Sustainable financing

Kommuninvest finances the development of Sweden’s local and regional sectors, as well as investments for a sound and sustainable society. The operations contribute to citizens’ tax funds being used as efficiently as possible and help improve the stability of the financial system. Financing at the lowest possible cost is central.

Kommuninvest’s contribution in the area of sustainable financing involves both cost-effective and stable financing of public investments, as well as long-term analysis for sustainable local government finances. Our work also focuses on enhancing the skills of our members and customers in sustainable financial management, and offering tools that improve internal decision-making processes.

The local government debt office

Kommuninvest plays a similar role for the local government sector as the National Debt Office does for the central government and its authorities. One of our principal tasks is to safeguard financing that is as cost-effective as possible for the investments that municipalities and regions make in housing, schools, healthcare systems, public transport, etc. By “pooling” local government borrowing needs and channelling them through a single organisation, economies of scale can be achieved, while keeping administrative costs down. This allows tax revenues to be used more effectively. 

Equally important is being able to offer financing to members even in times of financial market stress. Experience gained from the financial crisis of 2007 – 2008 shows that access to liquidity can be challenging at times, even for actors as creditworthy as local government authorities. Kommuninvest’s ability to maintain the financing capacity of the local government sector, even in the most troubled times, engenders security and contributes to financial stability.

Increasing awareness on local government financing

By means of our own research and reports, Kommuninvest helps increase knowledge about the local government sector’s long-term financial conditions. Each year, we publish reports describing developments in local government investment and its financing, and we analyse trends and phenomena associated with local government funding, debt and investment. The data are made available in public databases. Knowledge is disseminated on an ongoing basis by means of seminars and individual meetings.

Kommuninvest also collaborates with higher education. Since 2012, Kommuninvest has, among other things, maintained an in-depth partnership with the University of Örebro, promoting, for example, research on the local government sector’s debt management and financial conditions, and financing a chair and post-graduate studies. Kommuninvest is also part of the reference group affiliated with the university’s Master’s programme in Sustainable Business.

Local government debt management tool

KI Finans is a web-based financial management service for transaction management, analysis and reporting of financial liabilities and assets. All members of the Society have access to the service, which had more than 2,000 users at the end of 2019. The service was originally developed for the Swedish local government sector, but is now also offered by Kommuninvest’s sister organisations in Finland and Norway.

A non-profit concept that benefits society

Kommuninvest was established as a cooperative concept, to improve the local government sector’s access to financing and to increase competition. The operations are to be characterised by the lowest possible risk exposure and a not-for-profit purpose. Any profits generated in the operations are returned to the members in the form of interest on contribution capital and refunds in relation to business volume. In this way, SEK 717.8 (969.8) million was transferred back to the members of the Society in 2019. Profit is expected to decrease in the future, following decisions by members in 2018 regarding a changed and more transparent pricing model. This means that the prices offered by Kommuninvest have been reduced. 

Financing promoting a sustainable transition

To make the local government sector’s work towards national and regional environmental targets more visible, Kommuninvest offers so-called Green Loans. Green Loans may finance investment projects in areas including renewable energy, energy efficiency, public transport and water management, and can be linked to nine of the Sustainable Development Goals 2030 and all of the overall objectives of the Paris Agreement. Approved projects must promote the transition to a climate resilient society with low emissions and be part of the systematic environmental efforts of the borrower. 

Kommuninvest finances Green Loans by issuing Green Bonds. Seven Green Bonds have been issued since March 2016, and Kommuninvest is Sweden’s largest issuer of such instruments. The expected annual reductions of CO2 emissions from the projects financed are published in the annual Kommuninvest Green Bonds Impact Report, which is available here.

At the end of 2019, the volume of Green Loans disbursed amounted to SEK 41.0 (26.2) billion to 346 (232) green investment projects in 150 (109) municipalities and regions. The proportion of Green Loans in relation to total lending was 10.1 (7.4) percent.

Elbuss i Umeå

Green Loans – examples of funded projects

 

Umeå – Clean transportation

Investment cost: SEK 215 million

Green Loans (disbursed): SEK 200 million

Since 2011, the Municipality of Umeå has gradually replaced an increasing number of public transport buses with electric buses. The final stage of the process was completed in 2019 when all diesel vehicles on the principal lines routes were replaced with articulated electric buses. In total, 70 percent of Umeå’s public transport will be provided using electric buses. By themselves, the 25 articulated electric buses purchased most recently are expected to reduce CO₂ emissions by 2 million tonnes of CO₂ annually (gross).

 

Härnösand – Renewable energy

Investment cost: SEK 76.4 million

Green Loans (disbursed): SEK 39.5 million

Härnösand is building two new wind power plants that will use advanced wind power technology to generate significantly more power than previously, 3.5–4 MW per plant. The project will supply up to 24,000 MWh of locally produced electricity, corresponding to about 10 percent of Härnösand’s consumption.

 

Smedjebacken – Waste management

Investment cost: SEK 31 million

Green Loans (disbursed): SEK 31 million

In building a new recycling centre, Smedjebacken is thinking circularly and holistically, focusing on re-use at a location 4 km closer to the town than previously. By themselves, the CO₂ savings from shorter passenger and truck connections will amount to 60 tonnes annually. In connection with the construction work, two existing oil furnaces will also be replaced by geothermal or local district heating, and solar panels will be installed.