This report builds on academic research from the three-year project Accelerate sustainable financing: sustainable bonds for sustainable cities. Swedish municipalities are not on track to achieve the goals of Agenda 2030 or climate neutrality. In the absence of encompassing national guidelines, recommendations and coordination, Swedish municipalities all have different methods of and ambitions for approaching sustainability.
This study shows that common barriers to achieving sustainability goals are conflicting aims, low levels of internal collaboration, low levels of collaboration between municipalities, low levels of national coordination or support for sustainability and recurrent changes in political leadership. Generally speaking, neither municipalities nor investors perceive that Swedish municipalities are adversely affected by a lack of access to capital, although both actor groups foresee an increasing need for external financing of the sustainability transition and some believe municipal borrowing will increase. At the same time, investors are queuing up to invest in sustainable options and see Swedish municipalities as attractive investment opportunities.
This study identifies the most common barriers to the use of external capital to finance the sustainability transition in municipalities as
- the limited size of the asset base.
- a disconnect between sustainability-based projects and finance departments.
- an unmet need for risk capital and co-financing for the sustainable transition, for example for innovation and new technology, where municipalities currently have few options.
- that most of the increased costs are for operational expenditure but municipalities cannot borrow to fund such expenditure.
For the financial sector to play a more active role in supporting Swedish municipalities in the sustainability transition, a number of areas will need to be addressed. We suggest
- that all levels of Swedish public administration conduct a comprehensive review of the financing needs that stem from the sustainability transition to ensure that Sweden is not investing insufficiently for future generations, and to better assess how the private sector can support municipalities’ sustainability ambitions.
- that the Swedish government develop a shared national view on how Agenda 2030 translates to fit Swedish municipal circumstances, and that national coordination on sustainability and climate neutrality is improved.
- that municipalities strive for better internal coordination and enhanced communications and skill-sharing between sustainability and finance departments, to enable a more informed conversation about funding needs and how private sector financial actors can best be involved.
- that municipalities, investors and other relevant stakeholders engage in a dialogue about how municipal investment needs can be made investable, including how investments can be de-risked, scaled up and better defined.