Blogpost | 21 May 2019

Greenwashing risk not yet banned

The year 2019 will be key for future climate policy in Germany and Europe. Finance plays a key role in improving climate protection and sustainable growth.

To this end, Germany should learn from pioneering countries for "Green Finance". In the seven articles in our series, international authors will therefore explain their country's approach towards a green financial system, addressing opportunities, hurdles and unanswered questions.

Not only cities and municipalities, but also the real estate industry are driving the market for green bonds in Sweden, making the country a pioneer in sustainable finance. However, there are still no binding standards. 

Sweden has been a pioneer of so-called green bonds – bonds that allow investors to invest in sustainable projects while offering issuers affordable funding to finance these projects.

It was SEB, one of Sweden’s major banks, that initiated the first issuance of a green bond through the World Bank back in 2008. In 2019, with the global green bond market exceeding 180 billion USD, Sweden has issued more than 20 billion USD worth of such bonds. In January 2019 alone, more than half of all bonds issued in Sweden were "green."

Municipalities and the real estate industry as a driving force

Local governments have played a leading role in the success of the Swedish green bonds market. In 2013, the City of Gothenburg became the first city in the world to issue a green bond. More than 75% of proceeds from green bonds issued between 2013 and 2015 are used by the city to fund domestic climate change projects that promote the transition to low-carbon and climate-resilient growth. As a result, UNFCCC called Gothenburg a “global climate leader” and awarded the city a Momentum for Change Award in 2016.

Gothenburg isn´t the only example of how local governments in Sweden are leveraging the bond market for green investments. Kommuninvest is a credit market company owned by smaller and medium-sized municipalities and county councils that offers its members infrastructure loans. By pooling these loans into aggregated portfolios, Kommuninvest can more effectively access the international green bond market than individual members could. For providing local governments with affordable green financing, Kommuninvest received recognition from UNFCCC in the Momentum for Change Awards in 2017.

Cities and municipalities aside, the Swedish real estate industry is another driving force in green finance. Vasakronan – jointly owned by Swedish national pension funds - was the world’s first company to issue a green bond in 2013. Until spring 2019, Vasakronan has raised more than 2.6 billion USD in green bonds to finance and refinance energy efficiency, renewable energy and clean transport. Following Vasakronan’s example, the Swedish real estate industry has issued green bonds worth more than 6 billion USD.

Notably, the green bond market in Sweden has grown from the bottom-up. The Swedish central government has so far not followed the recommendations of its own public report agency from 2017 to issue sovereign green bonds. However, the Swedish government followed the report’s conclusions that legislation to promote the green bonds market should come from the EU.

Transparency as key

Like the rest of the world, Sweden lacks legal standards for what constitutes a green bond. Instead, most Swedish issuers and investors of green bonds follow the Green Bond Principles (GBP), a voluntary standard developed by the International Capital Market Association (ICMA).

The GBP requires issuers to develop a framework that outlines what projects green bond proceeds can be used for and how projects´ environmental impact will be reported. To make investors trust their offering, most Swedish issuers ask independent organizations to provide a second opinion on how their green bond framework aligns with the GBP.

Increasing risk for greenwashing

Swedish green bond issuers, however, struggle with finding a common standard of reporting the impact of their investments. There are dozens of different reporting formats and only a minority of issuers disclose the methodology of their impact reporting. This is true even in the case of carbon emissions.

This lack of a common standard of impact reporting increases the risk of what has been termed "greenwashing", meaning that the promised environmental impact is smaller than investors are led to believe. The absence of a common standard makes it harder to compare the environmental performance of green bonds and deters new actors from entering the green bond market. To address this issue, Swedish and other Nordic public issuers have put forward an impact reporting standard which details how often issuers should report, in what format and which methodologies they should use.

However, even this new standard appears flawed. It suggests that Swedish issuers calculate emission reductions achieved from investments into renewable electricity and electricity savings based on the average EU emission grid factor- even though Sweden sources
more than 50 % of its electricity from renewables, in contrast to most other EU countries. This highlights the need for impact report standard that is truly transparent and relevant. It remains to be seen if the EU Green Bond Standard which is currently under development can provide standardized impact reporting.


Gregor Vulturius is a Research Fellow at Stockholm Environment Institute (SEI) and Stockholm Sustainable Finance Centre (SSFC) and a PhD candidate at the University of Edinburgh. He has been a member of the Expert Network on Second Opinions about Green Bonds since 2017 and has more than ten years of experience in research about climate risks, renewable energy and green finance.

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With the financial support of Stiftung Mercator. The author and Germanwatch are responsible for the content.

The blog post was first published at and is available in German.


Gregor Vulturius