunity to diversify (Nanayakkara & Colombage, 2019). Zerbib (2019) concludes that a small green premium does not translate in a disincentive for the investors to contribute their part in expanding the green bond market. Further, estimating whether issuers can access capital cheaper through the means of green bonds is of paramount importance as the most significant driver in investment decisions is the funding cost (Gianfrate & Peri, 2019). Thus, since municipalities are issuers of green bonds, the green premium is substantial for cities and municipalities to have access to more and cheaper capital for sustainable infrastructure projects (Partridge & Medda, 2020).

2.4 Green bonds and sustainability

Green bonds relation to sustainability is unquestionable as it is embedded in its purpose of being a financial instrument aimed reaching the targets of the Paris climate agreement and the environmental related SDGs (Migliorelli & Dessertine, 2020). Only recently the relationship between green bonds and sustainability has come to scholars attention, despite being one of the financial instrument that funds green and climate friendly asset and projects (Climate Bonds Initiative, 2018). The study of Hanif et al. (2019) emphasizes that expanding the green bond market has the potential to help mitigate carbon emissions. In fact, green bonds have shown to have a positive impact on companies’ environmental performance. After issuing green bonds, Flammer (2021) found that these companies had reduced their carbon emissions and improved their environmental ratings. Nevertheless, within the context of the corporate transition to carbon neutrality Tuhkanen & Vulturius (2020) assessed that green bonds were not rigorous enough as the issuer’s green bond frameworks were lagging behind the issuer’s climate targets and the reporting after issuance fell short. They argued that more external pressure was necessary for green bonds to lead to an outcome that is within our planetary boundaries.

Furthermore, the “additionality” of green bonds or the added value that green bonds provide has been questioned, as green bonds might not change how the capital is allocated (Maltais & Nykvist, 2020). On the other hand, the EU TEG on sustainable finance (2019) argues that the concern about the added value of green bonds comes as a result of a misunderstanding of the refinancing role of green bonds. The expert group stresses that green bonds provide certain requirements for the issuer when it is used to refinance an asset or project, as green bonds are linked to the sustainability targets of the issuer (EU TEG on sustainable finance, 2019). Yet, green bonds could be perceived as more effective than they actually are, as their environmental benefits are emphasized by the issuers. This could create the perception that green bonds shift capital to new investments, which is mostly not the case. (Maltais & Nykvist, 2020).

A recent study by Maltais & Nykvist (2020) investigated the role of green bonds in advancing sustainability by interviewing investors and issuers from both the private and public sector in Sweden. The study indicates that green bonds provide some financial incentives, but mostly emphasized the influence green bonds had on integrating sustainability in the internal operations of issuers and raising sustainability ambitions of the organization. The respondents of the study also highlighted benefits like signaling effects and advantages in attracting customers and staff. An increased dialogue around sustainability between investors and issuers had also been observed. Finally, green bonds have been correlated with more investment into environmental performance (Maltais & Nykvist, 2020). Simultaneously, strong reasoning to believe that green bonds have become a captivating and an efficient financial instrument to address sustainable development derives from the OECD, which distinguishes several environmental improvements with regards to this green financial strategy. Some of these including promoting higher transparency and having the potential of a cost advantage in contrast to “brown” or in other words, conventional bonds (Sartzetakis, 2020). In fact, Carvalho, (2018) concludes in his study comparing the main climate finance instrument options for Canadian municipalities that green bonds are a transparent and accountable alternative, which can be reinforced through external monitoring.

The literature review aims at providing the reader with the current state of knowledge about the contributions of green bonds towards sustainability. While scholars have

largely been focusing on the financial contributions, the studies mentioned in the last paragraph, provide first insights about the non-financial contributions of green bonds towards sustainability. Thus, the different contributions found in the literature will serve as guideposts for this study. Nevertheless, more investigation is needed to understand the whole scope of contributions of green bonds to advancing sustainability. This study will investigate this phenomenon in the context of municipalities.

3 Chapter: Methodology

In the attempt of describing our research methodology and the methods used in our research in the most understandable way possible, the structure of this chapter is guided by the diagram below, which organizes the fundamental methodological choices into layers starting from the outer layer (Saunders et al., 2019). Thereafter, it will provide arguments for the quality and trustworthiness of the study and outline the ethical considerations taken when conducting the study.

Figure 2 The 'Research' onion by Saunders et al. (2019)

3.1 Research Paradigm

By discussing the research paradigm utilized, this section aims at clarifying the underlying assumptions and set of beliefs that the research rests on. To provide a brief overview, the two extremes of a continuum of paradigms in research are called positivism and interpretivism. Within this spectrum several other research paradigms have emerged over the years. Positivism, having its origin in the natural sciences, mostly employs quantitative data and a deductive approach and rests on the premise 19

that reality is singular and objective. Whereas interpretivism mostly is associated with qualitative methods and rests on the assumption that there are multiple subjective realities. This paradigm acknowledges the perception of study participants and aims at studying a social phenomenon through interpretative means. (Collis & Hussey, 2014).

Positivism and its deductive approach, often operating in established research fields with existing theories, was perceived as inadequate for the endeavor of this research (Collis & Hussey, 2014). An interpretivist paradigm was adopted to fulfill the purpose of the study. Its inductive approach allows a wide array of emergent knowledge to be taken into consideration, which can be applied to a theoretical foundation (Bhattacherjee, 2012). Interpretivism provides the opportunity to account for the distinct traits and context of the cases being studied, which is a substantial aspect of this research (Bhattacherjee, 2012). Additionally, employing such a paradigm allows for a more in-depth study of the phenomenon to uncover latent knowledge and create richer understandings, which is crucial to answer the research question of this study. From an epistemological and axiological perspective, the study relies on interviews with experts in the field, which implies a certain degree of subjectivity, both from the participants perspective and from the researchers conducting the study. Another advantage of using this paradigm concerns its ontological assumptions, which acknowledges study participants providing heterogenous answers to the inquiry (Collis & Hussey, 2014).

3.2 Research Approach

Due to the need of empirical data observation for the study’s purpose, inductive research being a method of theory building becomes the most accurate approach to employ. Given the lack of theorizing in this domain, the authors see necessary to engage in an inductive study where they can contribute to new insights. Undertaking an inductive reasoning allows the development of theory through observation of multiple sources (Collis & Hussey, 2014). This reasoning becomes crucial as the main purpose of this study is to allow emergent research findings from frequent, dominant, or significant themes in the empirical data (Thomas, 2006). The motive behind utilizing an inductive reasoning rather than a deductive one, stems from the impetus

of the study. This research involves developing theory from the empirical data rather than testing already developed conceptual and theoretical structures from the literature that will then, be compared and examined by empirical observation (Collis & Hussey, 2014).

3.3 Methodological choice

A study can employ either a qualitative or a quantitative method. Acquiring qualitative data entails collecting and analyzing empirical evidence through for example, interviews, along with the use of other non-numerical and interpretative methods. Whilst quantitative data in contrast, focuses on the collection of quantifiable data through analyzing and testing in a statistical manner the data under consideration (Collis & Hussey, 2014), which is not recommendable for this nascent research field due to the lack of statistical data allowing no logical comparative studies. In line with the purpose of the study, the most appropriate research method to proceed with and the one chosen, has been to use a qualitative method. This one aims at investigating the participants perceptions and understandings, concerning the contributions green bonds provide in advancing sustainability in municipalities. In other words, exploring the relationship between sustainability and green bonds. By choosing to use a qualitative method, the research reaches a subjective conclusion which allows the researchers to identify assumptions, whether individual or shared, that shape realities anent to the research purpose (Silverman, 2020).

3.4 Research design

Under the spectrum of the interpretivist paradigm there are several research designs, which serve different purposes and can differ slightly in terms of their philosophical assumptions (Collis & Hussey, 2014). A case study design is advocated for, as the contributions from green bonds to sustainability can be latent and context dependent and it is substantial to obtain in-depth knowledge that acknowledges the study participants context. Case studies can be performed as a single case study or multiple- case study, which in the latter alternative involves more than one case (Collis & Hussey,

2014). This research was conducted as a multiple case study on five Swedish municipalities. A multiple-case study design was preferred above a single case study since the data collection from several municipalities would lower the risk of misrepresentation and provide more compelling and robust evidence. Moreover, the study adopts a holistic approach towards each case, which means that subunits of the cases are not specifically addressed, and a global standpoint is taken towards each of the cases (Yin, 2018).

Finally, an exploratory case study design was deemed to be an adequate approach to satisfy the exploratory purpose of this study. Focusing on investigating the relationship between green bonds and environmental sustainability advancements. Utilizing such an approach provides the needed flexibility and independence concerning the research design and data collection. This is a suitable approach, as there are few theories and a deficient body of literature in this field of research. Hence, the study wants to define the relevant questions, research directions and clarify assumptions to provide a foundation that subsequent research can build on (Mills et al., 2010). The multiple cases are important in the context of this exploratory case study to provide an augmented understanding of the phenomenon that has not been defined by prior research. Utilizing several cases can provide more depth to the findings or a broader range of findings, which helps filling gaps and overcoming some of the shortcomings of individual cases (Saunders et al., 2019).

3.5 Time horizon

The research was conducted over a period of one university semester by three researchers. Having a relatively short time frame, it was crucial to work on sections simultaneously and thoroughly plan the process to overcome some of the time constraints. Being three researchers allowed for a larger number of cases to be used and the research to cover a broader scope than would have otherwise been possible. Given the mentioned time frame, this research is designed as a cross-sectional study, which means conducting the research on a phenomenon at a particular point in time. Using a metaphorical explanation, the study merely provides a snapshot of the

phenomenon and does not consider the changes and development of the study participants that occur over time (Saunders et al., 2019).

3.6 Data Collection

For this study, an interview method was conducted as a form of collecting primary data from first-hand sources. Collecting data through an interview method is done with the intention to understand the subjective meaning behind the experiences of the participants. The researchers aim to understand new and unforeseen insights upon a phenomenon instead of imposing assumptions previously collected through secondary data (Qu & Dumay, 2011). By following a qualitative approach, the need to contextualize is crucial for the validity of the study, hence background information about green bonds must be gathered in order to proceed with the research and therefore, understand the data within its context (Collis & Hussey, 2014). The secondary data utilized for the study consisted of textbooks, peer-reviewed articles, reports, and internal documents provided by the participants under the study, allowing the researchers to acquire enough knowledge upon the phenomenon under study to guide the data collection and later the analysis.

3.7 Sampling Method

The sampling for the data collection was assisted by a first-hand intermediary from the Climate Council of Jönköping municipality. One of the researchers had already worked with the Climate Council in Jönköping on a project on green bonds, and therefore a contact to the administrator of the Climate Council was already established. The Climate Council has several focus groups, one of them being on sustainable investments, which includes several professionals from the public and private sector in the county of Jönköping. This initial pool of individuals being active in the field of sustainable finance served as a springboard to access the individuals that would be in close contact with the research phenomenon and have the right knowledge. Through the recommendations of these individuals, the researchers received further contact to professionals working with green bonds in different municipalities and experts in the

field, which in turn provided further contacts for potential interviewees. Thus, a snowball sampling method was utilized as it ensured accuracy on the data collection, to identify individuals who would meet the sampling criterion, instead of the researchers improperly choosing samples which may not entail for the study. Nonetheless, it is recognized and understood by the researchers that asking study participants for potential contacts could compromise the sample frame (Ritchie et al., 2013). The data collection process concluded by drawing data from five different municipalities and three external informants who contributed to strengthening the study’s findings.

3.8 Interviews

By reason of the COVID-19 pandemic, physical interviews were eluded. Thus, the contact process with the participants fell strictly under online methods such as “Microsoft Teams” calls, telephone calls, e-mails, and the like. Nonetheless and because of the importance of the subjectivity from the interviews, video calls through the “Microsoft Teams” platform were performed to recognize to a full extent the human behavioral patterns the researchers would not manage to discern otherwise. The primary data was collected through other ways such as e-mails or phone calls.

The aim of interviewing the participants was to explore and understand from a firsthand experience the possible contributions green bonds provide in municipalities to advance sustainability. The design of the interview questions was constructed in three different sections (Appendix A). At the start of the interview, specific questions were asked to understand the participants professional positions within the municipalities. Following their relation and experience with green bonds or green loans. These focused personal questions were placed as introductory questions to start the interview broadly and avoid directing the conversation onto the actual contributions in question. This design was to facilitate the researchers to follow up the volatility of the conversation to ask the correct questions dependent on where the conversations were headed. With respect to the participants field of work, questions were asked in an aim to perceive the initiatives to having worked with green bonds, for what reason and to grasp how these influenced the municipalities to work in a

transition towards sustainability. These types of questions were designed to be in the middle section to allow a greater in depth of investigation, where emergent questions and probes would raise if needed in response to the interviewee’s answers (Collis & Hussey, 2014). Lastly, the interview process finalized with concluding questions which permitted the interviewee to rethink and reflect upon additional attributions of green bonds in the case they might not have thought off previously. During the interview it was important to avoid any personal influence from the researchers onto the participants, which could cause biased answers. The interview questions were also guided by a replication logic, by using the same interview guide in each of the municipal cases and keeping the timeframe of the interviews similar to one another.

Due to the research being done in English but performing it in Sweden as a study area, the possibility to conduct the interviews in Swedish was offered to avoid potential misunderstandings. As a result, two of the five case studies accepted such offer and proceeded the interviews in the Swedish language. Additionally, three other respondents accepted to be interviewed to assist the research with supporting evidence, which interviews were conducted in English.

3.8.1 Semi-structured interviews

Due to the nature of an interpretivism approach, a need surged to understand divergent interpretations. Thus, to conduct an interview with the attempt to explore emergent themes, understand the participants interpretations and experiences and to acquire deeper insights, a semi-structured interview method is utilized. This method is conducted where a set of predetermined questions are asked as well as follow-up questions, that can emerge granting a chance to further explore underlying assumptions of an important manner to the participant. Thus, ensuring flexibility to the issues addressed (Clifford et al., 2016). A set of systematic and consistent themes are brought throughout the interview, however, by employing a semi-structured interview, probes can be raised leading to a wider spectrum of responses (Qu & Dumay, 2011).

Table 1 Interview information of the five municipalities

Municipalities Participants Position Duration Date (min) Finance March 11, Skövde Bas Tijssen 56:12 Controller 2021 Portfolio March 11, Göteborg Fredik Block 50:48 Manager 2021 Susanne March 16, Borås Strategic Planner 53:05 Arneborg 2021

Eva Nilenfjord & CFO & Finance March 17, Jönköping 43:54 Antonio Cala manager 2021

March 18, Vaggeryd Jörgen Hansson CFO 01:01:47 2021

Table 2 Interview information of the three external experts

Organizations Participants Position Duration Date (min) Finance March 10, Kommuninvest Björn Söderlundh 30:33 Controller 2021

Länsförsäkringar March 12, Jesper Rundbäck CFO 27:08 Jönköping 2021

Region Finance March 18, Mattias Olsson 45:01 Jönköpings län Manager 2021

3.9 Data analysis

Once the interviews had been conducted, the recordings of the interviews were transcribed verbatim rather than re-writing it into a written and more formal form. More detailed speech patterns like intonation and emotional expressions were not included, as it would not provide additional information to answer the research question. Based on the interview transcripts the data analysis was performed through an inductive thematic analysis. This method aims at identifying, analyzing, and revealing patterns from textual data, which is referred to as, themes. As opposed to a theoretical thematic analysis, where themes are determined prior to the data collection, the inductive thematic analysis is close to the data and adopts an approach, where the themes emerge from the collected data. Further, the analysis was performed on an 26

explicit level, focusing only on what the interviewee had said, rather than on a latent level, which goes beyond and examines underlying ideas and assumptions (Saunders et al., 2019).

The first stage of the data analysis consisted of reducing the data, which was initiated by coding the interview transcripts. First, the three researchers conducting the study read through the transcripts several times for a general overview of the collected data. Then, in a systematic manner the researchers gave labels to passages in the transcripts that were of interest for the study. During that process reflections and observations were noted as well as reoccurring patterns to facilitate the further analysis. Notes were taken next to the codes to aid the allocation to themes. Following this, for each individual case the data analysis moved the codes to more abstract levels of aggregate dimensions (Appendix G). For illustrative purpose this process is shown in the table below for the case of Borås municipality.

Table 3 Codes, themes and aggregate dimensions of Borås municipality

1st order category 2nd order themes Aggregate dimensions …how you can show investors what the green bonds have done …how much CO2 and how you should calculate Provide transparency Transparency and to be transparent exactly how you calculate that and how we should do our reports

…it has been lots of fun to work with economics department and to get to know each other and Collaboration develop the same language Cross collaboration between between departments …the first thing that happened when we got a departments loan was that I met the chief of economy for the first time

…the green bond framework from Kommuninvest sort of gets a framework for us too and then we could in our investment plan Guide for municipality standards Tool for guidance …and the energy bill should be like this and this and framework we took from Kommuninvest …use it as a help deciding the energy level

…but then we also say within 4 years everybody has to be within this framework Setting targets & Tool …a way of showing what the politicians want, we for implementing want everybody to have green projects and this is green agenda our framework and you have to be within this limit …its cheaper but that is so little so it is not a big deal Lower interest rate Financial incentives …we have a green loan so they also get a cheaper loan from the municipality …we have asked several municipalities, how are Discussion between Knowledge you working with the climate issues and the municipalities exchange carbon budget

…show their own politicians and inhabitants that our project is a green project Signaling Signaling …it is sort of a stamp

The data was first analyzed internally by doing the coding and categorization process described above for each individual case. This allows the patterns of each of the cases to be identified before they are generalized across the cases (Eisenhardt, 1989). The rationale of such an approach is to keep the integrity of each case and only thereafter synthesize the patterns across the cases. Hence, in the next step the cases were analyzed externally to examine patterns across the cases. This also entails investigating the literal replication of the within-case patterns expressed in themes and dimensions (Yin, 2018). The previous research on green bonds and sustainability outlined in the frame of reference was used as an analytical framework to interpret and reflect on the empirical findings both in the within and cross-case analysis. One of the main reasons for conducting a cross-case analysis was to avoid taking false conclusions because of information-processing biases. The tactic used for the cross-case analysis was to select dimensions to assess the similarities and differences across the cases. These dimensions emerged from the most reoccurring themes across the cases: Financial incentives, cooperation, communication and awareness, and structure and requirements. Overall, the process of data analysis was an iterative process going back and forth between the data and the internal and external analysis and the associated themes and dimensions (Eisenhardt, 1989). Finally, the authors created a model to visualize the broad areas of contributions of green bonds towards sustainability, which facilitated the process of

crafting a conclusion. For a clearer understanding of the data analysis the steps were summarized in the figure below.

Figure 3 Overview of the data analysis process.

3.10 Quality of research

To display the quality of this research, this section is going to outline the extent that the study is meeting certain quality criteria. These criteria aim both at communicating how rigorous this study has been conducted and how it can be used or generalized. The traditional way of assessing the quality of research uses criteria such as validity and reliability, which corresponds well to quantitative research, but is of limited applicability for qualitative research (Saunders et al., 2019). Since the aforementioned criteria do not sufficiently consider the interpretive traits and assumptions of qualitative research, parallel versions of these criteria were used to suit the specificities of qualitative research, which are outlined in the sections below (Saunders et al., 2019).

3.10.1 Credibility

The credibility refers to whether findings of a qualitative research are plausible (Zach, 2006) and consists of a range of strategies to ensure that the findings correctly reflect the information conveyed by the study participants (Saunders et al., 2019).

Firstly, to strengthen the plausibility of the findings it was thought necessary to opt for a multiple-case study, rather than a single case study. Thus, the findings are grounded in multiple sources of empirical evidence. The data collection follows all the indispensable steps required from a multiple-case study based on interviews. Likewise, the data analysis has been carefully designed to use an appropriate method and considers the requirements from the thematic analysis and the internal and external analysis, which are widely accepted by the research community to analyze multiple- case studies (Eisenhardt, 1989).

To ensure further credibility of the findings the multiple-case study followed a literal replication design, which Yin (2018) refers to as selecting cases that are predicted to 29

provide similar results. This also entails approximately replicating the conditions for the data collection and analysis of each of the cases, which enhances the comparability across the cases and strengthens the findings when the cases provide similar results (Yin, 2018).

The study collected data not only from the municipalities, but also from investors and a municipal funding agency. This data triangulation was important to receive a more accurate picture of the phenomenon and provided the needed context to better understand the phenomenon. Finally, several of the crucial steps during the data collection and analysis were performed by more than one researcher. Concerning the data collection, all the interviews were conducted by two researchers. In the data analysis, the categorization process was performed separately and then later compared across the researchers. Finally, the analysis process was characterized by collective reflection and discussion between the three researchers to produce a thorough analysis of the collected data.

3.10.2 Transferability

The criterion transferability examines how generalizable the study is and to what extent it can be applied to other settings and cases. Since the study in detail outlines fundamental sections like background, research purpose, findings and analysis, the study’s generalizability can be assessed by the reader when wanting to apply it to another setting (Saunders et al., 2019).

To select the cases, a snowball sampling method was utilized, for which the climate council in Jönköping provided the initial contacts. While it ensures that the study investigates relevant cases, it is also likely that some of the cases have a rather high ambition concerning green bonds and sustainability, which might not correspond to the average municipality in Sweden. Compared to quantitative studies with large sample sizes, the generalizability of this study is more limited. Despite this being the case, a certain generalization is possible for the municipalities in Sweden since the setting and situation is to a large degree the same as in the study.

The standardized structure and framework of green bonds allows some parts of the study to be used to explain similar phenomena in other organizations in the public and private sector. However, other parts of the study are tied to the situational uniqueness

of Swedish municipalities, which cannot be generalized to settings with different characteristics. This can be exemplified by the internal mechanisms and organizational structures of Swedish municipalities.

3.10.3 Dependability

Dependability refers to the accuracy of the research study to meet the rules and protocols of qualitative methodology (Guest et al., 2012). It focuses on ensuring that the research processes are systematically, meticulously, and correctly documented and collected in order to create a satisfactory study (Collis & Hussey, 2014).

When collecting the data and before analysing it through a transcribing and coding process, the authors rigorously read the interview transcripts several times to fully understand the underlying meanings of assumptions, emotions and the subjectivity of the participants answers upon the phenomenon under study. These interpretations had to be maintained solid, meaning these should not be changed over time, otherwise it would cause an inadequate data analysis and an unreliable study. In other words, repeating the process of data analysis and re-evaluating it several times. The data was obtained from the interviews conducted to understand green bonds contributions to advance sustainability in municipalities. Thus, enhancing the dependability of the study and assuring data accuracy.

As Lincoln & Guba, (1982), argue that dependability accounts to the acceptability and the adequate execution of the norms behind a methodology. Which in this study would account to a qualitative methodology with an interpretivism approach.

3.10.4 Confirmability

Confirmability accounts to the task of verifying that the research process is being accurately followed and described to its full extent. Whilst accurately assessing the data findings and making sure the degree of relevance (Collis & Hussey, 2014) . In other words, objectivity should be enforced by having two or more authors confirming the data’s meanings to execute accuracy. Thus, to avoid any biases, the three researchers analysed the transcriptions. This supported the credibility of the data analysis, as the interpretation from the transcripts were not only based on one individual´s perception but instead, from several individuals. By comparing the different evaluations from the researchers coming from the data analysis, it reinforces the corroboration of data from 31

the researchers and strengthens the interpretations or theories of a phenomenon (Drisko, 1997).

3.11 Ethical Considerations

For this research project to become methodically ethical, there was a set of considerations that the project had to adhere to. This research project was conducted through interviewing professionals who are closely familiar with the phenomenon of green bonds. To guarantee an ethical participation, the interviewees had been previously contacted and talked through the purpose of the research project. Important points like the voluntary basis of the interviews, the recording and storage of the data and the choice of being anonymous were brought up prior to the interviews. These matters were communicated through a GDPR form, which was signed by all the study participants and discussed again before starting the interview.

Given the researchers interest in sustainability, the subjective perspective could lead to overstating the contributions of green bonds towards sustainability and unconsciously rejecting opposing results. To avoid such misrepresentations, the researchers gave precedence to maintain objectivity and a critical mindset throughout the whole study. This was especially important in the data collection and data analysis.

Finally, addressing sustainability in the interviews may cause a sense of insecurity in the interviewee as the questions asked could be taken as indirect judgement. To avoid any misunderstandings, it was crucial to ensure trustworthiness and maintain transparency throughout the whole interview for the interviewee to feel safe and to create a trusting environment. Further, throughout the interviews it was a priority to demonstrate respect and foster a sense of integrity. This was also taken into consideration when presenting the data. Part of the interview approach was to encourage and motivate the participants of the study by the researcher’s genuine curiosity about their work.

4 Chapter: Empirical findings

The findings and experiences of the participants are presented and explained below. This section is divided into five cases correspondent to the five municipalities.

Table 4 Municipalities and study participants overview

Municipalities Participants Position

Skövde Bas Tijssen Finance Controller

Göteborg Fredik Block Portfolio Manager

Borås Susanne Arneborg Strategic Planner

Eva Nilenfjord & CFO & Finance Jönköping Antonio Cala manager

Vaggeryd Jörgen Hansson CFO

4.1 Case A: Gothenburg municipality

For Gothenburg municipality, Fredrik Block, who is the portfolio manager at the municipality, was interviewed. One of his main tasks is to manage Gothenburg city’s large dept portfolio, where he actively works with green bonds. From the start, Fredrik’s interest and engagement in green bonds was noticeable. He began by explaining that the unique thing about green bonds is the transparency it provides to investors, where the use of proceeds is defined, and the investors know that the money is going to one of the earmarked projects of the municipality. Following this, he described with excitement the sustainability movement in Gothenburg, which is a municipality that has their own green bond framework and program and was the first in the Nordic countries to issue green bonds. He felt that the sustainability work of the city has facilitated his work with green bonds.

Furthermore, he pointed out that green bonds reduce the funding cost of investments, which can in some cases, be passed on to the companies contracted for the project. Using this financial instrument also makes it easier to find funding compared to regular bonds. Another benefit is that issuing green bond gives the municipality a “green halo”, which Fredrik describes as follows:

“Because we have issued some green bonds, we have a green halo, we are the green city, everybody likes us, also our normal bonds. They see we have a green agenda, and they like all our bonds.” – Fredrik Block

Moreover, the experience measuring the environmental impact of green bond investments will be valuable in the future, when the environmental impact of most municipal investments will need to be measured. Fredrik underlines that measuring the environmental impact is crucial for the transition towards sustainability. Next, he mentioned that using green bonds has contributed to raising interdepartmental collaboration.

“It has increased the collaboration between finance and environmental department because for this we have to collaborate” – Fredrik Block

Finally, he emphasizes several times that green bonds are not a leading role or a driver of sustainability in the municipality. The municipality funds some investments with green bonds however they do not depend on green bonds for funding. According to Fredrik, green bonds is mainly a financial product that was created for the investor. Hence, in the municipality, green bonds do not dictate what investments should be made and how the respective project should be executed. These are decisions taken by the municipality and are enforced by other means.

4.2 Case B: Jönköping municipality

For the case of Jönköping municipality, Eva Nilenfjord was interviewed, who is the CFO of the municipality and Antonio Cala, who was invited to the interview on the initiative of Eva, since he is directly involved with the internal bank of the municipality 34

and therefore manages the municipality’s debt and the different loans. Eva and Antonio explained that like all the municipalities part of the study except for Gothenburg municipality, Jönköping municipality uses Kommuninvest to issue bonds for their investments and apply to Kommuninvest for a green loan which they then issue as green bonds. Their financial department is then only administrating the loans with their internal bank, but it is the companies that apply directly for the loans to Kommuninvest. The three green loans that they currently have are for a newly built university building, a rental building, and a water treatment facility.

When applying for a green loan, Kommuninvest provides the municipality with a lower interest rate of 0.2 percent. The finance department then passes on the reduced interest rate, which for the previous green projects has been to a public real estate company and the water and waste department of the municipality. The reduced cost of capital has been an incentive for the companies to apply for green loans, even if it is perceived as a rather small reduction. Further, according to Antonio employing green bonds creates a certain marketing effect for the municipality. Green projects receive a stamp, which shows that the municipality has used green bonds to finance the project.

“From a marketing point of view, a project that has a green loan, gets a green stamp in this way” – Antonio Cala (translated from Swedish)

Throughout the interview Eva emphasizes that it is not green bonds that are driving sustainability in the municipality. Society at large is driving the discussions on sustainability issues rather than green bonds. She underlines that regardless of green bonds their investments are sustainable, since it is part of being a municipality to be sustainable and not to invest in something that is harming the environment or is unsustainable.

“We have strong programs for both environmental and social sustainability, and as a municipality we work with this the whole time, so it is nothing new to us” – Eva Nilenfjord (translated from Swedish)

Moreover, there are already environmental criteria and environmental considerations included in the procurement documents. According to Eva most of the projects would 35

qualify for green bond funding and the reason for having only a few earmarked projects is that they have just not applied for green bond funding for these projects. In addition to that, the municipality can cover most of their expenses with their income like taxes for instance. Therefore, there is only a need to use loans for larger projects and thus green bonds only make up for a small share of the total financing of the municipality.

4.3 Case C: Vaggeryd municipality

Jörgen Hansson, who is CFO at the municipality and part of the focus group sustainable investments at the Climate Council in Jönköping, was interviewed for Vaggeryds Kommun, which is a municipality in Jönköpings county with 14500 inhabitants. He manages amongst other things the green loans of the municipality, which are then issued as green bonds by Kommuninvest.

Green bonds have been used to fund investments in buildings, in a water treatment plant, and in waste disposal. He explained that this option is only employed when the investment needs of the municipality cannot be covered with taxes or other general government grants, which can be the case for larger investments.

Throughout the interview Jörgen discussed several effects that green bonds have on the municipality. For using green bonds instead of conventional bonds to fund investments, Kommuninvest provides the municipality with a discount in the interest rate.

“They have motivated the municipalities by providing a discount of two basis points in the interest rate” – Jörgen Hansson (translated from Swedish)

Another benefit is that using this financial instrument sends a signal to the inhabitants and external stakeholders that they are considerate towards sustainability.

Further, the use of green bonds has helped to bring in a sustainability perspective in the municipality and some of the decision making. The discussions around sustainability due to green bonds have fostered awareness and knowledge about sustainability on different levels in the municipality, which is summarized by Jörgen as follows: 36

“The more we talk about these questions, the more knowledge increases, and it is extremely important to receive knowledge, especially in decision making.” – Jörgen Hansson (translated from Swedish)

In addition, green bonds have contributed to an increased collaboration between the financial department, the sustainability and environmental department and the real estate department, which utilized better complementary competences and provides a more comprehensive picture of the project.

Finally, in the interview Jörgen mentions that the investment and procurement guidelines contain environmental regulations. However, these environmental guidelines are not directed by the green bond framework.

4.4 Case D: Borås municipality

Susanne Arneborg represented Borås municipality, where she currently works as a strategic planner. Her role consists of working directly with politicians in the municipality as well as working with the climate committee at Kommuninvest to find holistic ways to achieve a sustainable development in the municipality. Susanne has also been involved in Kommuninvest, which gives her deeper insight to the green bond framework that Kommuninvest utilizes and continuously develops along with Susanne. Such framework is utilized as a guide to adapt and shift the standards currently used by companies to more sustainable oriented targets and to obtain a green certificate. The municipality of Borås does not issue their own bonds, unlike the municipality of Gothenburg. Instead, they use Kommuninvest as an intermediary of acquiring green loans for the purpose of setting up a green project within the green bond framework.

Susanne started the interview by emphasizing the different ways of calculating CO2 emissions and how important it is for the green bond framework to be transparent when choosing a specific method to calculate emissions. In line with this, she highlighted the excitement that surged from working together with the economic department of the municipality and managing to finally talk the “same language”. Susanne expresses this being one of the biggest impacts green bonds contributes to

the municipality. Thus, having both perspectives of the coin whilst strengthening and aligning ambitions between departments.

“I mean the important thing is that we work together with different departments and that we use each other when it is needed.” – Susanne Arneborg

Following this, Susanne explains how municipalities have also, cooperated with one another to understand the ways of working with climate issues and the carbon budget connected to the investment plan. Next Susanne explains that green bonds act as a tool for politicians to implement a green agenda and set targets that are accord to this agenda, urging every company to engage in green projects under the green bond framework. Where the framework should not be too costly for every project but also adequate for the environment.

“It is a way of showing that the politicians want everyone to have green projects, and this is our framework that the projects must adhere to.” – Susanne Arneborg

As the interview progresses, the researchers ask Susanne about the perceived changes in the municipality with the use of green bonds. To what she responds without hesitation one of them being that having a green loan accompanies to getting a cheaper loan from the municipality. This is seen from her as an incentive to develop green projects. Nonetheless, she urges that the percentage cheaper interest rate of the loan it is so little for them to greatly consider. According to Susanne, even if green bonds were a tool yet to be available in the market, some of the sustainable projects would of have been conducted anyway. Thus, green bonds can be seen from her perspective as a “green stamp” more than a driver of green projects.

4.5 Case E: Skövde municipality

For Skövde municipality, Bas Tijssen took initiative to represent the municipality. Bas’s role within Skövde takes place as a financing controller with the responsibility to manage the municipality’s loan portfolio, interest rate products and other investments they currently own. After a brief explanation of himself, he continued the conversation 38

by explaining personal experiences with the phenomenon of green bonds or green loans. He explains how the municipality of Skövde currently lacks their own bond program, which limitation was due to the high costs of wanting to implement such work. Hence, being of small interest for the municipality to emit their own bonds, Skövde municipality works with Kommuninvest, benefiting the municipality with cheaper loans from this intermediary.

Next, the researchers opened the interview with a question focused on acquiring deeper insights on how green bonds have worked previously within the municipality. To what Bas responded confidently that one of the main contributions to having worked with green bonds were the creation of new networks and interdepartmental connections. Bas disclosed how new networks simultaneously have contributed to creating new types of change. For example, further developing new energy efficiency methods in buildings. Moreover, Bas acknowledged the formation of new connections between departments, where green bonds had contributed to strengthening this spectrum.

“Then we started making connections with both our environmental department and the real state department, building the network between these. […] Now these parts of the organization would actually talk to each other. So we are sharing information and thereby also influencing each other and creating these secondary benefits.” – Bas Tijssen

However, Bas explained along the interview that this emergent contribution of green bonds is due to secondary effects.

Additionally, Bas persisted about the easy accessibility of green bonds as well as the financial benefit related to the green premium Kommuninvest experiences. Such green premium provides Kommuninvest the option to reduce the interest rate by 0.2 percent for municipalities taking green loans rather than conventional loans. Nonetheless, Bas adds that the green premium is difficult to pinpoint, since in most cases they do not issue a conventional bond simultaneously with a green bond to be able to compare the reduction in interest rate. Bas comes back and forth regarding this contribution as he yet again, emphasizes that green loans make the municipality’s cost situation better through providing cheaper loans. However, he finalizes this 39

conversation topic by stating that investors are not willing to give up much of their return for a green investment and that the financial incentive for the municipality is not as prominent.

“We have a year results of 500 million SEK so then that 400 to 1000 SEK that we save in green loans, they are nice but not the main point on the agenda.” – Bas Tijssen

An additional contribution has been that the green bonds framework has helped in guiding the standards in the municipality in terms of the environmental regulations. However, Bas disputes that if green bonds would not have been available, investors would have still invested in green alternatives.

Moreover, using green bonds grants a reduction of carbon dioxide in investment projects, since with green bonds you certify that the project is more sustainable compared to a normal building standard. Nevertheless, he questions the causality between green bonds and the reduction of carbon emission in investment projects, as he argues that the municipality would choose to invest in green alternatives regardless of the existence of green bonds. Bas continues the conversation by mentioning that green bonds or green loans could be seen as a way of providing positive media exposure and signaling to society a “green” mindset within the municipality.

“It builds public relationships. Sending out press releases generates extra attention for projects and provides positive media exposure, which is a secondary benefit” – Bas Tijssen

Public relations work externally and internally. In other words, if an organization is conducting a project deemed to be green and set to follow the Agenda 2030, Bas argues that it will potentially influence and set politicians within the municipality to follow the work correspondent with the Agenda 2030. However, he adds that there is a possibility this could also portray the opposite and create a risk for perceived “greenwashing”.

Bas concludes that the main contributions of green bonds consist of creating secondary benefits such as setting sustainability on the agenda, generating press releases and discussion around sustainability. However, when studying the real benefits 40

of the phenomenon he questions the added value and the causality of green bonds and argues that it is difficult to pinpoint what change has been created by green bonds. He acknowledges the importance of this financial instrument but still recognizes that green bonds are not a driver of sustainability.

5 Chapter: Analysis

This chapter covers and analyses the data acquired in the empirical findings section. It is divided in two parts. The first one contains a thorough within-case analysis of the five cases and the second, analyses the findings across the cases. This is done by performing a cross-case synthesis on four relevant dimensions.

5.1 Case A: Gothenburg municipality

Transparency

Fredrik’s most noticeable and his opening statement with regards to the phenomenon’s contributions was the theme of transparency that green bonds provide especially to the investors. In fact, Sartzetakis (2020), expresses that one of its main benefits is that the green financial instrument is more transparent than conventional bonds. Since Gothenburg municipality’s green bond framework is following the GBP, transparency is ensured in the use of proceeds, the project evaluation and selection, the management of proceeds and reporting (ICMA, 2018).

Financial incentives

Green bonds are distinguished in the interview as being cheaper than the conventional or brown bonds for the municipality to issue, which Fredrik attributes to the green premium, despite its existence being debated in the literature (MacAskill et al., 2021). The green premium provides as a byproduct, an easier access to cheaper capital which is substantial for issuers as the main driver is the funding cost of the investment (Gianfrate & Peri, 2019).

Signaling

Fredrik continues exploring the set of contributions by entering the public exposure spectrum of the phenomenon. Flammer (2021) examines the different reasonings to engage with green bonds, where signaling surges as one of the main rationales. This one being seen as a tool for devotion to the environment. Fredrik describes such signaling as a “green halo”. While the literature is reinforcing signaling as a contribution 42

of the phenomenon, it could also carry a reputational risk if perceived as “greenwashing” (OECD, 2015).

Awareness

A closely related contribution to signaling, materializes into awareness. This one emerges in the interview as Fredrik stimulates the conversation focused on signaling, where he discloses the importance of raising awareness about green investments. This could be interpreted consequently from signaling they are investing in green. Which accompanies a dialogue aftereffect, hence increasing awareness. Although literature has not examined such secondary effects extensively, “awareness” as an emergent contribution, adds to previous findings that have acknowledged that green bonds contribute to mainstreaming sustainability in the organization (Maltais & Nykvist, 2020).

Collaboration between departments

De Carvalho Ferreira et al. (2016) study examines the relationship between finance and sustainability. In the aim to achieve a holistic sustainability, these two must be aligned and find ways to integrate common sustainable ambitions. One emerging contribution is that green bonds have increased the collaboration between the environmental and financial department in Gothenburg municipality, which has added value to sustainable targets of the municipality as knowledge and expertise is shared across building coherent decision-making. This is crucial given that green bonds have been associated with more investment into environmental performance (Maltais & Nykvist, 2020).

Systematize environmental measurement

The GBP prescribe issuers to measure the environmental impact of their investments and to enclose it when reporting (ICMA, 2018), which is critical to advance in the transition towards sustainability. Fredrik mentions that green bonds have provided experience in the monitoring of environmental impacts for the municipality and points out this contribution, since it will prove to be an asset for the future when the environmental impact will be measured more systematically throughout most investments of the municipality.

Compliance to environmental standards

Investments that fail to follow standards from the green bond framework are removed from the municipality’s green portfolio. Fredrik sees this process as an incentivizing method for companies as they would lose their discount in the interest rate and the funding cost playing a large role in investment decisions (Gianfrate & Peri, 2019).

5.2 Case B: Jönköping municipality

In light of the debate whether green bonds provide any added value (Maltais & Nykvist, 2020), this case is especially interesting, as it at several instances provides evidence that green bonds is not driving sustainability in the municipality. In contrast to the reasoning of the EU TEG on sustainable finance (2019), it was accentuated that the financial instrument does not have an influence on how the projects are conducted. In fact, the investment projects happen regardless of the use of green bonds. Given the tendency of green bonds to fund projects that happen anyway, the additionality of green bonds has been questioned (Maltais & Nykvist, 2020). Thus, in the municipality green bonds is a funding option that is considered in retrospect in case the investment project fits into the green bond framework. The added value can further be questioned, as environmental regulations are already in place in their procurement and the municipality has structures to account for social and environmental sustainability. This is similar for the public companies in Jönköping since they employ various environmental ISO standards and therefore already have experience with sustainability. In contrast to the study conducted by (Maltais & Nykvist, 2020), the municipality did not experience any of the secondary effects like mainstreaming sustainability in the organization and raising sustainability ambitions.

PR & marketing

While the case emphasizes that the influence of green bonds should not be overstated, Eva and Antonio offer two main contributions that come from green bonds, one of them being related to signaling. This adds to previous findings that signaling is the main rationale for engaging with green bonds (Flammer, 2021). In fact, the municipality perceives green bonds as a stamp for their projects which yield marketing effects to the public. 44

Financial incentives

Another benefit is the reduced interest rate that green bonds funding provides compared to conventional bonds (MacAskill et al., 2021). The reduced funding cost represents a financial incentive to employ green bonds (Nanayakkara & Colombage, 2019). On the other hand, since the discount on the interest rate is rather modest, the marginal reduction in cost of capital plays a minor role. Instead a more important rationale to engage with green bonds is to credibly signal the organization’s commitment to the environment (Flammer, 2021).

5.3 Case C: Vaggeryd municipality

Financial incentives

The reduction in funding cost due to the green premium can play a role in enabling cities to access cheaper capital for infrastructure projects (Partridge & Medda, 2020). The importance of cheaper capital is underlined by the large investment needs in municipality sector accentuated by Jörgen and the demand for sustainable infrastructure (Bielenberg et al., 2016). However, the reduction in interest rate for the municipality is small and does not significantly enable the municipality to access cheaper capital.

Awareness and knowledge

Several of the municipality’s experiences with green bonds add to the observations that the financial instrument contributes to integrating sustainability into the internal operations and raising the sustainability ambitions of issuers (Maltais & Nykvist, 2020). Green bonds seemingly bring in a sustainability perspective in decision making processes in the municipality. The financial instrument also stimulates discussions around sustainability, which raises awareness and level of knowledge around sustainability in the context of the municipality.

Collaboration between departments

The introduction of green bonds in the municipality increased the collaboration between the finance and environmental department. This could be an impetus to integrating sustainability into the internal operations (Maltais & Nykvist, 2020). 45

Integration into projects

Besides integrating sustainability into the organization, the application process to Kommuninvest for a project to be financed with green bonds, helps the municipality to incorporate a sustainability perspective into the project. Nevertheless, green bonds might not influence significantly how projects are conducted, since the municipality already has environmental criteria in place.

Signaling, PR & marketing

Signaling is a common motive for organizations to engage with green bonds (Flammer, 2021), which also applies to Vaggeryd municipality. They want to signal to their inhabitants and external stakeholders that they are adopting sustainability in their approaches. This is reinforced by going out with press releases about their earmarked investments. Jörgen recognizes the importance of having a good reputation amongst the inhabitants, which green bonds contribute to by enhancing the credibility of the sustainability strategy (OECD, 2015).

5.4 Case D: Borås municipality

Transparency

Carvalho (2018) evaluates green bonds to be an accountable and transparent financing alternative for municipalities. Adding onto these findings, Susanne highlights the transparency green bonds provide concerning the environmental impact and the carbon emissions associated with the investments. This is a crucial characteristic for a financial instrument that aims at supporting sustainable development (Sartzetakis, 2020). In the municipality context the external monitoring of green loans can help in ensuring transparency and accountability (Carvalho, 2018). The environmental committee at Kommuninvest, which assesses the green loan applications from member municipalities, is one of the parties taking such a role.

Financial incentives

Through Kommuninvest the municipality receives a discount in interest rate for their investments funded with green bonds. Although the green premium provides an inventive for issuers to engage with green bonds (Gianfrate & Peri, 2019) and has also 46

been found to be a means for cities to access cheaper funding for sustainable infrastructure projects (Partridge & Medda, 2020), the reduction in cost of capital in the case of the Borås is too small to have a significant impact. At the same time the green premium covers the transaction costs associated with green bonds, which otherwise could discourage the municipality to apply for green bond funding.

Signaling

Corporations have recorded lower carbon emissions after the issuance of green bonds (Flammer, 2021). However, since the municipality’s investment projects are carried out regardless of the use of green bonds, it appears likely that reducing emissions is not attributable to the financial instrument. Which is part of the reason why the added value of green bonds has been questioned (Maltais & Nykvist, 2020). In the municipality they are rather perceived as a stamp on projects that thereby sends signals to the inhabitants and to the politicians, which are crucial stakeholders of the municipality. This can provide credibility for their sustainability strategy (OECD, 2015), and is one of the main motives to issue green bonds (Flammer, 2021).

Collaboration across departments

Similarly to the respondents from the study by Maltais & Nykvist (2020), Susanne underlines the “secondary effects” of green bonds as contributions. The case of Borås especially highlights the cross collaboration between departments that surged from using green bonds. This can be an impetus to integrate sustainability in the internal operations (Maltais & Nykvist, 2020), since green bonds brings together the environmental and economics department. Susanne explains the importance of overcoming assumptions, getting to know the different processes in the other department and utilizing the different competencies to plan green projects.

Tool for guidance

The use of green bonds has as “secondary effect” that it raises the sustainability ambitions of issuers (Maltais & Nykvist, 2020), which it does in two main ways for the municipality. Firstly, as the green bond framework is thoroughly discussed by the environmental committee at Kommuninvest, it is adopted as a guide for some of the municipality’s standards for companies. Secondly, it serves as a tool for politicians to implement their green agenda and set environmental targets. 47

Knowledge exchange

Moreover, apart from generating more interaction between departments, green bonds also involve external stakeholders in the discussion around sustainability. Green bonds provide the opportunity for more extensive discussions around sustainability between investors and issuers (Maltais & Nykvist, 2020), but since the municipality is using Kommuninvest to issue their green bonds, they do not have direct contact with the investors. On the other hand, the municipality has engaged in discussions and exchanged knowledge with other municipalities with regards to the implementation of the green bonds framework in their own standards.

5.5 Case E: Skövde municipality

Collaboration between departments and networks

Bas took the initiative to recognize the importance of creating connections between departments, specifically between Skövde’s environmental department, economical and their real estate department and the building of networks between departments. The participant perceives this forming of collaborations as a contribution of green bonds in advancing sustainability. This is due to the aim of facilitating the integration of knowledge and operations between departments.

Integration into Standards

The municipality has used the green bond framework to adapt their building standards to have higher energy efficiency standards. Integrating sustainable development within the financial targets of the municipality through promoting economic prosperity as well as environmental and hence also integrating sustainability into the internal operations (Maltais & Nykvist, 2020).

PR & media

Green bonds contribute to the public image of the municipalities which contribution could be seen as a disguise of constructing positive media and publicity. Even though this could be perceived as “greenwashing”, one of the fundamental reasons for the International Capital Market Association (ICMA) to have created green bonds and

created the correspondent requirements, is in an attempt to mitigate “greenwashing” effects (OECD, 2017b) and remove any project not contributing to a sustainable development. Forcing projects to meet environmental targets and ensuring integrity. By progressively increasing the number of projects based on the green bond guidelines, sustainability is then set into the municipality’s agenda and simultaneously building positive media exposure.

Financial incentives

Following the interview, the participant sees necessary to center the attention onto financial incentives derived from green bonds. Skövde works with Kommuninvest which partnership benefits the municipality with cheaper loans. There is a yield of a percentage reduction of cost of capital for issuers, such as Skövde, which increases project development. Literature concurs with such contribution as funding costs are seen as a crucial driver of investment decisions. Thus, motivating issuers to opt for a green alternative such as green bonds, to raise capital (Gianfrate & Peri, 2019).

Improving Environmental Performance

While Bas perceives a reduction in emissions being another contribution of green bonds, he underlines that the causality is difficult to pinpoint. As a matter of fact, Flammer (2021) assents that, after having issued green bonds, companies had reduced their carbon emissions and improved their environmental rankings. However, these adaptations are minor, and the municipality perceives secondary effects like setting sustainability on the agenda, generating press releases and discussion around sustainability as more substantial, which confirms the findings of Maltais & Nykvist (2020) , that green bonds contribute rather through secondary effects. More towards raising sustainability ambitions and integrating sustainability into the internal operation than through reducing emissions or shifting capital to more sustainable investments. Bas legitimately questions the added value that green bonds provide to projects in terms of sustainability, since green bonds often fund project that would happen regardless of the use of green bonds (Maltais & Nykvist, 2020).

5.6 Comparison and Synthesis

Four dimensions were established based on the most prominent and reoccurring themes in the empirical findings with the aim to compare and to synthesize the findings from the five cases, the external respondents, and the literature. To facilitate a comparison across the cases and the external respondents, two tables were created displaying their aggregate dimensions. The analysis ends by suggesting three broad areas through which green bonds contribute to advancing sustainability.

Table 5 Comparison of the aggregate dimensions of the five municipalities

Dimensions Gothenburg Jönköping Vaggeryd Borås Skövde Financial Financial Financial Financial Financial Financial incentives incentives incentives incentives incentives incentives Collaboration Collaboration Collaboration Collaboration between Cooperation between - between between departments departments departments departments & networks Communication PR & Signaling, PR Signaling Signaling PR & media & Awareness marketing & marketing

Awareness & Knowledge Awareness - - knowledge exchange

Integration Structure & Integration Transparency - Transparency into requirements into projects standards

Table 6 Comparison of the aggregate dimensions of the external experts.

Region Länsförsäkringar Dimensions Kommuninvest Jönköpings Jönköping län Financial Green premium Green premium Green premium incentives Cooperation - - - Communication & PR & marketing Signaling Signaling & PR Awareness

- - -

Structure & Transparency Transparency - requirements 50

5.6.1 Financial incentives

While there is no common consensus about the existence of a green premium in the literature (MacAskill et al., 2021), all the respondents of the study, which include the municipalities, the municipal funding agency and the investors experience a green premium. In fact, all the municipalities mentioned that green bonds provide a lower cost of capital than conventional bonds. Gothenburg as the only municipality having their own green bond program reported that besides being a cheaper source of finance, green bonds also provide easier access to capital due to their popularity among investors. This was apparent when talking to Region Jönköping and the insurance company Länsförsäkringar that act as institutional investors in the green bond market, which disclose that they prefer green bonds over conventional bonds regardless of the lower return that they provide. Hence, green bonds provide a lower interest rate for the issuer, which does not discourage investors (Gianfrate & Peri, 2019). Apart from Gothenburg municipality, the municipal funding agency Kommuninvest issues the green bonds of the municipalities part of this study and subsequently provides them with a 0.2 percent discount in their interest rate. Björn, that works as the head of lending at Kommuninvest, confirms that passing on this discount is a result of the green premium they experience when issuing green bonds. Since the funding cost is a crucial factor in investment decisions (Gianfrate & Peri, 2019), several municipalities perceive the reduced funding cost as an incentive for the municipality and their public companies to employ green bonds. On the other hand, most of the municipalities point out that the reduction is rather modest. To sum up, green bonds provide a small financial incentive to employ this financial instrument. Despite Partridge & Medda (2020) acknowledging the potential of the green premium to support cities in accessing cheaper capital for sustainable infrastructure projects, the current discount is too small to significantly contribute.

5.6.2 Cooperation

Cooperation between departments has been an indisputable contribution amongst the municipalities. In Gothenburg an increased collaboration has been visible, specifically between the environmental and the finance department of the municipality. In Borås, Susanne repeatedly highlights the positive consequences resulted from departments working jointly to raise sustainability ambitions. Vaggeryd municipality added to such

collaboration the real estate department which improved the competencies and facilitated more coherent projects.

Similarly, to collaboration, networks emerged as contributions allowing, for example, Skövde municipality to exchange information between municipalities and to increase departmental connections. This factor has become an advantage to the municipalities by improving their execution of green bonds. Several of the respondents mentioned that the cooperation between departments or networks allowed the individual to share competencies and create initiatives to contribute to sustainability.

Mainstreaming of sustainability work into the municipality’s internal operations, surges as a significant contribution of issuing a green bond (Maltais & Nykvist, 2020). This contribution enables a motivation to search for innovative ways of development and generates innovative decision making using different capabilities, that may not have been possible if the work would have been done separately. Integrating sustainability in the organization and having a coalition of experts cooperating, drives sustainability ambitions and creates more efficient ways of achieving targets. Sustainable finance takes the role in uniting elements from finance and sustainability to adequately support societies and ecosystems (de Carvalho Ferreira et al., 2016). Enabling a faster transition towards sustainability. This cooperation has been apparent within the organizational level in the municipalities under study.

5.6.3 Communication and awareness

Communication and awareness have both, been themes all municipalities have analogously mentioned in the interviews. Even if these have been acknowledged as contributions of green bonds to advance sustainability, communication and awareness have been talked about distinctively between municipalities and external respondents. Gothenburg municipality identifies signaling as a major factor consequent upon increasing communication. This signal is described as a “green halo”, projecting or “marketing” Gothenburg as a sustainable embedded municipality which follows a green agenda and as a by-product, creating conversation upon this matter. Green bonds can serve as a credible signal towards the environment (Flammer, 2021). Following the marketing perspective, in Jönköping municipality it is agreed upon green bonds creating a marketing effect, which awards the municipality with a green stamp. 52

Green bonds might carry a reputational risk (OECD, 2015) and these stamps being perceived as “greenwashing” is acknowledged by several respondents, nevertheless it follows accurately with the contribution of communication as this signal or stamp stimulates conversation of the phenomenon. Vaggeryd concurs that green bonds foster awareness and with this, knowledge upon sustainability, again by engaging in conversation which facilitates a more efficient and accurate decision making. Borås sympathizes with Jönköping with the statement that green bonds provide a green stamp and is not so much a driver of sustainability but more representing an image of their doings. Finally, Skövde harmonizes with the previous municipalities when agreeing that green loans could be seen as a facilitator of positive media exposure, thus concurring with the previous statement of, acquiring a green stamp using green bonds. According to the external respondents, all of them have seemed to agree upon this contribution by acknowledging green bonds as a tool for signaling “green” identity, generating communication of sustainable investments and increasing the positive publicity of municipalities. As Länsförsakringar states, green bonds facilitate companies’ through signaling responsibility for sustainability. Mattias Olsson, from the Region of Jönköping, adds to this statement arguing that positive signaling acts as a benefit because if a municipality would not be engaged with sustainability, there is a possibility of getting bad press which influences additional stakeholders. Literature as well concurs with these perspectives as Maltais & Nykvist (2020) have previously acknowledged that green bonds contribute to mainstreaming sustainability in the organization.

5.6.4 Structure and requirements

The green bonds framework connected to the financial instrument provides a structure and requirements for the whole process of issuing green bonds for eligible projects. These frameworks follow the internationally recognized GBP, which aim is to ensure the integrity of the green bond market by promoting transparency (ICMA, 2018). Transparency has increasingly become a significant subject within the sustainability movement towards meeting holistic targets. In reference to the Paris Agreement, there is an imposed obligation to be transparent concerning carbon emissions, with the aim of not transcending the 2 degrees Celsius limit in the global temperature (Dimitrov, 2016). Additionally, transparency regarding the use of proceeds, the impact of

investments and reporting was highlighted by the investors and the municipal funding agency, but also perceived as a key feature of green bonds by several municipalities. Indeed, both for the investor and for municipalities, green bonds represent a transparent financing alternative (OECD, 2015; Carvalho, 2018). This contribution is significant for an advancement in sustainability as it provides a basis for dialogue on sustainability concerns and improves risk assessment of projects (OECD, 2015). This feature was more apparent for the investors and the green bond issuers like Kommuninvest and Gothenburg municipality, as they are in direct contact with those structures. Furthermore, several municipalities mentioned that the green bond framework was used as a tool to guide their own standards and frameworks for projects, which adds to the previous findings, which identify green bonds to raise the sustainability ambitions of organizations (Maltais & Nykvist, 2020). Finally, some municipalities more than others were questioning the added value that green bonds provide, which is a concern that can also be found in the literature (Maltais & Nykvist, 2020), since green bonds fund projects that would have happened anyway and do not influence how they are being conducted. In light of this questioning, it has been emphasized that green bonds are not a main driver of sustainability in the municipality.

5.7 Areas of contribution

From the empirical findings and the literature, three main areas could be derived. The model below illustrates how green bonds contribute to advancing sustainability in municipalities through these areas. The first area of contribution can be summarized as financial impetus, which mainly refers to the lower interest rate and better access to capital. Secondly, the use of green bonds for funding investments is both in the literature and in the study associated with several different organizational effects that contribute to advancing sustainability. Included are the influences of green bonds on the internal operations and sustainability ambitions highlighted in the literature (Maltais & Nykvist, 2020). It also encompasses the signaling effects and the cooperation emerging when employing green bonds. Finally, there are contributions that can be attributed to the structure and requirements of green bonds. Ensuring transparency and guiding some of the environmental standards in the organization are some of these contributions. 54

Figure 4 Areas of contribution

6 Chapter: Conclusion

In this chapter the key overall conclusions will be presented through answering the main research question of investigation in the study.

In closing, along with the key findings and the literature, it seems that green bonds do not significantly impact which investments projects are done in Swedish municipalities and only marginally influence the environmental sustainability of these investment projects. Thus, in the municipality context the financial instrument does not appear to shift capital to more environmentally sustainable investments. Since there is only a moderate influence on these projects, it is legitimate to question the added value green bonds provide to investment projects. Despite these limitations, the study has found several key contributions towards advancing sustainability in Swedish municipalities that can be attributed to green bonds, which are the basis to answer the research question:

How do green bonds contribute to advancing sustainability in Swedish municipalities?

Firstly, green bonds contribute to the financial spectrum through providing the municipalities with a lower interest rate for their environmentally earmarked investments and therefore, the municipalities benefit from this financial instrument by having a lower cost of capital. Yet, this green premium is rather modest and only represents a small incentive and financial benefit for the municipalities and the public companies. Further, the structure and requirements of green bonds, which includes the green bond framework that is based on the GBP, have an important role in the transition towards sustainability in municipalities. They provide transparency into the project for which the capital is used and the environmental impact of these projects. The framework has in some municipalities been used to guide the environmental standards and frameworks that are employed for investment projects. The study especially underlines the effects green bonds have on municipalities as organizations. One important result was that the use of green bonds seems to enhance the collaboration between the finance and environmental departments in the municipalities. Additionally, green bonds are used as a signaling tool for municipalities 56

and contributes to raising awareness and knowledge about environmental sustainability in the municipality. Overall, green bonds are not a main driver of sustainability in Swedish municipalities and its influence on reducing the environmental impact of investments should not be overstated, as the causality appears to be weak. Nonetheless, this financial instrument takes a role of contributing to sustainability through the financial impetuses, the organizational effects and the structure and requirements it provides.

7 Chapter: Discussion

This chapter will be focused on discussing how the research from this study can contribute to existent literature while also outlining the research strengths & limitations, practical implications and some suggestions for future research.

7.1 Theoretical Contribution

Green bonds being such a nascent field of research, the study contributes to literature by further exploring contributions provided by this financial instrument and yielding additional investigation to this rising domain. The researchers discovered along the investigation, several contributions, some were either not deeply investigated previously or at all. Emergent contributions have been systematically explored where literature formerly, had fragmentally touched upon. Referencing back to the significance of lack of funding for large investments in the public sector (Banga, 2019), the research has shown that in line with Gianfrate & Peri (2019) argument, green bonds do impart a negative premium, which represents a financial incentive to engage with green bonds, despite the reduction being rather moderate. This instrument does in fact contribute to existing theory referring to the financial incentive green bonds provide, that as a by-product, contribute to advancing sustainability. This research adds on to the studies examining the role of green bonds in the transition towards sustainability (Lagoarde-Segot, 2020; Sartzetakis, 2020; Tuhkanen & Vulturius, 2020). While Maltais & Nykvist (2020) point out that green bonds provide secondary effects on the environmental sustainability, the research has coincided with such statement by demonstrating that in fact, public relations, marketing, awareness, knowledge and communication across departments are a few of the contributions. Which are perceived as secondary effects by Maltais & Nykvist (2020) and raise sustainability ambitions and advance sustainability development. Moreover, ambiguity amongst green bonds providing lower environmental emissions already existed. Nonetheless, the study contributes to Flammer (2020) arguing for a correlation between the use of green bonds and better environmental performance, by questioning the causality of 58

that green bonds have in improving the environmental sustainability of the investments of municipalities.

7.2 Strengths and Limitations

In contrast with the numerous studies on green bonds that utilize a quantitative method, this study can produce more in depth and detailed information about the relationship between green bonds and sustainability. This can complement quantitative studies with qualitative evidence in various areas. Many municipalities do not use green bonds as a funding option, which could lead to selecting participants not useful for the study. Hence, one core strength of the study is due to the Climate Council in Jönköping and its network, which helped finding suitable study participants. Additionally, for triangulation purposes the study contains three external informants, which enhances the credibility of the study.

On the other hand, the sample size of the municipalities part of the study is rather small, and the findings cannot be generalized across all municipalities. The sample might therefore not be representative of all Swedish municipalities. Further, the study relies on interviews as evidence for the study and on the researchers to interpret the data. Due to the subjectivity associated with these interviews and the researcher's interpretation, the study might be subject to discrepancies.

7.3 Practical Implications

This study is beneficial, functional, and inspiring to numerous actors. Firstly, for additional municipalities wanting to engage with green bonds in an aim to further work with sustainability development but lacking knowledge of the phenomenon under study. Secondly, for institutional investors and actors like Kommuninvest that have large stakes influence on the future of the green bond market.

Thirdly, for policy makers instrumentalizing green bonds for the transition towards sustainability. Moreover, for researchers dedicated to further develop their research and prosper with their explorations. It can be also of interest for companies or individuals aspiring to understand more about additional benefits and contributions of 59

green bonds. Additionally, to university students or professors eager to increase their cognizance of the phenomenon. Lastly, the study could potentially be applicable to any stakeholder wanting to become more enlightened about sustainability transitioning through the financial spectrum or about the phenomenon’s effects in municipalities.

7.4 Suggestions for Future Research

Overall, future research would be highly valued towards advancing literature within the spectrum of sustainable financing to better understand the role of finance in the transition towards sustainability and its dedicated financial instruments.

For better contextualization of the phenomenon to be achieved, further research towards green bonds and the green bonds market needs to be gathered. The areas of contributions in this study could be further explored through a quantitative research or through quantitative methods that could provide more generalizable evidence as it can gather a larger sample base. Alternatively, it could adopt a wider scope and examine the phenomenon’s contribution on countries or within the private sector.

Throughout the research it has become apparent that green bonds were mainly issued for infrastructure within the real estate sector. Hence, the authors suggest to further investigate how green bonds could be employed to additional investment types in other sectors, crucial to mitigate climate change. Future research could be conducted on how to make green bonds more efficient in accelerating the transition towards sustainability. Such research could examine whether stricter criterions for the green bonds’ investment projects would enhance its effectiveness.

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9 Appendices

9.1 Appendix A: Interview questions for the municipalities

Introduction:

- Explanation of the purpose - Introduction of the interview process - Confidentiality aspects: permission of audio recording, anonymity

Introductory questions:

- Could you tell us a bit about your position? - What is your experience with green bonds/loans?

Middle section:

- Could you tell us how green bonds work in the municipality? - Could you describe what areas have been impacted by green bonds? - Why does the municipality engage with green bonds? - How are green bonds part of the transition of the municipality towards sustainability? - How do green bonds influence the overall work process in the municipality? - What effects do you perceive that green bonds have on the municipality as an organization?

Concluding questions:

- What other sustainability related changes in the municipality have you perceived that you could attribute to GB? - What would you modify related to green bonds to accelerate the transition towards sustainability in the municipality?

9.2 Appendix B: Interview questions for Kommuninvest

Introduction:

- Explanation of the purpose - Introduction of the interview process - Confidentiality aspects: permission of audio recording, anonymity

Introductory questions:

- Could you tell us a bit about your position? - What is your experience with green bonds/loans?

Middle section:

- Could you describe how Kommuninvest works with green bonds? - Could you describe how the municipality works with green bonds? - What areas have been impacted by green bonds in municipalities? - Since Kommuninvest has worked with green bonds, what are the perceived benefits for municipalities and other stakeholders? - How are green bonds part of transitioning the municipalities to sustainability? - How do green bonds influence the overall work process in the municipality? - How have green bonds impacted the relationship between municipalities and Kommuninvest?

Concluding section:

- What other sustainability related changes in municipalities have you perceived that you could attribute to GB? - What would you modify related to green bonds to accelerate the transition towards sustainability in the municipality?

9.3 Appendix C: Interview questions for Länsförsäkringar

Introduction:

- Explanation of the purpose - Introduction of the interview process - Confidentiality aspects: permission of audio recording, anonymity

Introductory questions:

- Could you tell us a bit about your position? - What is your experience with green bonds/loans (GB)?

Middle section:

- How does Länsförsäkringar work with GB? - Could you describe what areas have been impacted by green bonds? - What are the perceived benefits from GB for municipalities and other stakeholders? - How are GB part of transitioning the municipality towards sustainability? - How have GB impacted the financing procedure overall? - What effects do you perceive that GB have on the Kommun as an organization seen from an external perspective? - How have GB impacted the relationship between the different actors?

Concluding section:

9.4 Appendix D: Interview questions for Region Jönköping

Introduction:

- Explanation of the purpose - Introduction of the interview process - Confidentiality aspects: permission of audio recording, anonymity

Introductory questions:

- Could you tell us a bit more about your position? - Could you tell us a bit more about your experience with green bonds (GB)?

Middle section:

- How does Region Jönköping work with GB? - Could you describe what areas have been impacted by green bonds? - What are the benefits and drawbacks for investors to engage with green bonds? - What are the benefits for the municipality and other stakeholders to engage in the green bonds market? - How are green bonds part of transitioning the municipalities to sustainability? - How have green bonds impacted the municipalities as organizations seen from an external perspective? - How has GB impacted the interaction between the different GB stakeholders? - How does it shift capital from unsustainable to sustainable?

Concluding section:

9.5 Appendix E: GDPR Thesis Study Consent Form

9.6 Appendix F: Codes, themes and aggregate dimensions

Gothenburg municipality

1st order category 2nd order themes Aggregate dimensions

…the thing with green money, it’s not the color green but the transparency of the money …transparency is what it making it very interesting Providing for the investors now they just don’t borrow money Transparency or lend out money to the city now they know if the cities sustainability projects are getting funded.

…risk reward and impact what does your money do and that ethical dimension and the green bond Providing a choice & makes it golden because it is ethically correct. Ethical Dimension …you are going to say I want my money invested Transparency sustainable.

…Because they are better greener investments, and we have to every year prove that this investment was better for the environment than a normal investment so that’s the impact we measure the Green Impact green impact we have promised to make. …then the investor can compare our impact to other impacts

…it has increased the collaboration between finance Collaboration Collaboration across and environmental department because we have to between departments collaborate departments

…investors are helping us as long as they are giving us a greenium they are helping us in this transition. …if this greenium becomes big there will be no Greenium/ Cheaper brown investments because they will be penalized Funding Cost …rental flat building company they know if they stop building sustainable housing or green housing, Financial they know their funding cost will increase incentives

…its easier to find money …investors are more interested in lending us green Access to money money we should do sustainable projects because those investments are more easily funded

…raising awareness Awareness Awareness

Incentivizing …some houses are not as good as promised. So, Compliance to Compliance to then we have to kick them out of the green Environmental Environmental portfolio. Standards Standards

…we started green as a small part now and in the

coming years everything must be green Systematize Standardizing Green & …we already do our environmental impact and we Environmental Measuring have to start measuring all our environmental Measurement Environmental impact impacts if we are to be climate neutral.

…it gives us a “green halo” …you get some start dust doing green and that Signaling Signaling settles over everything you do

Jönköping municipality

1st order category 2nd order themes Aggregate dimensions

…in this way we get cheaper loans Financial Lower Interest Rate …it's a carrot for them that they can get a little Incentives discount in that case.

…it has a bit of a marketing effect. …from a marketing point of view, the fact that this Marketing PR & Marketing project has got a green loan and has got a green stamp in that way

Vaggeryd municipality

1st order category 2nd order themes Aggregate dimensions

…sends a signal to the inhabitants and to the

environment that we have a sustainability mindset in

our municipality Signaling, PR and …issue a press release now, for example from Signaling & PR marketing Vaggeryd municipality, stating that we have just

adopted a guideline for responsible investments

…collaborate across borders of departments much Collaboration more so that we unite the finance function and find Collaboration across between the connection with environmental strategists and departments departments the real estate managers

…motivated the municipalities then by the fact that Green Premium we get two basis points lower interest rate.

Green premium/Financi al incentive

…put this project together and send it to that committee of Kommuninvest and by doing this Green thinking in work, we get this green thinking into our whole project planning planning process.

…we become more aware, we get more knowledge In this way you receive knowledge, it spreads and Awareness & Awareness & the pride that we do things that are good for the Knowledge Knowledge environment or for sustainable, raises.

…the green loan have brought in the perspective Bringing Sustainability Project that we can take this alternative that is a little more perspective in the Sustainability expensive but much more sustainable and then we Municipality Integration algo get green loans.

Borås municipality

…it has been lots of fun to work with economics department and to get to know each and develop Collaboration the same language Cross collaboration between between departments …the first thing that happened when we got a departments loan was that I met the chief of economy for the first time

…the green bond framework from Kommuninvest sort of gets a framework for us too and then we could in our investment plan Guide for municipality standards …and the energy bill should be like this and this and framework we took from Kommuninvest …use it as a help deciding the energy level Tool for guidance …but then we also say within 4 years everybody has to be within this framework Setting targets & Tool …a way of showing what the politicians want, we for implementing want everybody to have green projects and this is green agenda our framework and you have to be within this limit

…its cheaper but that is so little so it is not a big deal Lower interest rate Financial incentives …we have a green loan so they also get a cheaper loan from the municipality

…we have asked several municipalities, how are Discussion between Knowledge you working with the climate issues and the municipalities exchange carbon budget

…show their own politicians and inhabitants that our project is a green project Signaling Signaling …it is sort of a stamp

Skövde municipality

1st order category 2nd order themes Aggregate dimensions

…making connections with both our environmental department and our department that is our real Collaboration estate department and building the network between Collaboration across between those three departments & creation departments & of networks …but that networks is creating other types of Networks change that we are mainly using in in in when we working with energy efficiencies in existing buildings

…a green loan it is it is cheaper, so we get a bit

lower rate interest rate then with a normal loan Lower Financial …making your loans cheaper 0.2% Interest/Greemium/ Incentives …green loans that are there that can make our cost Lower Cost of Capital situation better through providing cheaper loans

…sustainability gets a different platform; you get some press releases connected to it and then it comes that you set it on the agenda in a different way PR & Media PR & Media …build public relationships sending out press releases that creating the extra attention to …create projects and positive the media exposure

…When we revised our building standards that we Integration in Building Integration into took into account the demands that are in place of Standards Standards the green framework.

…With the green loans you certify the project you invest in, you certify how many carbon emissions Improving Reduce CO2 you achieved compared to a normal building’s Environmental Emissions standard, so there you get the reduction of carbon Performance dioxide through investing in green bonds