The proceeds of the sustainability bond are allocated primarily to Flanders’ expenditures of the year before issuance (X-1), followed by Flanders’ expenditures of the issuance year (X).
The eligible expenditures are selected depending on Flanders’ budgetary situation:
- If the ESA (European System of Accounts) budget is balanced in year X-1, ESA revenues are sufficient to finance ESA expenditures. Consequently, only ESA expenditures excluded from the financial balance related to the consolidated public debt are eligible, as projects cannot be financed twice.
- If the ESA budget is non-balanced in year X-1, Flanders received insufficient revenues to finance the expenditures. In that case, expenditures are partially financed with debt. Consequently, the expenditures included in the financial balance related to the consolidated public debt are also eligible.
The expenditures excluded from the financial balance are not considered into Flanders’ ESA result according to the ESA 2010 rules. Those eligible expenditures concern for example expenditures for the financing of public agencies (e.g. social housing), PPP projects (e.g. DBFM Schools of Tomorrow) and other expenditures for lending and holdings (e.g. energy loans). The expenditures are also voted by the Parliament.
A dedicated sustainability bond committee selects the eligible expenditures and approves the methodology used for the allocation.
The committee currently includes members of the Flemish Social Housing Company (VMSW), the Agency for School Infrastructure (AGION), the Flemish Energy Agency (VEA), Circular Flanders and the Department of Finance and Budget.
The composition of the committee may change for future issues.
Priority is given to the greenest projects. Consequently, the different categories in year X-1 are ranked as follows:
In year X, the same methodology is used as in year X-1 until proceeds are fully allocated.
Flanders aims to allocate the proceeds of the bond as optimally as possible. Partially funding a project or transferring small residual amounts to the next year is undesirable. Therefore, the final projects can be chosen based on their funding amount versus the amount left to allocate.