Financing a sustainable future : green bond sustainability experiments and sustainability transition

Abstract: Global warming has become a scientific consensus. Climate change induced impacts on both natural and human systems have been observed. Climate financing for mitigation and adaptation has increased over the years, but it is still far from what is needed according to the 1.5 ̊C scenario by the Intergovernmental Panel on Climate Change. The concept of green bond was developed as an innovative way to attract investments in climate mitigation and adaptation and other environmental protection projects. In spite of the wide discussion in the financial field as well as the implementation on different regions, there is no comprehensive analysis examining how green bonds funded projects facilitate sustainability transitions. This thesis addresses this knowledge gap by investigating green bond sustainability experiments in Sweden, particularly in the largest green bond issuer Kommuninvest, mapping how the green bond sustainability experiments are undertaken, and investigating how they influence sustainability transitions. This study has been conducted by gathering data from content analysis of published reports and documents from official websites as well as a semi-structured interview, and analyzing using a “four-step scheme” in the strategic niche management framework. This thesis found that networks for green bond sustainability experiments are built on the existing business networks in Kommuninvest. Green bond sustainability experiments articulate the expectations of most stakeholders. Learning processes are characterized by developing the green bond framework, monitoring and evaluating performance, and summarizing experience. It was also found that elements at landscape-level, like climate change, put pressure on established regimes, creating opportunities for green bond sustainability experiences to develop. Market preference and “supportive ecosystem” of citizens and governments at regimes level align with the green bond sustainability experiences, making further adjustments on established regimes possible. The key challenges for further facilitating sustainability transitions are increasing accessibility of project information, engaging civil society, and developing a more formal learning process. Learnings from the green bond sustainability experiments may inspire other countries, especially developing countries, in utilizing green bonds to finance climate change mitigation and adaptation projects. Existing challenges summarized as well as potential solutions suggested in this thesis might also be valuable to the countries where green bond sustainability experiments have already been undertaken.