Nordic Public Sector Issuers Position Paper on Green Bonds … · 2020-02-18 · 12358 #.Rep8 #or t23#xccRr3cd#.2c8t82i#.mar3#2i#,3rri#n2i5c#xgam t#fra23t8iu 3 Introduction and purpose

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


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


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).


Summary


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.


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


Reporting principles


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.


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.


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.


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.


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.


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.


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


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


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


Climatechangeadaptation

Energyefficiency


n/a

Cleantransportation


Pollutionpreventionandcontrol

Wastemanagement

Transitiontoacirculareconomy,wasteprevention,andrecycling

PollutionpreventionandcontrolClimatechangemitigation

Waterandwastewatermanagement

Sustainableuseandprotectionofwaterandmarineresources

ClimatechangeadaptationPollutionpreventionandcontrolClimatechangemitigation

Sustainablelanduse/environmentalmanagement

Protectionofhealthyecosystems

ClimatechangeadaptationClimatechangemitigation



n/a


Environmental impact methodology


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)


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


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.


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.


Project category recommendations


Project category recommendationsThischapterpresentsimpactreportingrecommendationsspecificallyrelevanttoeightprojectcategoriesthattypicallydominateNordicpublicsectorgreenbondsframeworks:

•Renewableenergy(incl.wind,solar,hydro,wave,bioenergy,geothermal,excessheat)•Greenbuildings•Energyefficiency•Cleantransportation•Wastemanagement•Waterandwastewatermanagement•Sustainablelanduse/environmentalmanagement•Climatechangeadaptation

ThislistmaybeupdatedastheuniverseofprojectseligibleforgreenbondfundingbyNordicissuersevolves.


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


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.


Suggested indicators

•AvoidedkWh/sqm,orinpercentageterms(%)belownationalbuildingstandards

•AnnualenergyavoidedinMWhorGWhcomparedtotherelevantbuildingcode(fornewbuildings)

•AnnualenergyreducedinMWhorGWhcomparedtothepre-investmentsituation(forrefurbishments)

•Annualenergyproductionon-site,inMWhorGWh

•AnnualGHGemissionsreduced/avoided,intonnesofCO2-equivalents




Suggested SDGs



•Annualenergyreduced/avoidedinMWhorGWh(electricity)andMWhorGWh(otherenergysavings)

•AnnualGHGemissionsreduced/avoided,intonnesofCO2-equivalent




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


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.


•AnnualGHGemissionsreduced/avoided,fromcarsandothervehicles,duetotheinvestment(bycomparisontoaverageemissionsbykmforalternativetransportation)

•Numberofkmofnewtrainlines,bicyclelanesetc.created

•Passenger-kilometresinnewmeansoftransportation

•Estimatedreductionincaruseandcarkilometrestheprojectwillreplace

•Project’seffectonincreasedresiliencetoclimatechange



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


31. Waste management

Anumberofquantitativeandqualitativeindicatorsmayberelevantforimpactreportingonwastemanagementprojects.Issuersareencouragedtoselectandreportonindicatorsthatarerelevantandfeasibleforeachindividualprojectandfortheirportfolioofwastemanagementinvestmentsasawhole,includingbutnotlimitedtothosementionedbelow.TheseincludemetricsoutlinedinapaperproducedbytheimpactreportingworkinggroupoftheGreenBondPrinciples,whichissuersareencouragedtoconsult23.


•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



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


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


•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



Primary Objective:Sustainableuseandprotectionofwaterandmarineresources

Secondary Objective: ClimatechangeadaptationPollutionpreventionandcontrolClimatechangemitigation

Suggested SDGs


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.


•Numberofspecies

•Numberofindividualsintargetpopulation

•Areareforestedorconverted

•Areaofhabitatorwetlandrestored


Primary Objective:Protectionofhealthyecosystems

Secondary Objective: ClimatechangeadaptationClimatechangemitigation

Suggested SDGs


34. Climate change adaptation

Theobjectiveofprojectsinthiscategoryistoimprovelocalcommunities’resilienceinthefaceofachangingclimate.Projectsinthiscategorymayincludefacilitiesandinstallationstomanageurbanrunoff,floods,landslides,avalanches,risingsealevelsetc.Thislistisnotcomprehensive,asthereisconsiderablelocalvarianceinthetypesofmeasuresneeded.

Theresilience-enhancingqualitiesofaprojectarepreferablydocumentedthroughquantitativeindicators,iffeasible.Quantitativeindicatorscanbecomplementedbyqualitativedescriptionsoftheproject’scharacteristicsandtheweather-relatedandclimate-relatedeffectsitseekstoaddress.


•Areasprotectedagainstheat(suchasbuildingfasades)ornumberofheatshieldsetcm2ornumberofitemsofheatprotection

•Areasprotectedagainststorms(buildingfasadesorlandsuchasschoolyards,hospitalfacilities,citycentres)m2ornumberofitems

•Capacityofsystemorareacovered,forexampleforwatermanagementorregardingenhancedresilience


Primary Objective:Climatechangeadaptation


Suggested SDGs


Appendices


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.


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


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.


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)


2e/kWhfor

EU25+UK&Norway)

Variablegeneration(windandsolar)


2e/kWhfor

EU25+UK&Norway)


2e/kWhfor

EU25+UK&Norway)

Energyefficiencyprojects,avoidedelectricityconsumptionfromthegrid,e.g.greenbuildingsandenergyefficiencyinpowerplants

CombinedMargininthereceivingelectricitygrid(Dependingonlifetimeofexistingequipmentetc.Forsimplification)=33%OperatingMargin+67%BuildMargin(266gCO

2e/kWhfor

EU25+UK&Norway)


2e/kWhfor

EU25+UK&Norway)

Electrificationprojects Gridaverage(subjecttodiscussion)(327gCO

2e/

kWhforEU25+UK&Norway)


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.


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


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.


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

https://kommuninvest.se/en/funding-and-funding-need/greenbonds/impact-reporting/




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

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Appendix D Summary of recommendations


TheNordic Position Paper on Green Bonds Impact Reportingisapracticalguideonimpactreporting.ItprimarilytargetspersonsengagedinimpactreportinginNordicpublicsectorissuerorganizations,butmaybebeneficialtootherissuersandtheGreenBondmarketasawhole.CréditAgricoleCIB,theNordicInvestmentBankandSEBhaveactedasadvisorstothegroupofsignatories.

Documents

Nordic Public Sector Issuers Position Paper on Green Bonds … · 2020-02-18 · 12358 #.Rep8 #or t23#xccRr3cd#.2c8t82i#.mar3#2i#,3rri#n2i5c#xgam t#fra23t8iu 3 Introduction and purpose