Highest GB1 Grade Assigned to City of Gothenburg Green Notes Offering
New York, May 31, 2016 -- Moody's Investors Service has today assigned a Green Bond Assessment (GBA)
of GB1 to the City of Gothenburg's Euro Medium Term Notes to be
issued pursuant to the City of Gothenburg's Euro Medium Term Note
Programme. The final maturity and amount will be determined prior
to issuance.
The proceeds from the note offering will be allocated to finance eligible
environmental projects that qualify under the City of Gothenburg's
Green Bond Framework. Such projects may be oriented toward mitigation
of and adaptation to climate change, or can be focused on achieving
a sustainable environment, up to a maximum of 20%,
may be fully or partially funded by the city. These projects are
described in more detail in the City of Gothenburg's annual investor
reports, both in terms of currently funded projects as well as forecasted
allocations to existing or new projects.
ASSESSMENT RATIONALE
The City of Gothenburg (Aaa stable), which has already issued three
green transactions between 2013 and 2015, for a total of SEK3.36
billion (about $405.4 million, based on current exchange
rates), is planning to issue a note under the City's Euro
Medium Term Note Programme, with the proceeds to be allocated to
finance both existing as well as new environmental projects.
The City of Gothenburg has developed a formal and rigorous process to
identify, consider, evaluate and select eligible projects
for funding through the issuance of green bonds.
Within the broad context of the City's Environmental Program and
Climate Strategy initiatives, municipal companies and city administrations,
which annually submit investment reports covering the next 10 years,
are asked to identify any investment projects that they believe might
be suitable for financing via the issuance of green bonds. These
reports, as well as any others that may be identified as potentially
eligible, are segregated and reviewed by the City Office (both Urban
Development and Treasury Departments). Projects are reviewed for
both their financial considerations and environmental impacts.
The outcome, if positive, results in the submission of an
application for funding through green bonds that is further evaluated
by the City's Environmental Department where support is provided
by about 150 environmental experts and administrative personnel.
In addition to qualifying on the basis of their environmental factors,
projects are screened to ensure that they are aligned with the Green Bond
Framework and the City's Environmental Program and Climate Strategy
initiatives. The City Executive Board ultimately approves eligible
projects for funding.
100% of the proceeds will be allocated to one or more of the listed
project categories, including projects intended to mitigate and
adapt to climate change, that qualify under the City of Gothenburg's
Green Bond Framework which was evaluated by CICERO, an independent
research center associated with the University of Oslo, in July
2013 and again in March 2015 with second party opinions produced in both
instances.
The project categories are, as follows:
• Renewable energy (solar, wind, wave, bio,
waste and hydro)
• Energy efficiency
• Waste management
• Water management
• Biofuel
• Smart grids
• Sustainable transportation (e.g. public transport,
cycle and shipping infrastructure)
• Sustainable housing (e.g. infrastructure and construction)
• Environmental (maximum 20%)
• Biodiversity
• Water clearing facilities
• Air pollution
• Chemicals
Examples of projects that were funded in 2015 include GoBiGas, a
concept facility for large scale production of biogas aimed at avoidance
of CO2 emissions, sustainable housing that contributes to lower
energy consumption and The Bicycle City, a program that forms part
of a broad objective to reduce car traffic and CO2 emissions due to road
traffic by 80%, to mention just a few.
The nature of the budgeting process with its significant lead time means
that the City is empowered to forecast in its annual investor report for
the benefit of investors expected financial allocations to individual
projects that are further described qualitatively and on the basis of
mitigation or adaptation indicators, applicable environmental categories,
impact indicators as well as projected dollar amounts to be spent--which
the Treasury indicates it can do with 90% confidence. This
level of disclosure is now provided for existing projects as well as any
new project initiatives in the form of the evolving annual investor disclosures,
for example the 2015 Investor Report issued in March 2016.
A special budget account is maintained for the purpose of supporting the
City of Gothenburg's lending for eligible green projects.
While the green bonds or notes are outstanding and the special account
continues to carry a positive balance, funds will be tracked and
deducted from the special account at the end of each quarter and added
to the City of Gothenburg's lending pool in an amount equal to all
disbursements from that pool made during such quarter to cover eligible
green projects. At this time, an independent internal or
external audit of the books and records of the special account is not
explicitly conducted.
The City has adopted a set of investment policies and guidelines for its
funds which also applies to balances maintained in the special account.
Such policies are generally designed to mitigate credit and interest rate
risks, counterparty risks, exchange rate risks and operational
risks. In addition, the policy extends to the consideration
of ethical factors that must be observed. Such factors include
the Principles for Responsible Investment (PRI), which calls for
the integration of environmental, social and governance factors
into investment management practices, ecological considerations
as well as the City's own Environmental Policy and current climate
and environmental strategies.
The City of Gothenburg is committed to transparent reporting and conservative
assessments when reporting these results. In this vein, project
level data is shown on the City's website and updates are posted
on an ongoing basis. Such disclosures include project name and
the annual dollar amounts allocated. Further, the City is
committed to provide annual investor reports. The reports,
which have now been produced and issued for three consecutive years,
have evolved and expanded. For calendar year 2015, the Investor
Report, which was timely issued in March 2016, includes a
general summary of the City of Gothenburg's Green Bond development,
a list of projects and a selection of project examples. As noted
above, additional project details, including project expectations
and impact are also provided.
For the first time, this information is being supplemented by a
Green Bond Impact Report, to be published in June 2016, that
discloses impact data for individual projects. While limited standards
for impact reporting are available and practices are evolving worldwide,
the City has provided a variety of key results indicators, including
four core indicators mainly targeting projects within the energy efficiency
and renewable energy sectors have been selected and where possible quantified,
including supplemental disclosures of methodologies and key underlying
assumptions. In part, the report aims to describe actual
results where possible as well as providing an assessment of what kind
of results can be expected from certain projects in the future.
The City of Gothenburg is a port city in Sweden with a strategic location
between Oslo and Copenhagen. It has a population of around 533,000
and is Sweden's second largest city. The Gothenburg region,
which spans 13 municipalities in Greater Gothenburg, has a population
of 1.1 million. The City has taken a leadership role globally
to address climate and environmental challenges by adopting as its aim
the achievement of "maintaining an equitable and sustainable level
of greenhouse gas emissions 2050." Working through the Environmental
and Climate Committee, with support from the corporate sector and
its citizenry, the City of Gothenburg has adopted an ambitious intermediate-term
Environmental Programme that includes a concrete action plan consisting
of 12 key objectives and tangible action plans to be met by 2020 while
the broader Climate strategy is focused on achieving the City's
goals by 2050. At the same time, a separate climate adaptation
initiatives have also been undertaken.
The principal methodology used in this rating was Green Bonds Assessment
(GBA) published in March 2016. Please see the Ratings Methodologies
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see Moody's Rating Symbols and Definitions on the Ratings
Definitions page on www.moodys.com for further information
on the meaning of each rating category and the definition of default and
recovery.
Please see Moody's Rating Symbols and Definitions on the Ratings
Definitions page on www.moodys.com for further information
on the time horizon in which a credit rating action may be expected after
a review or outlook action took place.
Please see the ratings tab on the issuer page on www.moodys.com
for the last action and the history of the rating. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com/disclosures
for further information.
Please see the ratings disclosure page on www.moodys.com/disclosures
for disclosures on significant Moody's shareholders and on certain relationships
between Moody's, its shareholders and/or rated issuers.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Henry Shilling
Senior Vice President
Env., Social and Governance
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Falk Frey
Senior Vice President
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Green Bond Assessment (GBA) of GB1 to the City of Gothenburg Green Medium Term Note Offering
