Investor report 2016

Increased use of green bonds

For the fourth year in a row the City of

Gothenburg has issued a green bond within

the framework of its Environmental

programme aimed at projects involving

renewable energy, public transport, water

treatment, energy efficiency, smart grids,

urban planning and waste management. The city returned to the market on June 15

2016 and issued SEK 1bn with maturity in

2022. Over the last four years a total of

SEK 4,36 bn has been issued.

The funds from the green bonds are

earmarked and dedicated to finance green

projects defined within the city's

framework for green bonds. The interest

from the market has been strong and green

bonds as a phenomenon continue to grow.

This shows that there is a strong appeal to

green investments and that investors are

interested in green alternatives even in

times of high volatility on the financial

markets.

City of Gothenburg’s green bonds

SEK

bn

Issued Maturity ISIN

0,25 13-10-03 19-10-03 XS0976165828

0,25 13-10-03 19-10-03 XS0976166719

1,5 14-06-03 20-06-03 XS1073521988

0,31 14-06-03 20-06-03 XS1073488675

1,05 15-06-30 21-06-03 XS1253847815

1,00 16-06-15 22-06-15 XS1433082861

Great demand for green investment Investors are increasingly focused on

integrating environment, social and

governance factors into their investment

strategy. Around 1700 investors with

$65trn of assets under management have

made public commitments to responsible

investments, and the demand for green

bonds is coming from a range of investors.

The green bond market has taken off in

recent years, with USD 42 billion issued in

2015 and USD 89,5billion in 2016.

”As an investor with a

strong focus on

climate change, we

can only applaud the

City of Gothenburg’s

work with green

bonds, and hope that

many cities will

follow suit” Gunnela Hahn, Head of Responsible Investment,

Church of Sweden Highest GB1 grade assigned to City of Gothenburg Moody’s investors service has may 31,

2016, assigned a Green Bond Assessment

(GBA) of GB1 to the City of Gothenburg’s

Green Euro Medium Term Note Offering.

GB1 is for the development of a formal

and rigorous process to identify, consider,

evaluate and select eligible projects for

funding through the issuance of Green

Bonds. The definition of GB1 is how the

green bond issuer has adopted an excellent

approach to manage, administer, allocate

proceeds to and report on environmental

projects financed with proceeds derived

from green bond offerings. Prospect for

achieving stated environmental objectives

are excellent.

”For the Folksam

group green bonds

offer a very good way

to be with, and fund the

transition to a

sustainable society

without sacrificing

return. It is a

commitment that is important for our

customers”

Birgitta Stenmark, Head of special investments,

Folksam asset management

Eligible projects

The proceeds from the green bonds are

used to finance projects defined within the

city's framework for green bonds. Eligible

projects are fully or partially funded by the

city in order to promote the transition to

low carbon and climate resilient growth in

line with the City’s Environmental

Programme and Climate Strategy.

Eligible projects may include projects that

target:

Mitigation of climate change, including

investments in low-carbon and clean

technologies, such as energy efficiency and

renewable energy programs and projects

(mitigation projects) or

adaptation to climate change, including

investments in climate-resilient growth

(adaption projects) or

to a smaller extent projects which are

related to a sustainable environment rather

than directly climate related.

Green bonds framework

A framework has been established by the

City of Gothenburg which constitutes the

basis for the city’s work with green bonds.

In March 2015, the requirements for

projects financed within the framework for

green bonds were specified. This was done

in order to assure that there are clear and

concrete requirements placed upon the

projects. Project within the following areas

are included within the framework:

Renewable energy (solar, wind,

wave, bio, waste and hydro)

Energy efficiency

Waste and water management

Biofuel

Smart grids

Sustainable transportation (e.g.

public transport, cycle and shipping

infrastructure)

Sustainable housing (e.g.

infrastructure and construction)

Environmental (max 20 %)

- Biodiversity

- Water clearing facilities

- Air pollution

- Chemicals

“NIB invests as a

long-term lender in

the City of

Gothenburg’s green

bonds to help finance

projects that promote

the transition to low-

carbon and

environmentally

sustainable growth. NIB targets bonds with

high creditworthiness and cooperates with

arranging banks to develop the green bond

market”

Thomas Wrangdahl, First Vice-President and Head

of Lending at NIB

Projects 2013-2016

Momentum for change

The momentum of change initiative is

spearheaded by the United Nation Climate

Change secretariat to shine a light on some

of the most innovative, scalable and

replicable examples of what people are

doing to address climate change.

The Gothenburg Green bonds project was

awarded under the Momentum for Change

Financing for Climate Friendly Investment

and for its work to bring new and

innovative green finance to the municipal

level: “A ground-breaking project based in

Gothenburg, Sweden, has pioneered green

debt instruments to accelerate climate

action and sustainable development in

Scandinavia”.

“The City of

Gothenburg has won

a wide recognition,

in Sweden and

internationally, for

its pioneering work

with green financing

of their green investments. We at SEB has

been privileged to follow this closely since

the first framework for green bonds was

developed in 2013 to the development of

their first impact report in 2016.

What characterize the city’s work with

green bonds is innovative strength,

courage, determination and humility. This

is reflected both by the city’s ability to

attract large groups of investors to come

on field trips, for example Lackarebäcks

waterwork and of the national and

international awards that the City of

Gothenburg has been awarded. These

recognitions for innovative work with

green finances is based on Gothenburg’s

long term and solid environmental efforts,

at the ground as well as at the policy

level.”

Mats Olausson, Senior Advisor, Climate &

Sustainable Financial Solutions, SEB

Green bond investor meeting

10 investors were invited to Gothenburg

for a full day of green bond discussions

and presentation on june 2nd

. City of

Gothenburg also presented its first impact

report, the first of its kind from a Nordic

issuer. The innovative report provides

additional transparency and insight to

investors on the environmental and

sustainability impacts of financed projects.

Because there are currently no established

standards or models in regards to impact

reporting of projects financed with Green

Bonds, the city of Gothenburg is

continuously working on developing and

improving the methods of reporting the

climate and environmental impacts to its

investors.

The event also included a visit to

Lackarebäcks Ultrafilter. Ultrafilters have

been installed in 2013 at a cost of SEK 700

million. This investment is one part of the

work the Eco-cycle and Water committee

is doing to assure clean drinking water of

the highest quality for all citizens.

Joint Nordic issuer discussion on Impact Reporting

The City of Gothenburg forms part of a

group of Nordic public sector issuers of

green bonds1 which during 2016 initiated

discussions regarding a joint common

approach to green bonds impact reporting.

This was done in the belief that a common

Nordic position to the issues involved may

be beneficial to other green bond issuers as

well as the investor community. Issuers

also believe that sharing experiences and

know-how will benefit all as individual

issuers.

The purpose of the work is to develop a

transparent, harmonized and relevant

approach to report impact from green

bonds. The group’s ambition is to develop

a practical guide for Nordic green bond

issuers, for publication in the second half

of 2017. The outcome of this work may

have an effect on how the City of

Gothenburg reports impact in the future.

1 Participants (FI=Finland, NO=Norway, SE=Sweden): City

of Göteborg (SE), Kommunalbanken (NO), Kommuninvest (SE), Municipality Finance (FI), Municipality of Borås (SE), Municipality of Norrköping (SE), Municipality of Örebro (SE), Stockholm County Council, SLL (SE), Swedish Export Credit Corporation, SEK (SE)

"City of Gothenburg is

a true pioneer in the

Green Bond market. As

the first Nordic issuer

to publish a dedicated

impact report and a

Moody's Green Bond Assessment,

Gothenburg has once again taken an active

role in further developing the market place

and ensuring its place at the forefront in

terms of disclosure and standards. We are

very happy to be working with them.”

Tobias Lindbergh. Head of Sustainable Finance,

Handelsbanken

Alignment with green bond principles

Projekt/administration A/M/E Area Effect/indicator* 2013 2014 2015 2016 2017 2018 2019

Ultrafilter

Eco-cycle and water

administration

A Environment 39400 sick days prevented on average per year.*

100 % of water passing through waterworks can

be processed.

150 420 0

GoBiGas

Göteborg Energi AB

M Biofuel Annual energy produced MWh 14 300 620

Electric cars

Gatubolaget

M Energy efficiency

and sustainable

transportation

Annual GHG emissions avoided tons of CO2 eq:

148

30 18,6 11,3

Denitrification

Gryaab AB

E Environement Expansion of a water treatment plant in order to

reach denitrification rate of 80 % (from 60-65)*

47 110 164 30

Tree Planting

Parks and landscape

administration

A/M/E Environment Trees are planted annually. 8,3 5,7 5,1 7 7 7

Celsius

Göteborg Energi AB

M Energy efficiency

and renewable

energy

Annual GHG emissions avoided tons

of CO2 eq: 500

Up to 90 % less power requirement for

electricity.

5 0

The Pedestrian City

Road Traffic

Administration

M Sustainable

transportation

Improved conditions for pedestrian traffic 50,3 9,7 36 35,8 29,7

The Bicycle City

Road Traffic

Administration

M Sustainable

transportation

Improved bicycle infrastructure 60,4 27,5 92,1 120 150

Traffic lights

Road Traffic

Administration

M Energy efficiency

and sustainable

transportation

Annual GHG emissions avoided tons

of CO2 eq: 424

48,9 41,5 37,1 37,9 33,1

Sustainable housing

Lokalförvaltningen

M Sustainable

housing

Annual energy savings MWh: 34 %

Estimations show 50-60 tons of CO2 emissions

will be avoided annually.

382 313,5 497,5 351 810,5 613

Sustainable housing

Förvaltnings AB

Framtiden

M Sustainable

housing

Annual energy savings MWh: 33 %.

388,1 427 500 500 500

New Trams

Göteborgs Stads Leasing

AB

Sustainable

transportation

Increased capacity and energy efficiency in public

transport

170 135 320 600

Amount per year 480 880,9 1608,2 1342,3 1188,2 1831,2 1932,8

Total 480 1360,9 2969,1 4311,4 5499,6 7330,8 9263,6

*Figures are for 2016. Updated figures will be presented next Impact Report (2018)

Project Project description

Ultrafilter

Department of sustainable waste

and water

To increase the purification efficiency of the waterworks in Lackarebäck, Ultrafilters have been installed at a cost of SEK

600 million. This investment is one part of the work the Department of sustainable waste and water is doing to assure that

clean drinking water of the highest quality is provided for all citizens. The ultrafilter will work in conjunction with the

already existing water treatment systems. The investment will have several positive effects. It will guarantee healthy water

of which the effects can be measured in the amount of sick days avoided for the population. Bigger disease outbreaks

transmitted through water, which have been observed both domestically and internationally can also be avoided. By the

end of 2015 all water exiting the Lackarebäck waterworks are forecasted to be processed by the Ultrafilters which adds

protection against waterborne microorganisms carrying diseases. In the coming years the project is focused on upgrading

“the old” parts of the waterworks to the new standard.

Read more. GoBiGas

Göteborg Energi AB

GoBiGas (Gothenburg Biomass Gasification), a concept facility for large scale production of biogas has now completed

the initial phase and is in continuous operation. In just a month in 2015 enough renewable fuel was generated to power 14

000 cars. In that same month, enough district heating for 1000 houses were delivered. The facility's capacity is now 20

MWh which means up to 36 000 tons of C02 emissions can be avoided each year.

Read more.

Electric cars

Göteborg stad leasing

In the first year of the project the municipal company could celebrate the purchase of its 100th electric car. Since then the

car fleet has been increased with even more environmentally friendly alternatives and quick chargers. The company is

responsible for the city's vehicles. The ambition is to replace the majority of the city's personnel car fleet with electric cars.

Even more electric vehicles have been purchased. This includes electric cars, electric bikes and some smaller electric

vehicles. Since the city purchases green electricity the CO2 emissions from the electric vehicles are almost decreased by

100 %. About 95 % of the company's vehicle fleet is classified as environmentally friendly.

Read more.

Denitrification

Gryaab

In order to fulfill Sweden's commitment in the Baltic Sea Action Plan and to handle growth in population size Gryaab is

expected to increase its capacity for denitrification from 60-65 % to 80 %. Gryaab has therefore decided to invest SEK 360

million on an extension of the facilities.The nutrient nitrogen affects the eutrophication in the seas. Gryaab's denitrification

is organized in two steps. The first step involves bacteria converting ammonium to nitrate. The second step converts the

nitrate to nitrogen. By doing this, nitrate reaching the seas can be avoided. The new investments are focused on the first

step of the denitrification process, which is an effective way of processing a lot of water in a small area.

Read more.

Project Project description

Tree planting

Parks and Landscape

Administration

Several planting projects are taking place in the city. A big variation of trees improves biodiversity and makes the city a

greener place. The Parks and Landscape Administration strive in its work to create good conditions for the trees in the

city. The administration is actively working with planting and replanting trees in parks and avenues to ensure that the city

stays green in the future. Work is also actively being done through active planning in the projects to minimize future

problems regarding spacing between trees, both over and under the ground level. The project is an investment in green

infrastructure promoting ecologically functional networks of habitats and structures, preserving biodiversity.

Read more.

Celsius

Göteborg Energi AB

The extent of Gothenburgs district heating system is unique in Europe. Together with the City of Gothenburg Göteborg

Energi AB is leading the EU project Celsius. The purpose of Celsius is to share knowledge about district heating and

cooling in order to help other cities in Europe develop and optimize their district heating systems. Through this work the

transition to a fossil free society is benefited. This type of solution also contributes to reaching the EU goal of increasing

energy efficiency by 20 % by 2020. The City of Gothenburg and Stena Line are also first in the world in heating a large

ferry with a new type of heat exchanger when it’s docked. The ferry is also provided with electricity when docked. This

investment reduces CO2 emissions by 500 tons per year. Instead of heating water in a washing machine or the air in a

dryer, district heating can be used as a heat source. With this technology it’s possible to replace up to 80 % of the needed

electricity and in doing so reducing the power requirement by up to 90 %. With district heating the heat comes from a heat

exchanger in the machine rather from electricity.

Read more. The Pedestrian City

Road Traffic Administration

According to the city's traffic strategy a decrease in car traffic by 25 % is needed regardless of increases in the population

in order for the city to reach its goal of 80 % less CO2 emissions from the road traffic in Gothenburg. The city's strategy

involves making room for and prioritizing pedestrians, cyclists and public transport, but also facilitating and developing

green ways to travel. The project involves measures directed at making the city better for pedestrians from both traffic

security and accessibility perspectives. The investments involve walkways, accessibility in the city and other urban

development measures.

Read more.

The Bicycle City

Road Traffic Administration

According to the city's traffic strategy a decrease of car traffic by 25 % is needed regardless of increases in the population

in order for the city to reach its goal of 80 % less CO2 emissions from the road traffic in Gothenburg. The city's strategy

involves making room for and prioritizing pedestrians, cyclists and public transport, but also facilitating and developing

green ways to travel. The starting point for the project is the city's bicycle programme. It mainly pertains to accessibility

for cyclists but smaller measures involving traffic security, parking and traffic lights directed at making bicycle traveling

more convenient are also included in the project. The city has set up a goal; the amount of traveling done with bicycles

should be tripled by 2025.

Read more.

Project Project description

Traffic lights energy efficiency

Road Traffic Administration

In order to improve the energy efficiency of the traffic lights in the city, investments have been made to replace old fittings

with modern LED fittings. In accordance with the current strategy, replacements has been made on busy streets and roads

with a high amount of public transports in order to minimize the need for service, repairs and future maintenance

shutdowns. By replacing ineffective fittings energy savings of around 60 % have been accomplished. In more peripheral

areas energy reductions of about 40 % have been made. The strategy is to also adjust lighting levels during periods where

the frequency of traffic is low including night adjustments in order to save both energy and to reduce the need for

maintenance.

Read more. Sustainable housing

City Premises Administration

Buildings constructed by the City Premises Administration should not use more energy than 45 kWh/m² and year for

heating, water heating and other services. This is 60 % lower than the requirements put forward by the National board of

Housing, Building and Planning and is also in line with the standard for passive housing. There are also rigorous

requirements regarding energy performance and the components used in the facilities. These rules include low energy

lights and energy efficient household appliances.

Read more.

Sustainable housing

Förvaltnings AB Framtiden

New constructions are certified by the eco label Svanen. This means they fulfill the requirements placed on the

construction process, materials and energy usage. The requirements on the indoor areas are stringent as are the

requirements on the impacts on the external environment. These conditions include proper and environmentally conscious

handling of construction waste and low energy consumption. The rules regarding hazardous materials are also very strict.

A construction where the energy consumption is lower than 60 kWh/m² and year was also finished.

Read more.

New trams

Göteborg Stad Leasing/Göteborg

Spårvägar

The first two trams will be delivered to the City of Gothenburg in 2019 for a test drive before the remaining trams will be delivered.

Some of the positive effects from the new trams include almost 30 % less energy per passenger than the Italian trams (M32) and thanks

to the technical solutions and the design of the vehicle the M33 will generate low noise levels, significantly lower than existing

vehicles. The new trams have also promised a recovery rate of more than 95 %.

Read more.