The Swedish city fined for missing an environmental target

Gothenburg, the second city of Sweden, is highlighting their environmental credentials to put their money on the line.

Back in 2022, the city of Gothenburg, which is believed to be the world’s first local government to take out “stability linked loan” or SLL.

It is a form of financing for a set of annual environmental and social reforms agreed between a borrower and his banks.

Gothenburg’s four target fields are the only source of making renewable energy the city’s only source of heat production, creating its own vehicle fleet Electric of the council to reduce the use of energy in municipal -owned buildings, such as hospitals and schools and the city’s poorest neighborhood.

Complete the agreed annual improvement levels in these areas and, for each, Gothenburg offers a discount at an annual fee that it pays for a loan of 0.1% or about 100,000 chronor ($ 10,500; £ 8,000). But remember one of the targets with a certain amount and he will have to pay a fine of the same amount.

In 2022 and 2023, Gothenburg managed to avoid a financial punishment, but newly released data for 2024 shows that it missed its goal to switch to renewable energy. And so it is being fined 150,000 kroner.

However, it is offset from discounts that are obtained to continue the level of improvement for energy use and social reforms. To electrify the council vehicles, while it missed its improvement target, it did not enough to impose a fine.

The Portfolio manager of the city of Gothenburg city Fredric Block says the local authority deliberately set “ambitious” targets.

“You have a high goal, and you get to the entire organization to try to that goal. We are not moving as fast as we expect, but we are taking a step at a time. The target is still close to the carbon-free by 2030.

“We are not really not for money. We are doing it to show it the important work of the city and we are progressing every year. We want to show the world how it is – that these are problems, and these are good things.”

Improvement in the poorest areas of the city – and whether the council has killed its goals – is measured by annual resident surveys. People are asked about their feelings towards safety and hygiene of one region.

Major initiatives include making housing more secure, introducing more surveillance cameras and increasing the presence of police as a measure of crime prevention in city areas such as Hazalbo and Biskopsgarden. Located to the north of the city, they have high levels of crime and unemployment and large immigrant population.

Public Housing Agency Framtiden, which is eventually owned by the city of Gothenburg, says this improvement takes the work very seriously.

“For some of these weak areas, we actually own the majority of the housing,” its research and development manager says Lars Bankwall.

“We are more or less the only official bodies in these areas. There is no one else, only we.

“I see us as the most powerful tool that is in the city, because we have a lot of financial resources. We are included in everything.”

But Faduma Avil, a social worker who now offers career coaching at an employment center in Gothenburg, is worried that the increased cameras and police attendance send wrong messages to the youth in the deprived areas of Gothenberg – and can see the racial outline increase.

“When our children wonder when they see cameras everywhere in Hazalbo, but no one in the Swedish neighborhood? How would they feel when they are constantly seen by the police?” She says.

“What will you tell them? You are showing them that there is a difference between them and the native Swar.”

Ms. Avil is also not convinced that residents survey are effective or accurate. And he feels that the city is placing an odd amount of effort in its environmental goals, at the cost of improving situations in underprivileged areas.

“People in these areas do not care about the environment. They need to go to school. They need to work. They need to eat,” Ms. Avil says, who moved to Sweden from Somalia as a child in 1987.

Talking to an SLL is a rigid, complex process – one that took the city of Gothenburg in a year, not included in less than six Nordic banks.

It is the difficulty of getting an SLL that the number released globally fell to 56% in 2023, In data Financial news provider from Bloomberg.

Mats Olausson Swedish is a senior stability advisor at the Swedish Bank SEB, who is the leading lender of Gothenburg’s SLL.

He says that SEB has rejected potential SLL borrowers as the customer’s proposed targets were not sufficiently ambitious. Still he says that SLLs are challenging for companies or local authorities who successfully receive one.

“It is sad that if a company puts a lot of resources in designing SLL, and then it turns out that the promotion they get is negative,” they say. “You risk pulling into dirt to not do a good job.

“It is not in the interest of anyone that it is impossible for goals who are highly ambitious and basically obtained, or for companies that do not have the right governance to implement the tasks that are blocking the actual strategy.”

A company that is happy with its SLL is Danish Management Consultancy Emagine. It borrowed £ 10m in 2021, the funds that helped it achieve six other firms worldwide.

Its binding goals have increased the number of female leaders in the organization by 16%, and the overall employee turnover is to reduce the turnover by 6% in a seven -year long period. It is doing this through leadership and advice programs.

By completing the goals, the Emagin is benefiting from low interest rates, the company’s Chief Financial Officer Lars Baloch says.

“If we do not meet the goals, we will be launched with interest punishment rates. We also accept that failing to meet the stability goals can damage the firm’s reputation, as we have made a public commitment.

“It should not be committed to loans to get a discount on financing – the need for ambition behind goals.”

Back in Gothenburg, the city’s current environment and social goals run until 2030. Mr. Block says that detailed annual SLL reporting to potential future investors in the city shows what their money will make a difference.

He says, “Banks want to give money to permanent cities, so our progress in our SLL reporting has to package our progress how I make the city beautiful for investors,” they say.

“I can’t change the city’s credit qualification, but I can change how investors look at our stability work, and make it more attractive.”