Nordic Public Sector Issuers Position Paper on Green Bonds … · 2020-02-18 · 12358 #.Rep8 #or...
Transcript of Nordic Public Sector Issuers Position Paper on Green Bonds … · 2020-02-18 · 12358 #.Rep8 #or...
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 1
Nordic Public Sector Issuers
Position Paper on Green Bonds Impact Reporting February
2020
2
ContentsIntroduction and purpose 3
Summary 5
Reporting principles 8
#1. Reportexpectedimpact,aimingforactualimpact 9
#2.Reportbasedonannualimpact 10
#3.Provideannualreporting 10
#4.Providequantitativeandqualitativereporting 10
#5.Focusonenvironmentalimpact 11
#6.Reportproject-by-project,wherefeasible 11
#7.Reportbasedonthesharefinanced 11
#8.Reportimpactby$onlywhenquantifiableandrelevant 12
#9.Reportbond-by-bondoronbond-programmebasis 12
#10.Providebothallocationandimpactreporting 13
#11.Distinguishbetweenfinancingandrefinancing 13
#12.Providebreakdownsonassettype,geographyandsector 14
#13.Maximizetransparencyanduseability 14
#14.Incorporateclimate-relatedphysicalriskswhenpossible 15
#15.ReportcontributionstotheSustainableDevelopmentGoals(SDGs) 16
#16.ConsiderreportingcontributionstotheEUEnvironmentalObjectives 16
Environmental impact methodology 18
#17.Coreindicators 19
#18.Baselines 19
#19.Calculatinggreenhousegas(GHG)emissions 19
#20.Projectboundaryandscopeofemissions 19
#21.Energysavingsvsenergyreducedandenergyavoided 20
#22.CO2baselineforelectricity 20
#23.Certificatesoforigin 21
#24.TheEUemissionstradingsystem(EU-ETS) 21
#25.CO2emissionbaselinefordistrictheating 22
#26.Energyunits:kWhorappropriatemultiplesrecommended 22
Project category recommendations 23
#27.Renewableenergy 25
#28.Greenbuildings 26
#29.Energyefficiency 28
#30.Cleantransportation 29
#31.Wastemanagement 30
#32.Waterandwastewatermanagement 31
#33.Sustainablelanduse/environmentalmanagement 32
#34.Climatechangeadaptation 33
Appendices 34
A:TheNordicelectricitygridandbaselineemissionfactors 35
B:Calculatingimpactfromdistrictheatingprojects 40
C:Executivesummarytemplate 41
D:Summaryofrecommendations 42
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 3
Introduction and purposeThisdocumenthasbeendevelopedasapracticalguideonimpactreportingforNordicpublicsectorgreenbondissuers.Forthisreason,acertainleveloftechnicaldetailcannotbeavoided.Thisversion,datedFebruary2020,isthethirdeditionofthePositionPaper,followingtheinauguralandsecondeditionspublishedin2017and2019,respectively.Thematerialchangesbetweenthepreviouseditionandthisoneareintroducedonpage7.
We,thesignatories,areagroupofNordicpublicsectorgreenbondissuers1whichestablishedjointcommonworkonimpactreportingin2016,thuscomplementingeffortsbyagroupofinternationalfinancialinstitutions,asdocumentedintheIFIHarmonizedFrameworkforImpactReporting2(IFIHarmonizedFramework).TheNordicInvestmentBankandtwoinvestmentbanks3haveactedasouradvisors.
Thedocumentprimarilytargetspersonsengagedinimpactreportinginissuerorganizations,suchasenvironmentalofficers,sustainabilityanalystsandinvestorrelationsspecialists.WebelievethatacommonNordicpositiontotheissuesdiscussedmaybebeneficialtootherissuersandareconfidentthatbysharingexperiencesandknow-howwecanallbenefit.Wetrustitisofinterestandvaluetoinvestors,asitgivesanoverviewofthereportingcommitmentsmadebythisgroupofgreenbondissuers.
Werecognizetheneedtostrikeabalancebetweena) acommitmenttodeliverimpactreportingatacertain,manageablelevelandb)absolute,detailedandfullyverifiablenumbersonprojectlevelandinthelocalcontext.
Notwithstandingthetechnicalnecessitiesinvolvedinreportingadequatelyonimpactfromprojectsfinancedwithgreenbonds,issuersshouldstrivetoreportprojectinformationalsointhecontextofhowtheycontributetothetransformationtoalow-carbonandresilientfuture,andotherimportantenvironmentalchallenges.Issuersarethereforeencouragedtopositiontheinformationwithinthecontextoftheissuer’soverarchingobjectivesand/orprocessesrelatingtoenvironmentalsustainabilityandtotheSustainableDevelopmentGoals(SDGs)4.IssuersmayalsoconsiderreportingcontributionstotheEUEnvironmentalObjectives5.
WeadviseissuerstoconsulttheGreenBondPrinciples,whichcapturethespiritofgreenbondsissuanceandalsoprovideguidanceongreenbondsimpactreporting6.TheproposalforanEUGreenBondStandard7,developedbytheEUTechnicalExpertGrouponSustainableFinance(TEG)alsoprovidesapreliminaryviewofexpectedfuturereportingrequirements.
Todate,mitigationprojectsdominatethegreenbondportfoliosofNordicpublicsectorissuers.Thestructureofthisdocumentisinfluencedbythisfact.However,anintegratedapproachtowardsadaptationandmitigationisencouraged.
1 Participants (DK=Denmark, FI=Finland, NO=Norway, SE=Sweden): City of Gothenburg (SE), Kommunalbanken (NO), Kommuninvest (SE), Municipality Finance (FI), Municipality of Lund (SE), Municipality of Norrköping (SE), Municipality of Örebro (SE), Region Skåne (SE), Region Stockholm (SE), Swedish Export Credit Corporation, SEK (SE). Kommunekredit (DK) and Municipality of Västerås (SE) participates in the group observers, with the intention to comply with the positions of this paper at a later stage. In addition, Municipality of Borås and Swedish Association of Local Authorities and Regions (SALAR) have participated in the development work, as representatives of the Kommuninvest Green Bonds Environmental Committee.2 International Financial Institutions (IFIs): Green Bonds, Working Towards a Harmonized Framework for Impact Reporting, December 2015. The IFI Harmonized Framework Impact Reporting Handbook is available at the Green Bond Principles Resource Centre at icmagroup.org3 Crédit Agricole CIB and SEB.4 “Transforming our world: the 2030 Agenda for Sustainable Development”, http://www.un.org/sustainabledevelopment/sustainable-development-goals/5 As outlined in the "Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the establishment of a framework to facilitate sustainable investment", COM (2018) 353 final.6 The Green Bond Principles, including the "Handbook - Harmonized Framework for Impact Reporting, June 2019 are available at www.icmagroup.org7 EU Technical Expert Group on Sustainable Finance “Report on EU Green Bond Standard”, June 2019
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 4
Thepositionpaperisaworkinprogress,anditcanbeexpectedtodevelopovertime.Weencouragefeedbackandwillseektodevelopourmethodologytoprovideasrelevantandappropriateimpactreportingaspossible.Whilewestrivetodeliverreportingthatispossibletocompareandaggregatebetweenissuers,werecognizethechallengesrelatedtodifferentmethodologiesandmetricsbeingused.Hence,wesuggestcautiontobeexercisedwhensuchcomparisonoraggregationisundertaken.
Thisdocumentisfocusedonenvironmentalbenefits,notwithstandingthepotentialsocialco-benefitsthatinvestmentprojectsfinancedthroughgreenbondsmaybring.Asthispaperoutlines,issuersmaychoosetoaddsocialimpactsintheirreportingiffeasibleandrelevant.
Issuersthataimtocomplywiththerecommendationsofthisupdatedpositionpaper,publishedin2020,areencouragedtoreflectthematthelatestasoftheirimpactreportingforthe2020calendaryear.ThejointharmonizationworkonimpactreportingamongNordicpublicsectorissuershasbeencoordinatedbyKommuninvest.PartiesinterestedinsupplyingcommentsorquestionstothesignatoriesareinvitedtocontactKommuninvestat:[email protected]
Acknowledgements
ThesignatorieswishtoexpresstheirgratitudetoCréditAgricoleCIB,NordicInvestmentBankandSEB,foradvisoryassistanceduringthedevelopmentofthispositionpaper.WearealsothankfulforinputreceivedduringpreviousconsultationsheldwithinvestorsincludingActiam,AffirmativeInvestmentManagement,AP2,KfW,Mirova,NNInvestmentPartnersandStorebrand,andsecondopinionproviders,representedbyCenterforInternationalClimateResearch(CICERO).
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 5
Summary
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 6
Summary
General reporting principles
Reporting format•Intheirimpactreporting,issuersarerecommendedtoincludeasummaryoftheirgreenbond
andgreeninvestmentactivities.AnexecutivesummarytemplateisavailableinAppendixC.•Inadditiontothetraditionalimpactreport,issuersarerecommendedtopublishtheproject
informationpresentedinorusedforthereportalsoinspreadsheetformat,whichcanbedownloadedbyinterestedpartiesfromtheissuer'swebsite.
Annual reporting based on annual impact•Annualreportingrecommendedfordynamicportfolios.Fornon-dynamicportfolios,issuers
arealsoencouragedtoreportannually,butmaychooseasimplifiedapproach(forinstance,aconfirmationofstatusquo).
•Reportannualimpact(asopposedtolife-timeresults).Issuersmaychoosetoaddlife-timeperspectivewhenrelevant.
•Reportonimpactaslongastherearegreenbondsoutstanding.
Report based on the share financed•Reportonthebasisoftheshareoftheproject’stotalinvestmentcostthattheissuerhasfinanced
withgreenbonds.•Reportimpactbasedonamountsdisbursedandoutstandingtoaproject(asopposedtoamounts
committed).
Report impact per monetary unit when quantifiable and relevant•ReportCO
2-reductionandotherquantifiedimpactperinvestedmonetaryunitsolelyfor
investmentsmadeinprojectsorprojectcategorieswheresuchimpactisrelevant.
Report bond-by-bond or on bond programme basis•Fornon-dynamicportfolios,impactshouldbereportedinrelationtotherespectivegreenbond(s).•Fordynamicportfoliosfinancedwithmultiplebondissuances,issuersshallprovideabreakdown
ofimpactattributabletoeachbond,typicallyusingasimplepro-rataallocation.AtemplateisfoundinAppendixC.
Report net benefits based on expected impact•Reportexpectedimpact(ex-ante),andstrivetoreportonactualimpact(ex-post).Ifreporting
includesbothex-anteandex-postimpactdata,acleardistinctionshouldbemade.•DistinguishbetweenreducedandavoidedCO
2emissions.Inthisdocument,reducedenergyis
definedasadirectorabsolutereductioninoperation;avoidedenergyusereferstoabaseline/alternativereferencescenario.
•Highlightmethodologiesusedandtheuncertaintyofenvironmentaldatatoreader•Reportnetbenefits,comparingprojectstorelevantreferencescenarios(seeprojectcategory
recommendations)
Focus on environmental impact•Issuersshallreportondirectclimate-related/environmentalimpactssuchasrenewable
energyproduction,energysavings,reducedgreenhousegasemissions,increasedresilience,environmentaloperationsandinfrastructureetc.
•Issuersmaychoosetoaddsocialand/oreconomicimpactswhendeemedfeasibleandrelevant.
Report at geography and sector level•Forissuerswithprojectslocatedinmultiplejurisdictions,itisrecommendedthatdisbursements
andimpactsarereportedbothatgeographyandsectorlevel,e.g.geographicaldistributionofwindsectorinvestments.
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Environmental impact methodology
Project boundary and scope of emissions•Greenhousegascalculationsshouldincludeallrelatedactivities,facilitiesorinfrastructurethat
theissuerisfinancing.•ReportonScope1andScope2emissionreductionsasdefinedbytheGreenhouseGasProtocol.•Reportingprojects’impactonotherindirectemissions,definedasScope3,isadesirablefuture
developmentandmaybeconsideredoncemorewidelyacceptedlifecycleanalysismethodologyisavailable.
CO2 baseline for electricity
•EuropeanmainlandmixincludingNorwayisrecommendedasthedefaultbaselineemissionfactorforelectricity,forprojectslocatedintheEuropeanUnionandNorway.
•FactorcalculatedasCombinedMarginaccordingtoIFIHarmonizedFrameworkmethodology8,combiningaBuildMarginandOperatingMargin.SamecombinationofBuildMargin(50%)andOperatingMargin(50%)usedforallelectricityprojects.
•CombinedMargintobeapplied:315gCO2/kWh.Thisbaselineistobeupdatedregularly,
subjecttoavailabilityofdata.
CO2 baseline for district heating
•Issuersshouldchooseabaselinethatisrelevantandthatreflectsthenational/localsituation.•SwedishissuersmaydrawonthemethodologyasoutlinedinAppendixC.
Material changes compared with the previous (2019) version
•Thebaselineemissionfactorforelectricityhasbeenreviseddownwards,from380gCO2e/kWh
to315gCO2e/kWh,basedonupdatedgridfactorsintheunderlyingdatasetprovidedbytheIFIs.
See#23andAppendixA,includingvisualizationofalternativebaselinesonpage39.•CertainamendmentsandadditionshavebeenmadetoreflecttheproposedEUGreenBond
Standard(EUGBS)andtheTaxonomyofenvironmentallysustainableactivities,developedaspartoftheEUSustainableFinanceActionPlan.WhiletheEUGBSandtheTaxonomyarenotyetinforcewhenthispositionpaperispublished,thefollowingrecommendationshavebeenaddedtoaccommodatethesuggestedrequirements:-Providebothallocationandimpactreporting.-Reportabreakdownofprojectsbythenatureofwhatisbeingfinanced(tangibleorintangible
assets,capitalexpenditures,operatingexpenditures,workingcapital,publicexpenditures),andbygeographyandsectorlevel.
-Distinguishbetweenfinancingandrefinancing,atleastaccordingtotheEUGreenBondStandard,butalsoverifyinganyfinancing/refinancingcommitmentsmadeintheissuer’sGreenBondFramework.
-ConsiderreportingcontributionstotheEUEnvironmentalObjectives.Tothisend,themappingvs.theSustainableDevelopmentGoalshasbeenexpandedtocapturealsotheEUEnvironmentalObjectives.
8 International Financial Institution Framework for a Harmonised Approach to Greenhouse Gas Accounting, November 2015
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Reporting principles
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 9
Reporting principles
Thissectionoutlinessomeofthemainprincipleswehaveagreedon.Unlessotherwiseindicated,theywillbeinalignmentwiththecoreprinciplesandrecommendationsasoutlinedintheIFIHarmonizedFrameworkandwiththevoluntaryguidelinesforgreenbonds,theGreenBondPrinciples.TheyalsoaddresstheTEG(Technicalexpertgrouponsustainablefinance)proposalforafutureEUGreenBondStandard,inparticularforthedistinctionbetweenallocationreportingandimpactreporting9.
Ourworkhasincludedtheidentificationofanumberofconsiderationsrelevanttoimpactreportingonenvironmentalinvestmentsfinancedwithgreenbonds.WhenmappingagainsttheIFIHarmonizedFrameworkwebelievethatitems#12(comparingprojects),#13(complexcalculations)and#16(differentcurrencies)areoflessrelevancetoNordicpublicsectorissuersandwillthereforenotbetreatedinthispositionpaper.
Wehaveconcludedthefollowing:
1. Report expected impact, aiming for actual impact•Reportexpectedimpact,andstrivetoreportonactualimpact•Reportingshouldincludetheestimatedreductioningreenhousegases,aswellasothergreen
indicatorsappropriatetodescribeenvironmentalimpactandperformance•DistinguishbetweenreducedandavoidedCO
2emissions.
•Targetnetbenefits,considertoreportgrossemissionsiffeasible•Highlightmethodologiesusedandtheuncertaintyofenvironmentaldatatoreaders
Weundertakeourimpactreportingbasedontheexpectedenvironmentalimpact(ex-ante)fromtheprojectswefinanceorco-finance10.Issuersthathavetheabilitytoprovideimpactreportingbasedonactual(ex-post)impacts,areencouragedtodoso.
Intheirreporting,issuersshoulddistinguishbetweenimpactsbasedonex-anteandex-postcalculations.
Reportingshouldincludebothgreenindicators(whichtheprojectownerhascontrolover)andresultingemissionsreductions(whichrequirecertainassumptions).Greenindicators,suchasrenewableenergyproducedorelectricitysaved,shouldbeeasytoreportonwithgoodquality.Emissionsreductionsshouldbereportedifcalculationscanbemadewithsatisfactoryquality.Ifemissionreductionsareindirectand/oroutsidethescopeoftheproject(s)financed,theyshouldnotbeincluded.Generally,aconservativeapproachisrecommended.
Forpracticalreasons,issuersare,atleastinitially,recommendedtotargetnetbenefitsratherthandisclosinggrossemissionsbeforeandafterprojectcompletion.Disclosingthefullcarbonintensityofportfolios,aswellasthenetCO
2reduction,maybeconsideredbyissuers,iffeasible.Issuersmay
choosetoincludesuchreportinggradually,forselectedprojectsorprojectcategories.
Issuersarerecommendedtobetransparentaboutestimationsandassumptionsthatmayneedtobemadeaspartoftheimpactreporting.Thereportshouldincludeinformationabouttheprecisionofenvironmentaldata,attributabletothescientificuncertaintyregardingthemeasurementmethods,aswellasuncertaintiesregardingthedatathatthemeasurementmethodsareappliedto.
9 EU Technical Expert Group on Sustainable Finance “Report on EU Green Bond Standard”, June 201910 A significant share of the use-of-proceeds from green bonds are typically directed at investment projects that are either planned or in the process of completion. Therefore, actual impact data is typically not available to issuers in the project selection and verification phase.
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2. Report based on annual impact Wecommittoreportimpactontheprojectswefinancebasedonannualimpact(asopposedtolifetimeresults).Issuersmaychoosetoaddlife-timeperspectivewhenrelevant.
Whereprojectsareconstructedduringaprolongedtimeperiodandwhereexpectedimpactsarenottoberealizeduntilfaroutinthefuture,issuersmayelecttodisclosetheexpectedfuturetimingofimpact.However,thisisonlyrecommendediftheproject/projectsarematerialtothegreenbondsissuance.
Whenpossible,reportingshouldbenormalizedtoreflectarepresentativeyear.Inthecaseofrenewableenergyandgreenbuildingsnormalizationincludestheconsiderationofweather-relatedirregularitiesinenergyconsumptionorproduction.Normalizationshouldbeconductedinaccordancewithestablishednationalorinternationalpractice.
Normalizationmaynotbeapplicableforallprojectcategories,andinthecaseofcleantransportationmaybecomplicated,seeposition#30onpage29.
3. Provide annual reporting •Annualreportingrecommendedforbothdynamicandnon-dynamicportfolios•Issuersshouldreportonimpactaslongastherearegreenbondsoutstanding•Disclosereportingperiodandprocessforprojectinclusion•Fornon-dynamicportfolios,issuersmayelectmoresimplifiedapproach
Weundertaketoreportonimpactaslongaswehavegreenbondsoutstanding.
Fordynamicportfolios,i.e.wherethecompositionofassetsfinancedbygreenbondschangeonaregularbasisthroughadditionorremovalofassets,reportingwillbeannual.
Issuersarerecommendedtodefineanddisclosetheperiodandprocessforincludingprojectsintheirreport,andtoexplainthekeycharacteristicsoftheapproachforapprovingprojectsthatmeettheissuer’spredefinedeligibilitycriteria.
Reportingmaynonethelessconsistofe.g.alistofprojectsontheissuer’swebpage,whichmaynotneedamendmentsforseveralyearsunlessinputvariableschange(e.g.disbursements/repayments/baselines/estimatesvsactualetc.).
Fornon-dynamicportfoliosorprojectswhereallocationiscompleteandnonewadditionalinformationhasarisensincepreviousreporting,itisrecommendedtoprovideannualreporting.Issuersmayhoweverelectasimplifiedapproach(forinstance,aconfirmationofstatusquo;anupdateontheprogressofprojectimplementation;orarecalculationonimpactduetoupdatedbaselineemissionsfactors).
4. Provide quantitative and qualitative reporting Recognisingthewishesoftheinvestorcommunityforrelevantquantitativeinformation,issuersareencouragedtoprovidequantitativereportingasfaraspossible.However,bothqualitativeandquantitativeperspectivesmaybeappropriateandshouldbereportedupondependingonthetypeofprojectfinancedandtheavailabilityofinformation.
Suggestedcoreindicatorscanbefoundintheeightrespectiveprojectcategories,startingonpage24.
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5. Focus on environmental impact Thispositionpaperdealswithreportingenvironmentalimpactrelatedtoprojectsfinancedthroughgreenbondissuance.Wehaveattemptedtoincluderecommendationsregardingarangeofprojectcategories,includingrenewableenergy,greenbuildings,energyefficiency,cleantransportation,wastemanagement,waterandwastewatermanagement,andsustainablelanduse/environmentalmanagement.
Wecommittoreportingonenvironmentalimpactsinourannualgreenbondinvestorreporting.
However,individualissuersmaychoosetoaddsocialand/oreconomicimpactswhendeemedfeasibleandrelevant.Thesemayinclude,forexample:
•numberofjobscreatedand/orpreserved;•numberofdwellingsand/orbeneficiariesforgreenbuildings;•numberofstudentsforgreenschoolbuildings.
6. Report project-by-project, where feasible Issuersareencouragedtoreportonaproject-by-projectbasis,wherefeasible.Weencourageaggregatingtoportfoliolevelreportingforindividualprojectcategories.However,wealsorecognizethatsomeissuersforconfidentialityreasons,competitionconsiderations,alargenumberofunderlyingprojects,orothermayhavetolimittheamountofdetailthatcanbemadeavailableonaproject-by-projectbasis,andmaythusberestrictedtoreportingonaportfoliobasis.Inthesecases,issuersmaywanttoreferenceanexternalreview,whichcanpotentiallyincreasetransparency.Forgreenbondframeworkswherenocommitmentismadetoreportingonsmallerprojects,i.e.projectsbelowadefinedinvestmentsize,project-by-projectreportingisnotrequired.
7. Report based on the share financed •Reportimpactattributabletotheshareoftheproject’stotal
investmentcostthattheissuerhasfinancedwithgreenbonds•Reportimpactbasedonamountsdisbursedandoutstanding
toaproject(asopposedtoamountscommitted).
Theimpactreportshouldaccountfortheexpectedannualenvironmentalimpactrealisedthroughprojectstowhichgreenbondproceedshavebeenallocatedanddisbursed.Thereportedimpactofaprojectshouldreflecttheshareofthetotalinvestmentcosttheissuerhasfinancedthroughthegreenbondissuance.Thetotalinvestmentcostmaybesubjecttochangebutshouldbereportedasaccuratelyaspossible.Generally,aconservativeapproachtoimpactcalculationisrecommended.
Insomecases,itmayberelevanttotakeintoaccountthefullenvironmentalbenefitofaninvestment,eventhoughadditionalinvestmentsbyotherpartiesarerequiredtoreapsuchbenefits.Onerelevantexampleisaninvestmentininfrastructuretosupportelectricalvehicletransports,suchaselectricalchargingposts,wherethefullenvironmentalbenefitrequiresinvestmentsalsobyvehicleowners.Anotherexampleisadditionalproductionofrenewableenergy,whereadditionalgridinvestmentsmayberequired.
Insuchcases,issuersshouldstrivetoensurethatdouble-countingofenvironmentalbenefitsisavoided.Thisalsounderlinestheimportanceofincludinginthereportingnotonlyemissionsreductions,butalsotheproject-specificgreenindicators.
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Forconservativepurposes,itisrecommendedtoreportimpactbasedonamountsdisbursedtoaproject(asopposedtoamountscommitted).Ifdisbursementsaremadegradually,environmentalimpactwillalsobetakenintoaccountgradually.Thesamelogicappliesforamortisations.Amortisationswillgraduallyreducetheissuer’sreportedenvironmentalimpactofaproject,whileatthesametimefreeingupcapacitytofinancenewprojectswithpotentialforincrementalimpacttotheportfolio.Inotherwords,projectstowhichfundsarenolongeroutstandingshouldnotbeincludedintheimpactreporting,eveniftheprojectisstilloperating.
8. Report impact by $ only when quantifiable and relevant •ReportCO
2-reductionandotherimpactperinvestedmonetaryunitsolelyforinvestmentsmade
inprojectsorprojectcategorieswheresuchimpactisquantifiableandrelevant
Werecognizethedesireoftheinvestorcommunityforclearandsimplemetricstoevaluategreenbonds.
OnesuchmeasureistheCO2impactofaninvestmentinrelationtotheinvestedmonetaryunit,
i.e.XkgofCO2avoidedannuallyperinvestedUSD(orotherrelevantcurrency).Whilethismeasure
makesiteasytocomparegreenbondissuesagainsteachother,itmaycreateafalsesenseofquantitativerigor,assuchanapproachputsfaithintheprecisionofnumbersrelatedtouncertainenvironmentalcalculations,whichinmanycasesareperformedex-ante.
Suchanapproachmayalsofailtorecognizethatsomegreenbondframeworksarebroadinscope,targetingenvironmentalprojectcategoriesthatdonotprovideimpactsmeasurableinCO
2.This
could,forinstance,beclimatechangeadaptationandwatermanagementprojectsorsustainablebuildingsthathaveothersignificantenvironmentalvaluesapartfromtheCO
2reduced/avoided.
Forcertainprojects,themajorefficiency-enhancinginvestmentsmayhavebeenmadealready,thusincreasingthemarginalcostforadditionalimprovements.
IssuersarethereforerecommendedtoreportCO2impactperinvestedmonetaryunitsolelyforthe
shareofinvestmentsinprojectsorprojectcategorieswheresuchimpactisquantifiableandrelevant.Theshareoftotalinvestmentsforwhichthisreportingismadeshouldbeclearlystated.Ifanissuer’sentireportfolioconsistsofprojectswheretheCO
2impactismeasurable,theissuermaycommunicate
impactpermonetaryunitinrelationtoallportfolioinvestments.Whenrelevant,othermetricscanbereportedoninrelationtoinvestedmonetaryunitsuchasaddedcapacityofrenewableenergyorenergysavingsinkWhperinvestedUSD.
9. Report bond-by-bond or on bond-programme basis Allprojectstowhichfundsareoutstandingshouldbeincludedinthereportingregardlessofwhetherthefundsweredisbursedduringtheyearofreportingoratapriordate.
Fornon-dynamicportfolioswhereallocationiscomplete,eachoutstandinggreenbondwillfinanceadesignatedsub-portfolioofprojects.Insuchcases,theimpactreportshouldclearlystatetheestimatedimpactofeachsub-portfolio/bond.Reportedimpactdatashouldpreferablyandiffeasiblealsobeaggregatedforalloutstandinggreenbonds,sothatispossibletoassociateallbondsfromthesameissuerwithoneaggregatedsetofimpactresults.Usingtheaforementionedapproachesshouldservetomeetreportingdemandsbothfrominvestorswhichpreferimpactreportingdatarelevanttothespecificbondthattheyhavepurchasedaswellasfrominvestorswhopreferanaggregatedapproach.
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Fordynamicportfolioswherethecompositionofprojectsfinancedbytheoutstandinggreenbondschangesonaregularbasisthroughadditionorremovalofassets,issuersmayinsteadchoosetoreportimpactonaportfoliobasis.Suchreportingcaneitherassesstheimpactofthegreenprojectstowhichdisbursementshavebeenmadeduringthereportingyear,ortheimpactoftheaggregateportfolioofeligibleassetsasofthereportingdate.
Forsuchdynamicportfolios,issuersshallprovideabreakdownofimpactattributabletoeachbond,typicallyusingasimplepro-rataallocationofaggregatedimpacttoeachoutstandingbond.AtemplateforreportingspecificbondimpactisfoundinAppendixC,seetable"Impactattributabletogreenbondinvestors".
10. Provide both allocation and impact reporting •Allocationreportingisanecessaryfirststeptopresentimpactreporting•Bothallocationandimpactreportingareintimatelylinked,shouldusethesamemethodologyand
shouldbepresentedtogether,inaconsistentmanner.
InaccordancewiththeproposedEUGreenBondStandard,reportingshouldincludeinformationontheproceedsraisedbythegreenbondandinformationontheamountsallocatedtoprojects(the“allocationreporting”).Itisrecommendedthatsuchallocationreportingisverifiedbyanindependentexternalverifiertoguarantee,onanannualbasisuntilfullallocation,theactualallocationofuseofproceeds.
Reportingshouldalsoprovideinformationontheactualenvironmentalandsocialimpactsoftheprojectfinancedbythegreenbond(the“impactreporting”),whichistheactualpurposeofthispositionpaper.Bothallocationandimpactreportingareintimatelylinked,shouldusethesamemethodologyandbepresentedtogether,inaconsistentmanner.
11. Distinguish between financing and refinancing •Reportontheshareoffinancingandrefinancing,atleastaccordingtotheproposedEUGreen
BondStandard
IssuersarerecommendedtoreportontheshareoffinancingandrefinancingaccordingtotheproposedTEGEUGreenBondStandard(EUGBS).Issuersshouldalsoverifyanyfinancing/refinancingreportingcommitmentsintheirownGreenBondframeworks,andreportontheseiftheydeviatefromtheEUGBSrequirements.
TheEUGBSrequestissuerstoreportona)theshareoffinancing(i.e.theallocatedamounttoprojectsfinancedafterbondissuance)andb)theshareofrefinancing(i.e.theallocatedamounttoprojectsfinancedbeforebondissuance).
ForissuerswhofindthattheEUGBSreportingrequirementsregardingfinancingandrefinancingarenotdirectlyapplicabletotheirissuancemodel,andwhichlackafinancingandrefinancingreportingcommitmentintheirownframeworks,acomplementaryreportingalternativeisoutlinedbelow.Itmaysuitissuersfollowingabondprogramme/portfolioapproach.
Thiscomplementaryalternative,whichisentirelyvoluntary,istoreporta)theshareoffinancingbasedontheallocatedamounttoprojectsduringtheyearofreportingandb)theshareofrefinancingbasedontheallocatedamounttoprojectsfinancedbeforetheyearofreporting.
Issuersmayelecttoincludeinsuchreportinginformationalsoontheaveragephysicalageoftheprojects,basedontheyearofcompletion,and,ifrelevant,thematurityprofileofanyassociatedfinancing,suchasGreenLoans.
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Issuersshouldseektodemonstratethattherefinancingofexistingprojectsisdirectlylinkedtotheissuer’ssustainabilityobjectives.
Inthecaseoffinancingoffutureprojects,issuersarerecommendedtoprovidetransparencyonthedisbursementtimeline.Issuersarehoweverrecommendedtoreportimpactonlyfromprojectstowhichfundsaredisbursedandoutstandingatthetimeofreporting,seePrinciple#7.
12. Provide breakdowns on asset type, geography and sector•Reportabreakdownofprojectsbythenatureofwhatisbeingfinanced,andalsobygeography
andsectorlevel.
InlinewiththeproposedreportingrequirementsforEUGreenBonds,issuersarerecommendedtoprovideabreakdownofallocationsbythenatureofwhatisbeingfinanced(tangibleorintangibleassets,capitalexpenditures,operatingexpenditures,workingcapital,publicexpenditures).
Itisalsorecommendedthatdisbursementsandimpactsarereportedatgeographyandsectorlevel.Forissuerswithprojectslocatedinmultiplejurisdictions,reportingshouldbedoneatgeographyandsectorlevelcombined.
13. Maximize transparency and useability•Publishimpactreportsandotherrelevantinformationatasingleaccesspointontheissuer
website•Aggregateinformationordataonindividualprojectstothebondlevelorprojectcategorylevel•Structureandpresentoverarchingdataearlyoninreports•Incorporateanexecutivesummary,whichsummarizesgreenbondandgreeninvestment
activities,earlyoninreports•Makeprojectinformationusedfortheimpactreportavailableinspreadsheetformat•Evaluatewhetheraggregationplatformsforimpactreportingcanbeusedtomaximize
transparencyanduseability
Impactreportingisafeatureofgreenbondsissuancethatisbecomingincreasinglyvaluableforinvestorsandotherstakeholders,whomaybespendingasignificantamountoftimesimplysearchingandaggregatingsuchimpactdata.
Issuersarethereforeencouragedtoconsiderbotheaseofaccessandeaseofusewhentheymaketheirimpactreportingdataavailabletostakeholders.Thisincludes,forinstance,publishingimpactreportsandotherrelevantinformationatasingleaccesspointontheissuerwebsite;aggregatinginformationordataonindividualprojectstothebondlevelorprojectcategorylevel;andstructuringoverarchingdatainvisuallyappealingandfunctionalmannerearlyoninreports.
Werecommendthatissuers’reportingincorporatea)anexecutivesummary,whichsummarizesgreenbondandgreeninvestmentactivities,seeAppendixCforasuggestedexample,andb)thatissuersmakeprojectinformationpresentedintheimpactreportavailablealsoinspreadsheetformatontheirwebsite.
Thereisanemergingtrendforplatformsthataggregateimpactreportingdatafrommanyissuers,allowingissuerstoreportongreenbondimpactsandinvestorstoaccessimpactdataonmultipleportfolioinvestmentsfromasingleaccesspoint.Suchdevelopmentsarespearheadedbothbystockexchangesandotherentities.Weencourageissuerstoevaluatewhethersuchplatformscanbeusedtomaximizetransparencyanduseability.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 15
14. Incorporate climate-related physical risks when possibleWhereasgreenbondinvestmentsareinherentlyopportunity-oriented,werecognisethatgreeninvestmentsarealsosubjecttorisks,includingphysicalrisksrelatedtoclimatechange.Suchriskscanberelatedtoincreasedseverityofextremeweathereventsorlonger-termshiftsinprecipitationandtemperatureandincreasedvariabilityinweatherpatterns,suchassealevelrise.Thefinancialimplicationsofphysicalrisksonorganizationsmayberelatedbothtodirectdamagetoassetsandindirectimpactsfromsupplychaindisruption.Organisations’financialperformancemayalsobeaffectedbychangesinwateravailability,sourcing,andquality;foodsecurity;andextremetemperaturechangesaffectingorganizations’premises,operations,supplychain,transportneeds,andemployeesafety.
Normally,greenbondinvestorsarenotdirectlyexposedtothephysicalriskofprojectsfinancedbygreenbonds,sincethemajorityofgreenbondsissuedarestandardrecourse-to-the-issuerdebtobligations.However,westilldeemphysicalriskofprojectsfinancedbygreenbondstobeatopicthatdeservesattentionfromissuers.
AsdescribedintheTCFDrecommendations11.“Physicalclimate-relatedscenariosareparticularlyrelevantfororganizationsexposedtoacuteorchronicclimatechange,suchasthosewithlong-lived,fixedassets;locationsoroperationsinclimate-sensitiveregions(e.g.,coastalandfloodzones);relianceonavailabilityofwater;andvaluechainsexposedtotheabove.”
Issuersareencouragedtobetransparentaboutclimate-relatedphysicalriskofprojectsorportfolios,wheretheseareidentified.Insuchcases,issuersshouldbetransparentabouthowtheseriskswillbemitigated.
InadditiontotheTCFDguidance,issuersarealsorecommendedtoconsultareport12publishedbyEBRD(theEuropeanBankforReconstructionandDevelopment)andtheGlobalCentreofExcellenceonClimateAdaptation.
11 Task-Force on Climate-Related Financial Disclosures: “Recommendations of the Task-Force on Climate-Related Financial Disclosures, June 2017”, see page 27.12 European Bank for Reconstruction and Development & Global Centre of Excellence on Climate Adaptation: “Advancing TCFD Guidance on Physical Climate Risks and Opportunities”, May 2018
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 16
15. Report contributions to the Sustainable Development Goals (SDGs)WerecognisethattheSustainableDevelopmentGoalsadoptedbytheUnitedNationsin2015areablueprintforsustainabledevelopmentglobally,andserveasauniversalbenchmarkwhendevelopingmethodologiestoassessandreportsustainabilityperformance.WealsoacknowledgegrowingdemandfrominvestorstomaptheirgreenbondinvestmentstotheUNSDGs.TheprojectcategoriesreferencedinthispositionpaperhavebeenmappedagainsttherelevantSDGs,seepage17.Thismapping,whichisinspiredbytheGBP/ICMAmapping13andtheexistingpractisesofNordicissuers,relatestothespecificcontextofprojectsintheNordiccountries.ItmaybeusedasagenericreferenceforNordicissuerstomaptheirGreenBondprojectcategoriestotheUNSDGs.Issuersareneverthelessencouragedtoadaptthemappingtotheirspecificportfolioofassets,inthecontextoftheiroverallsustainabilitystrategy,andtoincludetheirmappingintheimpactreport.
16. Consider reporting contributions to the EU Environmental Objectives OneoftherequirementsintheproposedTEGEUGreenBondStandardislinkingtheuseofbondproceedstothesixEUEnvironmentalObjectives:i) Climatechangemitigationii) Climatechangeadaptationiii) Sustainableuseandprotectionofwaterandmarineresourcesiv) Transitiontoacirculareconomy,wastepreventionandrecyclingv) Pollutionpreventionandcontrolvi) Protectionofhealthyecosystems
WhilewaitingforamoregranularTaxonomy of environmentally sustainable economic activitiestobeadopted,projectsfinancedwithanEUGreenBondshouldbedemonstratingsubstantialcontributiontooneormoreofthesesixobjectives.
Toaccommodatesuchademonstrationthroughissuers’impactreports,theprojectcategoriesreferencedinthepositionpaperhavebeenmappedagainsttherelevantenvironmentalobjectives14,seepage17.SimilartotheSDGmapping,thisismeantasagenericreferenceforissuerswhenconductingtheirownmappingbasedontheirspecificprojectportfolioandcontext.
IssuersareencouragedtodrawalinkbetweenaprojectcategoryandanEUenvironmentalobjectiveonlywhenandiftheirreportingincludesindicatorsthatillustratetheprojects’contributionstothesameobjective(s).
ProvidingamappingofprojectsorprojectcategoriesagainsttheEUEnvironmentalObjectivesisnotafirmrequirementatthisstagebutmaybeincludedasarecommendationinthefuture.
13 Green and Social Bonds: A High-level Mapping to the Sustainable Development Goals”, June 201814 Defined in Article 5-11 in the Taxonomy Regulation https://ec.europa.eu/info/law/better-regulation/initiative/1185/publication/238025/attachment/090166e5baea4e23_en
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 17
Mapping vs the EU Environmental Objectives and the SDGs
Thissuggestedmappingmaybeadaptedbyindividualissuers,toreflecttheirspecificportfolioofassetsandtheiroverallsustainabilitystrategy.
Position Paper Project Category
Primary EU Environmental Objective
Secondary EU Environmental Objective(s)
Relevant SDGs
Renewableenergy
Climatechangemitigation
n/a
Greenbuildings
Climatechangemitigation
Climatechangeadaptation
Energyefficiency
Climatechangemitigation
n/a
Cleantransportation
Climatechangemitigation
Pollutionpreventionandcontrol
Wastemanagement
Transitiontoacirculareconomy,wasteprevention,andrecycling
PollutionpreventionandcontrolClimatechangemitigation
Waterandwastewatermanagement
Sustainableuseandprotectionofwaterandmarineresources
ClimatechangeadaptationPollutionpreventionandcontrolClimatechangemitigation
Sustainablelanduse/environmentalmanagement
Protectionofhealthyecosystems
ClimatechangeadaptationClimatechangemitigation
Climatechangeadaptation
Climatechangeadaptation
n/a
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 18
Environmental impact methodology
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 19
Environmental impact methodologyReporting benefits and comparing with relevant baselines
Inthissectionwedescribethemethodologicalchoiceswehavemadeforenvironmentalimpactandthereasoningbehindthem,withtheambitionofmeetinghighstandardsoftransparency.
17. Core indicatorsIssuersshouldstrivetocalculateandaggregatetheimpactofindividualprojectsandprojectcategorieswherethisisfeasible.AnumberofsuggestedimpactindicatorsarelistedintheProjectcategoryrecommendationssection,seebelow.Werecognisethatotherindicatorsmaybeofrelevanceforcertainprojects;insuchcasesissuersareencouragedtousetheseasacomplementorevensubstitution.
18. BaselinesDecidinguponabaselineagainstwhichtheenvironmentalimpactcanbemeasuredisimportant,asthechosenbaselinewilldeterminethecalculatedenvironmentalbenefits.
Thispaperoutlinesrecommendedbaselineapproachesforcertainprojectcategoriesandforelectricity.Issuersmaychoosetodiscloseimpactrelativetootherrelevantbaselines,additionallyorinsteadofthesuggestedbaselines.Forinstance,thismayberelevantforprojectslocatedoutsidetheEuropeanUnion.Issuersarerecommendedtobetransparentaboutthechoiceofbaselines,andtostaytruetothegeneralprincipleofconservativeimpactcalculations.
WheneverfeasibleandrelevantwebasethesuggestedbaselinesontheIFIHarmonizedFrameworkandtheirstandardsforGHG-accounting15.ThisapproachisalsoinaccordancewithGHGProtocolguidelinesforgrid-connectedelectricityprojects16.(SeeAppendixA)
19. Calculating greenhouse gas (GHG) emissionsIntheabsenceofonesinglecommonly-usedstandardforthecalculationofGHGemissionsreduced/avoided,issuersmayfollowtheirownmethodologieswhilemakingtheseavailabletoinvestors.IssuersareencouragedtoreportGHGemissionsdataonlywhentheycanprovidefulltransparencyontheapplicableGHGaccountingmethodologyandassumptions,whichcanbereferenced.
20. Project boundary and scope of emissionsTheprojectboundaryforgreenhousegascalculationsshouldincludeallactivities,facilitiesorinfrastructurethattheissuerisfinancing.TheNordicissuersatthisstagecommittoreportonScope1andScope2emissionreductionsasdefinedbytheGreenhouseGasProtocol.
Reportingprojects’impactonotherindirectemissions,definedasScope3,isadesirablefuturedevelopmentandmaybeconsideredoncemorewidelyacceptedlifecycleanalysismethodologyisavailable.IssuersshouldclarifywhichScopeisusedfortheimpactreport.
15 https://unfccc.int/climate-action/sectoral-engagement/ifis-harmonization-of-standards-for-ghg-accounting16 See “Guidelines for Quantifying GHG Reductions from Grid-Connected Electricity Projects”, published by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBSCD)
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 20
21. Energy savings vs energy reduced and energy avoidedTheIFIHarmonizedFrameworkhighlights“energysavings”asacoreindicatorinimpactreporting.WerecommendfurthergranulatingthisindicatorintoreducedandavoidedenergyuseandCO
2
emissions.Weviewreducedenergyuseasadirectorabsolutereductioninoperation;avoidedenergyusereferstoabaseline/alternativereferencescenario.
Whenwerefertoenergysavings,wemeanbothenergyreducedandenergyavoidedandthesumofthetwo.Whenpresentingaggregatedimpactresults,issuersareencouragedtoreportthetotalenergysavings,withabreak-downonenergyreducedandenergyavoided.
22. CO2 baseline for electricity
•FactorcalculatedasaCombinedMarginbasedonIFIHarmonizedFrameworkmethodology,combiningagridOperatingMargin(OM)andaBuildMargin(BM)frompotentialnewgenerationcapacitythatisaffectedbytheproject.
•UnliketheIFIweusethesamedefaultcombinationofOMandBM(50%:50%)forallelectricity-relatedprojects,asareflectionofanopenNordicelectricitysysteminterconnectedtoneighboringnorthernEuropeansystems,whichgivesmorepotentialtoreplaceexistingOM,andlesscompetitionwithotherpotentialBM.
•EuropeanmainlandmixincludingtheUKandNorwayisrecommendedasthegeographicgridareaforthedefaultbaselineemissionfactorforelectricity.
•Issuersarerecommendedtousethefollowingresultingdefaultbaselineemissionfactorforelectricity:Combined Margin: 315 g CO
2/kWh
InlinewiththeIFIHarmonizedFramework,thebaselineemissionfactorisconstructedusingaCombinedMargin(CM)fortheelectricitygrid,comprisedofanexistingOperatingMargin(OM)andaBuildMargin(BM)frompotentialnewgenerationcapacity17.
WerecommendusingaCombinedMarginfactorof50%OM+50%BMforallelectricity-basedprojects,includingallrenewableenergy(RE)andenergyefficiency/savedenergy(EE).WiththisapproachwedeviatefromtheIFIHarmonizedFramework,inordertobetterreflecttheNordiccontext.Inordertosimplifyreportingrequirements,weapplythisapproachalsotoelectrificationprojectsthatleadtoanincreaseduseofelectricity,e.g.transportationprojects.SeeAppendixAforamoredetaileddiscussionandacomparisonbetweentheNordicissuers'approachandtheIFIapproach.
AbaselineemissionfactorforNordicgreenbondissuerscouldbechosenfromseveral,geographicallydifferent,gridfactors:projectspecific,local,national,Nordic,BalticSearegionorEuropean.
ThispositionpapersuggestsanEUMainlandgridfactorincludingtheUKandNorwayasthedefaultbaselineforaccountinganddisclosureofelectricity.WehavechosenthisgridfactorastherelevantbaselinebecausetheNordicelectricitymarketisalreadycharacterisedbyahighlevelofinterconnection,alsowithneighboringcountriesintheNorthernEuropeanregion.Furthermore,theintegrationofEuropeanelectricitymarketsisplannedtoincreaseinthecomingyearsanddecades,whichistherelevanttimeperspectiveformostinvestments.Apan-EuropeanbaselineishigherthanonecomprisingonlyDenmark,Finland,NorwayandSwedenbutmoreconservativethanonecomprisingtheBalticSeaRegionincludingthethreeBalticstates,Germany,PolandandtheNetherlands,whichwouldreflectcurrentgridinterconnection,asdetailedinAppendixA.
17 International Financial Institution Framework for a Harmonised Approach to Greenhouse Gas Accounting, November 2015
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 21
TherecommendedbaselineemissionfactorforelectricityisaCombined Margin of 315 g CO2/kWh.
ThisCO2baselinehasbeencalculatedbasedongridfactorsforOMandBMinadataset(IFIDataset
ofDefaultGridFactors11.05.2019)providedbytheNordicInvestmentBank,oneofthesignatoriestotheIFIFrameworkforGHG-accounting.AvailablefiguresaregenerallyScope2.Ourambitionistoreviewthisbaselineemissionfactoronaregularbasis,subjecttoavailabilityofnewdata.WeareopentofuturefurtherharmonizationwithIFI:s,e.g.ontheOM-BMrelationship,asmethodologiesdevelop.
Issuersmaychooseanotherbaseline,forexamplefromarelevantlocalornationalcontext,ifandwhenthisisrelevant,forexampleiffinancedprojectsarelocatedoutsideoftheEuropeanUnion.Issuersmayalsouseadditionalbaselines(suchaslocal,NordicandEuropean)forinformationalpurposes.
23. Certificates of originIssuersarerecommendednottousecertificatesoforiginand/orresidualmixasthebasisforCO
2
values.Theprincipalreasonisthatwedonotconsidersuchcertificatestobeamaindrivingforcefordeploymentofmorerenewableenergy,incomparisonwithmoresubstantialmarketsettingpolicymeasuressuchastheEUemissionstradingsystem(EU-ETS),CO
2-taxationandtheSwedishand
Norwegiangreenelectricitycertificates.
24. The EU emissions trading system (EU-ETS)WiththeEUemissionstradingsysteminplace,itcouldbepreviouslyarguedthatallinvestmentscoveredbythesystemcontributedtoachievingtheoveralltargetandthatadditionalreductionfromoneinvestmentmayeffectivelybelevelledoutbyincreasedemissionsfromotherprojectsandinothermemberstates.However,thesystemhasrecentlybeenmodifiedtoallowforcancellationsforunusedvolumes,whichshowsthatthetotalquotasandmechanismsoftheEU-ETSisapoliticalissueandalsoinfluencedbytheactualperformanceofemissionsreductions.WehavethereforenotmadeanydistinctionsbetweeninvestmentsandemissionsinsideandoutsidetheEU-ETS.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 22
25. CO2 emission baseline for district heating18
•Nocommonbaselineemissionfactorfordistrictheatinghasbeenestablished•Thebaselineselectedshouldreflectthenational/localsituation,includingthesituationpriorto
theinvestment•SwedishissuersmaydrawonthemethodologyasoutlinedinAppendixB
Thedistrictheatinganddistrictcoolingsystemsarefundamentallylocal/regionalandnotinterconnectedonanationalorNordicbasiseventhoughthefuelsused(bio,solidwaste,fossil)maybeoftentradedoverlongdistances.Localmixesforbothdirectandavoidedemissionsareconsideredmostrelevantinimpactreporting,however,issuersmaychoosetouseanationalmixtosimplifyreporting.Onesuchnationalcalculation(fromSweden)ispresentedinAppendixB.PleasenotethatthereisnotyetanyIFIharmonisedapproachforinvestmentsrelatedtodistrictheating.
Onecrucialquestioniswhichalternativesituationtocompareadistrictheatinginvestmentto.Issuersmayconsiderapplyinga“noproject”scenarioasbaselinewhenfinancingnewdistrictheatingsystems,and“theactualsituationbeforeprojectimplementation”forinvestmentsrelatedtoexpandingorimprovingexistingsystems.
Thechosenbaselineshouldreflectnational/localcircumstancesandregulations.Thecalculationmethodshouldconsiderbothemissionscausedbytheproductionofdistrictheating,cooling,steamorcombinedheatandpower(CHP)(includingScope2),aswellasavoidedemissionsfromalternativesourcesofenergy.
26. Energy units: kWh or appropriate multiples recommendedIntheNordiccountries,themostcommonlyusedenergyunitiskilowatt-hours(kWh).WethereforeintendtousekWhorappropriatemultiplesastheenergyunitinourimpactreporting(i.e.MWh,GWhetc.alongwithinstalledeffectsinkw,MWandGW,etc.).
However,issuersarerecommendedtoincludeaJoule(J)conversionfactor,where1kWhrepresents3.6MJand1MWhrepresents3.6GJ.IssuersmayalsochoosetoreportaggregateenergysavingsoraddedcapacityinJoules,alongsideWh.
18 District heating is a system for distributing heat generated in a centralized location for residential and commercial heating requirements. In the Nordic countries, the heat is often obtained from a cogeneration plant burning principally renewable energy sources, including biomass, but plants also use waste, excess heat, and, to a minor extent, fossil fuels. District heating plants may also be used to produce electricity (combined power and heating plants, CHP), and cooling. Depending on the characteristics of the project financed by green bonds, it may fall under different project categories, such as renewable energy and energy efficiency.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 23
Project category recommendations
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 24
Project category recommendationsThischapterpresentsimpactreportingrecommendationsspecificallyrelevanttoeightprojectcategoriesthattypicallydominateNordicpublicsectorgreenbondsframeworks:
•Renewableenergy(incl.wind,solar,hydro,wave,bioenergy,geothermal,excessheat)•Greenbuildings•Energyefficiency•Cleantransportation•Wastemanagement•Waterandwastewatermanagement•Sustainablelanduse/environmentalmanagement•Climatechangeadaptation
ThislistmaybeupdatedastheuniverseofprojectseligibleforgreenbondfundingbyNordicissuersevolves.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 25
27. Renewable energy
Issuersareencouragedtoreporttheimpactfromrenewableenergyinvestments(wind,solar,hydro,bioenergy,etc.)intermsofcapacityaddedandestimatedannualproduction,aswellastheassociatedamountofCO
2avoided,accordingtotheguidelinesestablishedbytheIFIs19.
WehoweverrecommendusingthesameCombinedMarginforelectricityforalltypesofprojects(seesection#22:"CO
2baselineforelectricity"above).
TheemissionfactortobeappliedwhencalculatingCO2avoideddependsonthetypeofenergy
replaced.1kWhofrenewableelectricityproductionmaybereportedasreplacing1kWhofelectricityfromthegrid,applyingthegridfactorsuggestedinsection#22(assumingzero(0)emissionsnetinscope1and2fromrenewableenergyproduction).Iftherenewableenergyproducedreplacesotherformsofenergythanelectricity,e.g.fossilheatingoil,arelevantemissionfactorforthesubstitutedenergysourcemaybeapplied.Insuchcases,issuersshouldbetransparentabouttheirchoiceofemissionfactor.
Issuersmayalsoelecttoreportothergreenhousegasemissionsthathavebeenreducedoravoided,whererelevantandapplicable.
Suggested indicators•Capacityofenergygenerationofplant(MW)•AnnualrenewableenergygenerationinMWhorGWh•AnnualGHGemissionsreduced/avoided,intonnesofCO
2-equivalent
Suggested EU Environmental Objectives
Primary Objective:Climatechangemitigation
Secondary Objective: n/a
Suggested SDGs
19 IFI Approach to GHG Accounting for Renewable Energy Projects, November 2015
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 26
28. Green buildings
•Discloseenergysavingsfromgreenbuildingsasanetvaluecomparedtonationalbuildingrequirements.Alternatively,performancecanbereportedincomparisontoarelevantreferencebuilding.
•Issuersareencouragedtodisclosethebuildingarea,insquaremeters.•Refurbishmentsandretrofitsaretobecomparedagainststatuspre-investment.•Energyproducedon-sitemaybesubtractedfromtheenergyuseofthebuildingifthisisclarified
inthereport.•Issuersareencouragedalsotoincludeinformationaboutmaterialsused,thelocationofthe
building,andotherfeaturesthatmaycontributetotheenvironmentalbenefitsoftheproject.
Energysavingsfromgreenbuildingsshouldbedisclosedasanetvalue,basedonenergyusepersquaremeterandperyear,andcomparedtoabaselinescenarioinwhichthebuildingcomplieswithapplicablenationalregulationsfortherespectiveNordiccountry20.Standardsandmethodsforcalculatingenergyusedifferbycountryandarenoteasytocompare.Regardinguseofbaselinesforsavingsinelectricityandindistrictheating,seeabovepositions#22and#25.
Issuersareencouragedtodisclosethebuildingarea,insquaremeters.Asadditionalinformation,issuersmaychoosetoreportagreenbuilding’sperformanceincomparisontoareferencebuildingbasedone.g.theaverageenergyperformanceofthenationalbuildingstock,consideringrelevanttypeofbuildingandclimatezone.Reportinginrelationtoaveragesshouldsolelybeforinformationalpurposes(nottobeusedinaggregation)andwhererelevant(forinstancerefurbishmentsofexistingbuildings).
Energyproducedon-site(behindthemeter)thatisusedinthebuildingmaybesubtractedfromthereportedenergyperformanceofthebuilding,ifthisisinlinewithnationalbuildingregulations.(Ahousewithanenergyuseof45kWhpersq.m.withsolarpanelsproducing5kWhpersq.m.maybereportedashavinganenergyperformanceof40kWhpersq.m.consideringanenergyproductionof5kWhpersq.m.)Issuersareinthatcaseencouragedtoseparatelyreporttheenergyproducedon-site(thatissubtractedfromtheenergyuseofthebuilding),aswellasadditionalenergyproducedon-siteandexportedtothegrid.
Intheirreporting,issuersshoulddistinguishbetweennewbuildingsandmajorrefurbishments,wheretheformershouldbecomparedtonationalbuildingstandardsandthelattertothestatuspre-investment.
Inadditiontoinformationabouttheenergyperformanceand-productionofabuilding,issuersmayelecttodescribeotherenvironmentallyrelevantfeaturesofthebuilding,iffeasible.Thisinformationmayincludethemainmaterialgroupsusedintheconstruction,thelocationofthebuilding,waterintensity,wastemanagement,anyuseoffossil-freeconstructionmachineryandequipment,wastemanagementpoliciesontheconstructionsite,mitigationeffortsrelatedtophysicalclimaterisks,etc.IssuersarenotrequiredtocalculateCO
2impactofbuildingmaterialsatthisstage,astheseemissions
areoutsidescopes1and2.
20 Calculating impact based on buildings standards, as opposed to comparing against the average for the national building stock, represents a more conservative approach to impact reporting.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 27
Suggested indicators
•AvoidedkWh/sqm,orinpercentageterms(%)belownationalbuildingstandards
•AnnualenergyavoidedinMWhorGWhcomparedtotherelevantbuildingcode(fornewbuildings)
•AnnualenergyreducedinMWhorGWhcomparedtothepre-investmentsituation(forrefurbishments)
•Annualenergyproductionon-site,inMWhorGWh
•AnnualGHGemissionsreduced/avoided,intonnesofCO2-equivalents
Suggested EU Environmental Objectives
Primary Objective:Climatechangemitigation
Secondary Objective: n/a
Suggested SDGs
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 28
Suggested indicators
•Annualenergyreduced/avoidedinMWhorGWh(electricity)andMWhorGWh(otherenergysavings)
•AnnualGHGemissionsreduced/avoided,intonnesofCO2-equivalent
Suggested EU Environmental Objectives
Primary Objective:Climatechangemitigation
Secondary Objective: n/a
Suggested SDGs
29. Energy efficiency
WeencourageissuerstoapplytheIFIHarmonizedFrameworkapproachforGHGaccountingforenergyefficiencyprojects21.SofarwedonotcommittousingtheIFImethodfordifferentiatingeffectsduringremainingandprolongedlifetimeforaproject.Wedeemthisareasonableapproach,giventhatwearecommittedtoannualreportinganddonotreportonlife-timeeffects.
Issuersshouldreportonboththeabsolutereduction(inkWhorothermetric)andthepercentagereductioninenergyuseforthesameoutput/service.Regardinguseofbaselinesforsavingsinelectricityandindistrictheating,seeabovesections#22and#25.
Forenergyefficiencyprojectthatarepartofalargerretrofittingorrefurbishingproject,wherepartsoftheprojectcostisnotdirectlylinkedtoareductioninenergyuse,werecommendacautiousapproach.Thismeansreportingimpact(suchasenergyreduced)inrelationtotheentireprojectcost.Anexampleistherefurbishmentofabuildingthatinvolvesbothenergyefficiencycomponentssuchasimprovedinsulationandventilationsystems,aswellaspurelyestheticalcomponentssuchasafaçadeupgrade.
21 IFI Approach to GHG Accounting for Energy Efficiency Projects, November 2015
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 29
30. Clean transportation
Whilecleantransportationprojectsmaydifferincharacter,theprimaryobjectivefromanimpactreportingperspectiveistoreportonavoidedemissionsofCO
2,incomparisonwithanalternative
scenario.Whatrepresentsthemostrelevantalternativescenario,islikelytovarygreatlydependingonthelocalcontextoftheprojectaswellasthetypeoftransportmodetobeinvestedin.
Forlargerinvestmentsintransportationsystems,apre-studyofthemobilitysituationandtherelatedenergyconsumption/emissionscanbehelpfulinordertomeasuretheimpactoftheinvestment.Anotherresourcetoissuersmaybethecost/benefitassumptionsusedintheproject’s“businesscase”evaluation.Wedohoweverrecognizethatmanysmallerprojectsmaynotbebackedupbypre-studiesandotheranalysisandthereforesuchreportingcannotalwaysberequiredfromissuers.
Forprojectsinvolvingthepurchaseoflow-carbonvehicles,issuersarerecommendedtocomparetheemissionsoftheacquiredvehicleswiththoseofacomparableconventionalnewalternative,suchasamodernfossil-fueldrivencar.Calculationsshouldbebasedonthesameemissionfactorforelectricityasappliede.g.toaddedrenewableenergyandenergyefficiencyprojects,seepositions#27and#29.
Wheneverpossible,issuersmayincludereportingonotheravoidedGHGemissions,suchasNOx.Ifrelevant,reportingmayalsoincludeotherbenefits,suchasnoisereductions.
Issuersareencouragedtoselectandreportonindicatorsthatarerelevantandfeasibleforeachindividualprojectandfortheirportfoliooftransportinvestmentsasawhole,includingbutnotlimitedtothosementionedbelow.TheseincludesuggestedreportingmetricsasoutlinedinapaperproducedbytheimpactreportingworkinggroupoftheGreenBondPrinciples,whichissuersareencouragedtoconsult22.
Suggested indicators
•AnnualGHGemissionsreduced/avoided,fromcarsandothervehicles,duetotheinvestment(bycomparisontoaverageemissionsbykmforalternativetransportation)
•Numberofkmofnewtrainlines,bicyclelanesetc.created
•Passenger-kilometresinnewmeansoftransportation
•Estimatedreductionincaruseandcarkilometrestheprojectwillreplace
•Project’seffectonincreasedresiliencetoclimatechange
Suggested EU Environmental Objectives
Primary Objective:Climatechangemitigation
Secondary Objective: Pollutionpreventionandcontrol
Suggested SDGs
22 See Resource Centre for Green Bond Principles at www.icmagroup.org: “Handbook - Harmonized Framework for Impact Reporting”, June 2019
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 30
31. Waste management
Anumberofquantitativeandqualitativeindicatorsmayberelevantforimpactreportingonwastemanagementprojects.Issuersareencouragedtoselectandreportonindicatorsthatarerelevantandfeasibleforeachindividualprojectandfortheirportfolioofwastemanagementinvestmentsasawhole,includingbutnotlimitedtothosementionedbelow.TheseincludemetricsoutlinedinapaperproducedbytheimpactreportingworkinggroupoftheGreenBondPrinciples,whichissuersareencouragedtoconsult23.
Suggested indicators
•Estimateofthereductioningreenhousegasemissionsavoidedasaresultoftheinvestment(SeealsoAppendixBforanexamplemethodologyondistrictheatingandwastetreatment).
•Wastethatisprevented,minimised,reusedorrecycledbeforeandaftertheprojectin%oftotalwasteand/orinabsoluteamountintonnesperyear.
•Annualabsolute(gross)amountofwastethatisseparatedand/orcollectedandtreated(includingcomposted)ordisposedof(intonnesperyear.andin%oftotalwaste)
•Numberofmetrictonsprocessedinthefacility
•Materialrecoveryrate,in%
•Expectedimprovementinmaterialrecoveryrateorothertargetforimprovedresourceuse
•Numberofhouseholdsdeliveringtothefacility
•Energyproduced(incaseofbiogas/waste-to-energyplant)
•Energysavingattributabletotheinvestment
•Project’seffectonincreasedresiliencetoclimatechange
Suggested EU Environmental Objectives
Primary Objective:Transitiontoacirculareconomy,wasteprevention,andrecycling
Secondary Objective: PollutionpreventionandcontrolClimatechangemitigation
Suggested SDGs
23 See Resource Centre for Green Bond Principles at www.icmagroup.org:“Handbook - Harmonized Framework for Impact Reporting”, June 2019
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 31
32. Water and wastewater management
Anumberofquantitativeandqualitativeindicatorsmayberelevantforimpactreportingonwaterandwastewatermanagementprojects.Issuersareencouragedtoselectandreportonindicatorsthatarerelevantandfeasibleforeachindividualprojectandfortheirportfolioofwaterandwastewatermanagementinvestmentsasawhole,includingbutnotlimitedtothosementionedbelow.TheseincludesuggestedreportingmetricsasoutlinedinapaperproducedbytheimpactreportingworkinggroupoftheGreenBondPrinciples,whichissuersareencouragedtoconsult24.
24 See Resource Centre for Green Bond Principles at www.icmagroup.org:“Handbook - Harmonized Framework for Impact Reporting”, June 2019
Suggested indicators
•Annualwatersavings
•Annualvolumeofwastewatertreatedoravoided
•Capacityofplantsbeingbuilt
•Numberofmetersofpiping/conduitlaid,upgradedorreplaced
•Numberofpersonequivalents(PE)ofwaterorwastewatertheplantprocesses,identifyinganyincreasethatcanbeattributedtotheinvestment
•Reductionofemissionsintothelocalenvironment(nitrogenandphosphorous,BiochemicalOxygenDemand,etc)
•Whererelevant,amountofelectricity,biogasorotherenergycarrierexpectedtobeproducedeachyear,alongwithavoidedCO
2emissions(seeabovesectionsonelectricityanddistrict
heating)
•Healthmetrics(suchasairandwaterquality)
•Biologicalmetrics:biologicaldiversity,wildlife
•Project’seffectonincreasedresiliencetoclimatechange
Suggested EU Environmental Objectives
Primary Objective:Sustainableuseandprotectionofwaterandmarineresources
Secondary Objective: ClimatechangeadaptationPollutionpreventionandcontrolClimatechangemitigation
Suggested SDGs
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 32
33. Sustainable land use / environmental management
Projectsinthiscategoryareprimarilyintendedtofocusonenvironmentalmanagementinareasotherthanclimatechange.Theymayincludenatureconservation,biodiversitymeasures,sustainableagriculture,improvingeco-systems,convertinglandfromindustrial/businessusetowildlifereserves/recreationalareasetc.
Forthesetypesofprojects,issuersarerecommendedtoidentifybothqualitativeandquantitativeindicators,wherequalitativemeasuresmaybeofparticularrelevance.Thesemayincludei)surfaceareaofthelandconverted(measuredinsquaremetersorsquarekilometers),ii)areaunderconversationorpreservation,iii)areaundercertifiedlandmanagement(ideallywithbreakdown,FSC,PEFC,RainforestAlliance),iv)monitoringofchemicaluse,v)biologicaldiversityandvi)airquality.Ifannualenergysavingsand/orreductioningreenhousegasemissionsorotheremissionsarerelevantfortheproject,issuersareencouragedtoreportonsuchmeasuresaswell.
Suggested indicators
•Numberofspecies
•Numberofindividualsintargetpopulation
•Areareforestedorconverted
•Areaofhabitatorwetlandrestored
Suggested EU Environmental Objectives
Primary Objective:Protectionofhealthyecosystems
Secondary Objective: ClimatechangeadaptationClimatechangemitigation
Suggested SDGs
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 33
34. Climate change adaptation
Theobjectiveofprojectsinthiscategoryistoimprovelocalcommunities’resilienceinthefaceofachangingclimate.Projectsinthiscategorymayincludefacilitiesandinstallationstomanageurbanrunoff,floods,landslides,avalanches,risingsealevelsetc.Thislistisnotcomprehensive,asthereisconsiderablelocalvarianceinthetypesofmeasuresneeded.
Theresilience-enhancingqualitiesofaprojectarepreferablydocumentedthroughquantitativeindicators,iffeasible.Quantitativeindicatorscanbecomplementedbyqualitativedescriptionsoftheproject’scharacteristicsandtheweather-relatedandclimate-relatedeffectsitseekstoaddress.
Suggested indicators
•Areasprotectedagainstheat(suchasbuildingfasades)ornumberofheatshieldsetcm2ornumberofitemsofheatprotection
•Areasprotectedagainststorms(buildingfasadesorlandsuchasschoolyards,hospitalfacilities,citycentres)m2ornumberofitems
•Capacityofsystemorareacovered,forexampleforwatermanagementorregardingenhancedresilience
Suggested EU Environmental Objectives
Primary Objective:Climatechangeadaptation
Secondary Objective: n/a
Suggested SDGs
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 34
Appendices
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 35
Note: CNS = Nordic Carbon-Neutral Scenario; VRE=Variable Renewable Energy; CCS=Carbon Capture and StorageSource: Nordic Energy Technology Perspectives (NETP) 2016
Appendix AThe Nordic electricity grid and baseline emission factors
The Nordic electricity grid
Generallyspeaking,alocalornationalmixforelectricitydoesnotexistintheNordiccountries,sinceelectricityiswidelytradedcross-borderwithneighboringcountries.Sincethemid-1990s,allNordiccountrieshaveliberalizedtheirelectricitymarkets,openingupbothelectricitytradingandelectricityproductiontocompetition.ThehighlyinterconnectedmarketisthecornerstoneoftheNordicenergysystemandisexpectedtoserveasakeyenablerforfurtheremissionreductionstowards2050.
Areportpublishedin2016bytheNordicCouncilofMinistersandtheInternationalEnergyAgency(“NordicEnergyTechnologyPerspectives2016),demonstratedthattheNordicelectricitysystemhadnetexportsofalmost15TWhin2015,andprovidedanoutlookforexpectedinterconnectednessin2050,seefigurebelow.Accordingtopreliminarydata25,importsandexportsamountedtojustover17TWheachin2019.NetimportswererecordedfromRussiaandGermanyandnetexportswererecordedtoEstonia,Lithuania,PolandandtheNetherlands.ConnectionsbetweenNorwayandtheUKisexpectedtostartoperatingin2021.
25 Swedenergy – Energiföretagen Sverige, "Kraftläget", sum of 52 weeks in 2019.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 36
Baseline emission factors for the electricity grid
WheneverfeasibleandrelevantwebasethesuggestedbaselinesontheIFIHarmonizedFrameworkandtheirstandardsforGHG-accounting(IFIFrameworkforGHG-accounting).26ThisapproachwasinitiallydevelopedforprojectsassociatedwiththeCleanDevelopmentMechanismandissupportedbyGHGProtocolguidelines27.
Itshouldbenotedthatthesemethodsarebasedonaconsequentialassessment,aimingtodescribehowenvironmentallyrelevantflowswillchangeinresponsetopossibledecisions-inthiscasetheeffectsofinvestmentprojectsonemissionsfromtheelectricitygridmargin.Thiscanbecontrastedwiththeattributionaloraccountingassessment,thatisconcernedwithattributingarelevantshareoftheglobalenvironmentalburdensthatbelongtoanexistingorganizationoractivity,basedonaveragedataandtypicallyusedforannualreporting.28
Developing a Combined Margin AccordingtotheIFIFrameworkforGHG-accounting,thebaselineemissionfactorisconstructedusingaCombinedMargin(CM)fortheelectricitygrid,comprisedofanexistingOperatingMargin(OM)andaBuildMargin(BM)frompotentialnewgenerationcapacity.
TheOMrepresentsthemarginalgeneratingcapacityintheexistingdispatchhierarchythatwillmostlikelybedisplacedbytheproject.TheBMiscalculatedbasedonanassessmentofplannedandexpectednewcapacitygenerationofthegrid,projectedoverthenext8yearsundertheNewPoliciesScenario(NPS)ofthemostrecentIEAWorldEnergyOutlook.ThisBMisamixofrenewableandfossilproduction,dependingonregions,startingpointsofgridsandGDP/capita.Formostgrids,thepresentOMhasamuchhigheremissionfactorthantheexpectedBM.
Whenaddingnewgenerationcapacitytoagrid,thisisassumedtoonlypartlyreplaceexistinggenerationcapacityonthemargin(OM),sinceitislikelythatintheabsenceoftheprojectimplementation,othergenerationprojectswouldatleasttosomeextentbeimplementedtomeetthedemandforpower(BM).IntroducingrelativeweightingstotheOM-BMisusedforsimplificationandasaproxytoestimateaCombinedMargin(CM),toavoidundueandcostlysimulationsontheeffectsofinvestmentsinthegridsystem.
TheIFI’sdeploytwoversionsoftheCM.Forvariablerenewableenergygeneration(e.g.windandsolarPV),theweightingis75%OM+25%BM.Forfirmrenewableenergygeneration(e.g.hydropower,concentratedsolarpower,geothermalandbiomass)andforenergyefficiencyprojects,theweightingis33%OM+67%BM.TheseCM’swereestablishedinaJuly2019revision,inwhichtheCMsforfirmrenewableelectricitygenerationandenergyefficiencyprojectswerechangedfromtheirpreviousdefaultweightsof50%OM+50%BM.
ThismeansthattheIFImethodnowassumesthatnewprojectsforenergyefficiencyandfirmrenewableenergyaremoreincompetitionwithalternativenewinvestments(BM)thanwiththeexistingOMofthegrid.Ontheotherhand,theIFImethodcreditsvariablerenewableelectricitygenerationwith75%OM+25%BM.TheresultinghigherCO
2displacementvalueisgivenbecause
variableenergyislesslikelytodisplacealternativenewinvestmentincapacitythatisalsoavailableatpeakloadtimes.
26 https://unfccc.int/climate-action/sectoral-engagement/ifis-harmonization-of-standards-for-ghg-accounting27 See “Guidelines for Quantifying GHG Reductions from Grid-Connected Electricity Projects”, published by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBSCD). See https://www.wri.org/publication/guidelines-quantifying-ghg-reductions-grid-connected-electricity-projects 28 See “Attributional and Consequential Life Cycle Assessment”, 2019, authored by Tom Ekvall, IVL Swedish Environmental Research Institute: https://www.intechopen.com/online-first/attributional-and-consequential-life-cycle-assessment
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 37
Appropriate Combined Margin weightings for the Nordic electricity systemDuringtherevisionofthispaperwehavebeenindialoguewiththeEIBandNIBrepresentativesoftheIFIapproach,concerningtheCombinedMarginassumptionsandthemeritsofharmonization.Fornow,wehaveresolvedtosticktoourpositionofpartiallydeviatingfromtheIFIapproach,forsimplificationpurposesandinordertobetterreflecttheNordicelectricitysystem.WearehoweveropenforfuturefurtherharmonizationwiththeIFI:sasmethodologiesdevelop.
WeviewtheaboveIFIassumptionsontheCMtobebetteralignedwith“closed”electricitysystems,where,implicitly,thereisafixedlevelofolder(non-BM)production.Forhighlyintegratedelectricitymarkets,suchastheNordicelectricitysystem,whichhasahighandincreasinglevelofinterconnectionalsotoneighboringnorthernEuropeancountries,theprerequisitesaredifferentinourview.ThenorthernEuropeanelectricitysystemalsohasexcesscapacity,whichcombinedwithexistingpoliticalambitionstoexpandrenewableenergyshouldresultinnewinvestmentcontributingtomorerapidclosing-downofolderfossil-basedenergyplants.
WewouldexpectthistoresultinpotentialformoreprojectsthatcanaffectandreplacetheOMofthe(entire)grid,andlessbeincompetitionwithotherpotentialprojects(BM).
WethereforerecommendusingaCombinedMarginfactorof50%OM+50%BMforallelectricity-basedprojects,includingallrenewableenergy(RE)andenergyefficiency/savedenergy(EE).Thisapproachalsoavoidsgivingmorecredittovariableenergygeneration,eventhoughsuchgenerationislesslikelythanfirmrenewableenergygenerationandenergyefficiencyprojectstodisplaceolderandfossil-richcapacitythatisalsoavailableatpeakloadtimes.Inusingthesamefactorforenergyefficiencyandrenewableenergywealsobelievewearealignedwiththeprincipleof“EnergyEfficiencyFirst”,advocatedbytheEUCommission.
Inordertosimplifyreportingrequirements,weapplythisapproachalsotoelectrificationprojectsthatleadtoanincreaseduseofelectricity,e.g.transportationprojects.Webelievetheuseofasinglefactoralsowillsimplifyforissuersandinvestorswishingtodeployownalternativeemissionfactors.
Combined margin applied by the Nordic Issuers WerecommendusingagridfactorbasedonEUMainland(EU27excludingMaltaandCyprus)andtheUKandNorwayasthedefaultbaselineemissionfactorforaccountinganddisclosureofelectricity.WebelievethisistherelevantbaselinebecausetheNordicelectricitymarketisalreadycharacterizedbyinterconnectionandexportsurplus.Furthermore,theintegrationofEuropeanelectricitymarketsisplannedtoincreaseinthecomingyearsanddecades,whichistherelevanttimeperspectiveformostinvestments(seefigureonpage35).
Fornow,weapplythefollowingbaselineemissionfactorforelectricity:
Combined Margin: 315 g CO2/kWh
➞=50%OperatingMargin(476gCO2e/kWh)+50%BuildMargin(154gCO
2e/kWh)29
ThisCMgridfactorcorrespondstothegeographicareaofEU25+theUKandNorway.Thebaselineemissionfactoristobeupdatedonaregularbasis(subjecttoavailabilityofdata),reflectingnewgridfactorsandotherrelevantchangesinconditionsandassumptions.
29 Calculation by Kommuninvest in November 2019, based on IFI Interim Dataset of Harmonized Grid Factors 11.05.2019, as provided by Nordic Investment Bank.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 38
IFI harmonized framework approach30 vs. Nordic issuers’ approach
Type IFI Approach Nordic issuers’ approach
Firmgeneration(e.g.hydropower,geothermalandbiomass)
CombinedMargin=33%OperatingMargin+67%BuildMargin(266gCO
2e/kWhfor
EU25+UK&Norway)
CombinedMargin=50%OperatingMargin+50%BuildMargin(315gCO
2e/kWhfor
EU25+UK&Norway)
Variablegeneration(windandsolar)
CombinedMargin=75%OperatingMargin+25%BuildMargin(396gCO
2e/kWhfor
EU25+UK&Norway)
CombinedMargin=50%OperatingMargin+50%BuildMargin(315gCO
2e/kWhfor
EU25+UK&Norway)
Energyefficiencyprojects,avoidedelectricityconsumptionfromthegrid,e.g.greenbuildingsandenergyefficiencyinpowerplants
CombinedMargininthereceivingelectricitygrid(Dependingonlifetimeofexistingequipmentetc.Forsimplification)=33%OperatingMargin+67%BuildMargin(266gCO
2e/kWhfor
EU25+UK&Norway)
CombinedMargin=50%OperatingMargin+50%BuildMargin(315gCO
2e/kWhfor
EU25+UK&Norway)
Electrificationprojects Gridaverage(subjecttodiscussion)(327gCO
2e/
kWhforEU25+UK&Norway)
CombinedMargin=50%OperatingMargin+50%BuildMargin(315gCO
2e/kWhfor
EU25+UK&Norway)
Alternative geographic boundaries AlternativegeographicboundariescouldbebasedonproductionintheNordicsonly(excludingIceland)orintheBalticSeaRegionincludingGermany,PolandandtheNetherlands.Thelatterwouldreflectcurrentgridinterconnection.SelectingafactorbasedonproductionsolelyintheNordicswouldresultinalowerbaselineforelectricity(122gCO
2e/kWh)butwoulddisregardthevalueof
existingandexpandingexportsoflow-carbonelectricityproduction.Ontheotherhand,basingthegridfactorontheenlargedBalticSearegionwouldresultinahigherbaseline(395gCO
2e/kWh),
effectivelyincreasingthereportedenvironmentalbenefitsfromincreasedrenewableenergycapacityorenergyefficiencysavings31.
30 https://unfccc.int/climate-action/sectoral-engagement/ifis-harmonization-of-standards-for-ghg-accounting31 Combined Margin in g CO2e/kWh, based on 50% OM: 50% BM: Denmark 294, Finland 194, Norway 59, Sweden 63, Estonia 860, Latvia 204, Lithuania 250, Germany 458, Poland 647, Netherlands 245.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 39
Theillustrationbelowcomparesalternativebaselinesandtheirrelativereportedenvironmentalbenefits.
Comparing alternative baselines (g CO2e/kWh)
1
CM:122
2 4
CM:262 GA:327
3
CM: 315
5
CM:395
6
CM:396
1: Alternative Nordic Position Paper (Nordics only): CM=50%OM+50%BM=122gCO
2e/kWh
2: IFI Harmonized Framework: CM=33%OM+67%BM=262gCO
2e/kWh
3: Nordic Position Paper (EU25 + UK & Norway): CM = 50% OM + 50% BM = 315 g CO
2e/kWh
4: European grid average (GA) (Grid average for EU25 + UK & Norway) =327gCO
2e/kWh
5: Alternative Nordic Position Paper (Nordics + Baltic States + Germany + Poland + Netherlands): CM=50%OM+50%BM=395gCO
2e/kWh
6: IFI Harmonized Framework: CM=75%OM+25%BM=396gCO
2e/kWh
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 40
Appendix BCalculating impact from district heating projects
In2017,theSwedishlocalgovernmentdebtofficeKommuninvestcommissionedProfu32,anenvirotechconsultancy,todevelopacalculationmethodforthenetCO
2-effectfordistrictheatingin
SwedentobeusedinKommuninvest’sfirstgreenbondsimpactreport,publishedinMarch2017.
Thisresultedinthedevelopmentofanational-average-baselineemissionfactorfordistrictheating,representingtheavoidedemissionsfromalternativeheatingsources.Thebaselinewasestablishedat117gCO
2/kWh(Scope2),beingamixofavoidedalternativeindividualheatingsourcesusingcurrent
technologiesforwoodpelletboilersandvarioustypesofheatpumps(20%pellet-firedboilers,45%geothermalheatpumps/groundsourceheatpumps,28%air/waterheatpumpsand7%air/airheatpumps).
SincewasteburningtypicallyformspartoftheenergymixinSwedishdistrictheatingplants,additionalenvironmentalbenefitisascribedtotheprojectduetotheavoidanceoflandfillandmethaneleakage,inothercountrieswherelandfillisstillused.
Thiscorrespondsto41gCO2/kWhasanationalaverageforsolidwasteindistrictheating,basedona
baselineemissionfactorof170gCO2e/kWhforwaste.Thetotalbaselineemissionfactorappliedfor
themajorityofKommuninvest’sdistrictheatingprojectsistherefore158gCO2e/kWh.
DirectemissionsarecalculatedfromnationalaverageemissionsfordistrictheatinginSweden(whichcouldbesubstitutedwithafactorforthelocalenergymix).Theaverage2018was63gCO
2/kWh
(scope2,including5%fossilfuels),source:Energiföretagen.
Usinganationalaverageasabaselinefactorfordistrictheatingisfeasibleforaportfolioofinvestmentprojectsandexpansionofproductionandsupply,butlocalcircumstancesandactualchangesinproductionmixneedtobeconsideredforprojectssuchasenergyefficiency,increasedinterconnectionandotherchangesintheproductionmix.
32 Profu report (in Swedish only): ”Stöd till klimatutvärdering av gröna investeringar inom fjärrvärmeområdet”, February 2017.
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 41
Appendix CExecutive summary template
Executive Summary AS OF 31 DEC 2018
CO2 IMPACT AND GREEN INDICATORSbased on outstanding disbursed amounts1
Project category
GHG emissions reduced/ avoided, tonnes CO2e/year
Outstanding disbursed amounts to projects, SEK mn
Impact, tonnes CO2e per SEK mn
Renewable energy 634,446 7,878 80.5
Green buildings 4,915 13,295 0.4
Energy efficiency 21,796 235 92.7
Clean transportation 651 730 0.9
Waste management 583 155 3.8
Water management n/a 3,442 n/a
Climate change adaptation n/a 16 n/a
Total 662,390 25,750 n/a
Disbursed amounts with CO2 impact 22,293
Impact, tonnes CO2e per SEK mn 29.7
Annual renewable energy generation, GWh 3,032,220 MWh p.a.
Annual energy reduced/avoided, MWh 144,706 MWh p.a.
1) This table presents the calculated impact in terms of CO2 reduced or avoided. Aggregated project data reported represent both ex-ante estimates and ex-post outcomes. Reporting methodology presented on pages 38–46. The complete project-by-project-reporting is available in spreadsheet format at kommuninvest.se ==> For investors ==> Green Bonds ==> Impact Reporting.
GREEN BONDS ISSUANCE AND GREEN PROJECT PORTFOLIO
0
5
10
15
20
25
30
35
40
SEK bn
Total commitments to projects
Disbursed to projects
2018201720162015
SEK 3bn Green Bond (6/2023)
SEK 3bn Green Bond (12/2021)
USD 500m green bond (06/2021)
SEK 5bn green bond (05/2020)
USD 600m green bond (04/2019)
Disbursed Green Loans Committed Green Loans (not yet disbursed)
USD 600m Green Bond (04/2019) SEK 5bn Green Bond (05/2020) USD 500m Green Bond (06/2021) SEK 3bn Green Bond (12/2021) SEK 3bn Green Bond (06/2023)
KEY FACTS • The Green Project portfolio exclusively consists of
Green Loans to Swedish municipalities and regions. Each loan is selected according to the Kommuninvest Green Bonds Framework (see pages 14–16). The complete framework is available online.
• Kommuninvest reports on a portfolio basis in Swedish kronor (SEK). F/X rate as per the date of Green Bonds issuance.
• Kommuninvest reports impact based on the share of the project’s total investment cost financed with green bonds. Impacts are based on outstanding disbursed amounts to projects (net of redemp-tions).
• Reporting is undertaken in accordance with recommendations outlined in the Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting.
GREEN PROJECT PORTFOLIO DISTRIBUTION
based on disbursed amounts
Renewable energy 30 %
Waste management 1 %
Energy efficiency 1 %
Climate change adaptation 0 %
Green buildings 51 %
Clean transportation
3 %
Water management
14 %
Basic information
Green Bond Frameworks applied
Report comprises projects financed under GB frameworks dated March 2018, January 2016 and May 2015
Related Green Bond ISIN(s) XS1383831648 (RegS) / US50046PAU93 (144A); XS1508534861; XS1618289802 (RegS) / US50049GAB86 (144A); XS1897258098; XS1814404577
External verifier of allocation report
KPMG
Reporting period Reporting for calendar year 2018. Comprises all eligible projects financed from GB programme start in 2015 until year-end 2018.
Report publication date April 4, 2019
Frequency of reporting Annual
Next reporting planned for March/April 2020
Reporting approach Portfolio-based and project-by-project reporting
Impact attributable to green bond investors1 78%
Whereof impact attributable to Green Bond USD 600 mn maturing 23 April, 2019 19%
Whereof Impact attributable to Green Bond SEK 5 bn, maturing 5 May, 2020 19%
Whereof Impact attributable to Green Bond USD 500m, maturing 1 June, 2021 17%
Whereof Impact attributable to Green Bond SEK 3 bn, maturing 15 December, 2021 12%
Whereof Impact attributable to Green Bond SEK 3 bn, maturing 1 June, 2023 12%
1) Total outstanding green bonds divided by total outstand-ing disbursed amounts to projects (in SEK).
Availableatkommuninvest.seGreenBondsImpactReporting
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 42
Project categoryProject examples (non-exhaustive)
Document reference Indicators Unit Mandatory Baseline / benchmark
General principles for all categories
Renewable energyGBP category for reference:Renewable energy
• Wind power generation #27Emission factor for electricity: European mainland mix including Norway, 315 g CO2 per kWh (or detailed approach), see apendix B. Emission factor for district heating: Swedish issuers may apply 158 g CO2 per kWh, see Appendix B.
• Solar power plants Capacity of energy generation of plant MW Y• Geothermal energy Annual renewable energy generation MWh or GWh Y• Bio-energy Annual GHG emissions reduced/avoided Tonnes CO2e Y
Energy efficiencyGBP category for reference: Energy efficiency
• Retrofitting of existing buildings or installations
#29 Annual energy reduced/avoided (electricity and other energy savings)
MWh or GWh Y
• Smart technology aimed at reducing energy consumption
Reduction in energy use Percentage Y
Annual GHG emissions reduced/avoided Tonnes CO2e YGreen buildingsGBP category for reference:Green Buildings
New or retrofitted buildings satisfying the issuer's energy and /or building standard requirements
#28 Energy avoided below national building standards kWh/m2, or percentage (%)
National building codes or standards
Annual energy avoided compared to the relevant building code (for new buildings)
MWh or GWh Y National building codes or standards
Annual energy reduced compared to the pre-investment situation (for refurbishments)
MWh or GWh Y
Annual energy production on-site MWh or GWhAnnual GHG emissions reduced/avoided Tonnes CO2e Y
Clean transportationGBP category for reference:Clean transportation
• Non-fossil public transportation systems
#30 Annual GHG emissions reduced/avoided, from cars and other vehicles, due to the investment
Tonnes CO2e Y Average emissions by km for alternative transportation.• Infrastructure for bicycles and
pedestriantsNumber of km of new train lines, bicycle lanes etc. created Km
• Infrastructure for electric vehicles Passenger-kilometres in new means of transportation KmN/A
Estimated reduction in car use and car kilometres the project will replace
Km
Project’s effect on increased resilience to climate changeWaste managementGBP category for reference: Pollution prevention and control
• Energy efficient and resource-preserving waste treatment
#31 Reduced/avoided GHG emissions as a result of the investment (See also Appendix B)
Tonnes CO2e
N/A
• Biogas production from organic waste
Amount or share of waste that is prevented, minimised, reused or recycled before and after the project
Tonnes, Percentage (of total waste)
Amount of waste that is separated and/or collected and treated (including composted) or disposed of
Tonnes, Percentage (of total waste)
Number of tonnes processed in the facility Metric tonnesMaterial recovery rate PercentExpected improvement in material recovery rate or other target for improved resource use
Percent
Number of households delivering to the facility Number of households
Energy produced (in case of biogas/waste-to-energy plant) kWh/MWh/GWhEnergy saving attributable to the investment kWh/MWh/GWhProject’s effect on increased resilience to climate change Tonnes CO2e
Water and wastewater managementGBP category for reference:Pollution prevention and control
• Energy-/ emission efficient water and wastewater management
#32 Annual water savings m3
N/A
• Biogas production from wastewater
Annual volume of wastewater treated or avoided m3
Capacity of plants being built m3 or litres/m3 per minute/hour/day or year
Number of metres of piping/conduit laid, upgraded, replaced MetresNumber of person equivalents (PE) of water or wastewater the plant processes, identifying any increase that can be attributed to the investment
Number of people or PE
Reduction of emissions into the local environment (nitrogen and phosphorous, Biochemical Oxygen Demand, etc)
Kilos/tonnes or litres/m3
Amount of electricity, biogas or other energy carrier produced annually expected to be produced each year, if relevant. Include avoided CO2 emissions
kWH or MWh, tonnes CO2e
Health metrics (such as air and water quality) Biological metrics: biological diversity, wildlifeProject’s effect on increased resilience to climate change
Sustainable land use / environmental managementGBP categories for reference:Terrestrial and aquatic biodiversity conservation; Environmentally sustainable management of living natural resources and land use
• Biodiversity conservation #33 A number of qualitative and quantitative indicators may be relevant, see section #31
N/A
• Reforestation Number of species Number• Restoration of wetlands Number of individuals in target population Number
Area reforested or converted m2 or hectaresArea of habitat or wetland restored m2 or hectares
Climate change adaptationGBP category for reference:Climate change adaptation
Climate change adaptation measures such as:
#34 A number of qualitative and quantitative indicators may be relevant, see section #32
N/A
• Heat protection Areas protected (such as building fasades) or number of heat shields etc
m2 or number of items
• Storm protection Areas protected (building fasades or land such as school yards, hospital facilities, city centres)
m2 or number of items
• Systems for enhanced resilience• Water management systems
(to prevent or mitigate flooding)Capacity of system or area covered m3 or drainage
areas covered in km2 or hectares
1.
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Appendix D Summary of recommendations
Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting 43
TheNordic Position Paper on Green Bonds Impact Reportingisapracticalguideonimpactreporting.ItprimarilytargetspersonsengagedinimpactreportinginNordicpublicsectorissuerorganizations,butmaybebeneficialtootherissuersandtheGreenBondmarketasawhole.CréditAgricoleCIB,theNordicInvestmentBankandSEBhaveactedasadvisorstothegroupofsignatories.