Green bonds : greening capital, organizations and potentially a building or two : a case study of the green bond financed construction and real estate sector in Sweden

Abstract: With the ongoing climate collapse, there is a need for a capital switch, rerouting investments into low carbon infrastructure. Green bonds are a new financial vehicle aimed to facilitate this transition. Through signaling the issuers’ intent to use the proceeds of the bonds towards environmentally beneficial activities, they increase transparency and allow investors to better calculate risks while at the same time having a positive environmental impact. Yet, it is unclear to what extent green bonds bring issuers benefits, incentivizing or enabling them to conduct more green projects or increase the environmental standards in future projects. Furthermore, the lack of standardization of what qualifies as green has raised concerns over the environmental integrity of green bond funded projects. This is explored through a case study of the Swedish green bond-financed construction and real estate sector using semi-structured interviews as well as analyzing the commitments made under issuers’ green bond frameworks. The results show that eligibility criteria for green bond financed buildings do generally not ensure low upstream emissions but tend to emphasize downstream emissions through energy efficiency requirements. Furthermore, findings indicate that the direct material impact of green bonds is very limited. Nevertheless, green bonds can bring issuers financial benefits as well as strengthening issuers’ long-term sustainability focus.