Marylou Costa
Business Reporter
Happy Visual Goteborg
The local government in Gotenburg is trying to highlight its green qualifications
Gothenburg, Sweden’s second city, emphasizes environmental qualifications.
In 2022, Gothenburg became what is believed to be the world’s first local government to take away “sustainability-linked loans” or SLLs.
This is a form of funding fixed in a set of environmental and social improvements agreed between the borrower and his bank.
The four target areas of Gautenburg are efforts to make renewable energy the city’s sole source of heat production, generating the council’s auto fleet electricity, reducing the use of energy in municipally owned buildings such as hospitals and schools, and improving the city’s poorest areas.
Meet the agreed annual improvement levels in these sectors, and for each, Gothenburg receives a discount on annual fees paid on loans of 0.1% or around 100,000 Cronner ($10,500, £8,000). However, you will have to miss one of your targets for a certain amount and pay the same amount of fine.
Gothenburg was able to avoid financial penalties in 2022 and 2023, but the newly released figures in 2024 indicate that it missed its target for switching to renewables. And it is about to be fined 150,000 Kroner.
However, this is offset by the discounts you get to continue to reach improvement levels for energy use and social improvement. To impress the council’s vehicles, they missed out on improvement goals, but were not enough to be fined.
Fredrick Brock, the city of Gothenburg’s portfolio manager, says local governments have deliberately set “ambitious” targets.
“You aim high and let the entire organization work towards that goal. We’re not going as fast as we expected, but we’re taking it step by step.
“We don’t actually do it for money. We do it to show the city’s important work. We progress every year. We want to show the world how it is – these are the issues and these are good things.”
Fredrick Block
Fredrick Brock says the cities highlighting environmental work are more attractive to other potential investors
The improvement of the city’s poorest areas, and whether the council has achieved its goals, is measured by annual resident surveys. People are asked about their feelings about the safety and cleanliness of the community.
Key initiatives include the introduction of safer cameras in housing, and the increased presence of police as a crime scale in urban areas such as Hjallbo and Biskopsgarden. Located north of the city, they have high levels of crime and unemployment, as well as large immigration groups.
Framtiden, the agency of public housing, which is ultimately owned by the city of Joteburg, says he takes the improvement work very seriously.
“For some of these vulnerable areas, we actually own a large portion of our homes,” says Lars Bankvall, its research and development manager.
“We are more or less the only official institution in these areas. There is no one else, we are.
“We think it’s probably the most powerful tool the city has because we have a lot of financial resources. We’re involved in everything.”
However, Faduma Awil, a social worker who currently offers career coaching at the employment centre in Gothenburg, is concerned that an increase in camera and police presence will send false messages to young people in the stolen area of Gothenburg and see an increase in racial profiling.
“Do you think our kids don’t have anyone in their Swedish neighborhood when they see the camera anywhere in hjallbo? How do they feel when they’re constantly being watched by the police?” she says.
“What do you tell them? You show them that there is a difference between them and the native Swedes.”
Also, Ms Awil is not convinced that the resident survey would be effective or accurate. And she feels that cities are putting disproportionate efforts on environmental goals at the expense of improving conditions in disadvantaged areas.
“People in these areas don’t care about the environment. They need to go to school. They need to work. They need to eat,” says Awil, who moved from Somalia to Sweden in 1987 as a child.
Jonas Bjorn
City Council is looking to improve the poor parts of Gothenburg, such as Biskopsgarden.
Negotiation for SLL is a rigorous and complicated process. This is the process of taking Gothenburg City in a year, with more than six major Nordic banks involved.
The difficulty of obtaining SLLs, which have been published in 2023, has fallen by 56% in 2023, according to data from financial news provider Bloomberg.
Mats Olausson is a senior sustainability advisor at Swedish Bank SEB, the leading lender for SLL at Gothenburg.
He says that SEB turned down potential SLL borrowers because the client’s proposed target was not ambitious enough. However, he added that SLL is challenging for successful businesses and local governments.
“It’s sad when companies are putting a lot of resources into designing SLLs. And it turns out that the only publicity they get is negative,” he says. “We risk being drawn into the dirt because we don’t do enough work.
“No one’s interest for companies that have overly ambitious and fundamentally impossible targets to achieve, or that do not have the proper governance to implement actions that constitute an actual strategy.”
One company that is happy with SLL is Emagine, a Danish management consultancy company. I borrowed £10 million in 2021. This is the funds that helped them acquire six other companies around the world.
Its binding goals include increasing the number of female leaders in the organization by 16% and reducing employee turnover by 6% over the course of seven years. This is done through leadership and mentoring programs.
By meeting targets, Emagine benefits from lowering interest rates, says Lars Bloch, the company’s chief financial officer.
“If we fail to meet our target, we will land at an interest rate penalty rate and we also accept that failure to meet our sustainability goals could undermine the company’s reputation as we made public commitments.
“It’s not about committing to a loan to receive a discount on funding. You need the ambition behind your goal.”
Back in Gothenburg, the city’s current environmental and social goals will be implemented until 2030. Brock said the detailed annual SLL report shows that future investors in the city will make a difference in their money.
“Banks want to give sustainable cities money, so wrapping up the progress of SLL reporting is a way for me to make cities beautiful for investors,” he says.
“I can’t change the credit value of a city, but I can change how investors see our sustainability work and make it more appealing to them.”
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