Helsingborg Becomes First City to List a Sustainability-Linked Bond, Supporting Efforts to Reach Net-Zero Emissions by 2035
As environmental, social and governance (ESG) investing has grown globally, the Swedish city of Helsingborg has become the first city to list a sustainability-linked bond (SLB). The bond, which is listed on Nasdaq’s Sustainable Bond Market, ties its returns to Helsingborg’s ambition of achieving net-zero greenhouse gas emissions by 2035.
“With this SLB, we put up a clear and tough target for the climate work that we do. Hopefully, other cities around the globe will follow—if so, there is a climate benefit, and thereby a benefit for all of us,” said Göran Heimer, Group Treasurer for the city of Helsingborg.
Under this framework, which was developed in collaboration with Danske Bank and in accordance with the International Capital Market Association's Sustainability-Linked Bond Principles, the key performance indicator for the SLB is the trajectory of the city’s yearly emission reduction efforts. Notably, the emission reduction targets are tracked by a third party, the Swedish National Emissions Database, which is available to the public, enabling investors to track the progress on the sustainability performance target while providing greater transparency.
The city of Helsingborg has made progress in curbing greenhouse gas emissions, with a 52% decrease since 1990, and believes it is possible to reach net-zero emissions by 2035. However, Göran Heimer acknowledges that the journey will be challenging.
“Private transportation and the local industry are the biggest sources of greenhouse gas emissions, so that’s a tough task. Electric and heating are the third biggest, and the city has a direct influence in this sector. We are working on this task,” said Heimer.
The SLB will help fund the city’s efforts to not only reduce greenhouse gas but also increase the quality of life and build a more sustainable society.
¨We’re working broadly with these questions within the city's organization and together with important actors in the city. This can be seen, for example, in our work with local climate agreements and our innovation initiatives. In September, we were finalists in the European Commission's EU Green Capital, and now we’re looking at whether we have the potential to become one of the 100 European cities to take the lead in climate change. This is an important step in the right direction,” Lars Thunberg, deputy mayor, said in a press release.
Unlike other European cities, Helsingborg opted for a SLB rather than a green bond, in which proceeds are earmarked for projects and assets with environmental benefits. The SLB route is a better fit for the city’s strategy, which goes beyond projects directly controlled by Helsingborg.
“It’s about a higher quality of life for all within the geographical area of Helsingborg; therefore, the SLB format suits us better,” said Heimer
Similar to green bonds, the SLB was able to issue at a so-called “greenium,” which refers to the premium bondholders are willing to pay to invest in green securities rather than conventional ones.
“There is a greenium and a bit more,” said Heimer. “In this case, the premium is larger, but if we do not meet our targets, the premium will shrink. This premium is not a cost for the investor. If we achieve our goals and other cities were to follow, it is a tremendous gain for all investors lowering the cost of climate change.”
“The climate change will affect the investment market; for some, it’s a huge cost, for others an investment opportunity,” continued Heimer. “Addressing the key parameter, greenhouse gas emissions, in this SLB is something we hope will be appreciated by investors [as] it’s hard work lowering the cost of climate change.”
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