Companies, Financial, Stock Exchange, Green Bond or “green bonds”
MOT and ExtraMOT markets
Recently the European Commission has emphasized the potential and the functioning of the Green Bond market, presenting a package of measures entitled “Clean Energy for all Europeans”, according to which from 2021 a supplement of 177 billion euros will be needed per year achieve the objectives identified for 2030 on climate and energy for which these new financing and investment mechanisms could play an essential role.
The Green Bonds allow in fact to finance various types of projects with characteristics of environmental sustainability, such as water and waste treatment, initiatives related to pollution prevention and control, transport infrastructures, including the central wind farms and more in general initiatives linked to the sustainable use of water or to eco-compatible buildings, to cite a few examples.
In recent years there has been a more significant expansion also thanks to the drive of the Paris COP21 and climate agreements.
Many countries, including China, are trying to balance the weight of fossil fuels in the energy mix with new investments to reduce greenhouse gas emissions.
In 2017 there could be a further increase and the Green bonds could grow by 54% on an annual basis.
The growth of the Green Bond market, and its relative sustainability, is mainly due to two factors: on the one hand the entry into the green bond market by large companies in emerging countries (in particular China and India), from other the growing attention of supranational institutions to the issue of environmental sustainability.
Regarding the first point, we can cite a datum: in 2016, about 30 billion US dollars were issued by financial institutions, local authorities and large Chinese companies.
As for the second factor, the attention of international organizations to the issue of environmental sustainability is significant: all the main development banks (World Bank, International Finance Corporation, European Bank for Reconstruction and Development, European Investment Bank, Asian Development Bank, African Development Bank ) every year renew their commitment to sustainability by launching new Green Bond emission plans.
On the part of investors, both trends lead to greater attention to issues related to climate change and financial inclusion, two central issues on the global agenda that are strongly reflected in the guidelines defined within the Sustainable Development Goals promoted by United Nations.
“Green” certification
At the moment there is no global standard to certify a specific bond as “green”, but there are guidelines drawn up by the International Capital Market Association (ICMA).
There are four ICMA principles: first, the issuer of a security must clearly identify the destination of the proceeds. Secondly, it must follow some particular procedures in the evaluation and selection of projects, which must be included in a list of categories.
Furthermore, the issuer of the obligation must guarantee maximum transparency in communicating the management of the proceeds. Finally, reports must be made available to keep investors informed about the progress of the funded projects.
The issue of Green Bonds is added to that of the Social Bonds and the Sustainable Bonds.
The Social Bonds represent a bond loan aimed at supporting initiatives of high social interest and allow to combine, in the investment choices, individual economic objectives (to obtain an adequate remuneration of the investment) with those values of general interest (favor the realization of initiatives that create value for society).
Through the Sustainable Bonds, on the other hand, investors are offered the opportunity to match their financial objectives with those of social and environmental sustainability, to support sustainable projects in beneficiary member countries.
These projects are aimed at poverty reduction and the development of various sectors such as education, health, agriculture and infrastructure.
In Italy
Borsa Italiana plays an active role in promoting the definition of information standards able to encourage the development of Green Bonds.
In addition to being part of the Sustainable Stock Exchanges Initiative supported by the United Nations with the aim of supporting the transition to a low environmental impact economy, it joins the London Stock Exchange Group to the Climate Bonds Initiative and is among the observers of the Green Bonds Principles of the United Nations. ICMA, International Capital Markets Association.
The London Stock Exchange Group is also among the signers of the Paris Pledge for Action.
In the last year, it has undertaken to make the issuers aware of the need to provide the markets with more complete information on their ESG policies, noting that, in the decision-making processes of investors, they play an increasingly important role. Furthermore, it has made available to the market a series of tools to better identify and analyze the world of sustainable finance, such as:
1. Indices and analysis (FTSE website)
2. London Green Bond Market (site)
3. List of green and / or social instruments being traded on the MOT and ExtraMOT markets
With regard to the latter in particular, starting from March 13, 2017, Borsa Italiana has decided to offer institutional and retail investors the opportunity to identify the instruments whose proceeds are used to finance projects with specific benefits or impacts of a nature. environmental (“green bonds”) and / or social (“social bonds”).
The identification passes through the initial certification of an independent third party and the renewal, at least annually, of the information regarding the use of the proceeds.
At the same time as the launch of the new segment, the largest European green bond was launched on ExtraMOT PRO, issued by Enel Finance International N.V. and guaranteed by Enel S.p.A. for a total amount of 1.25 billion euro, with annual coupons equal to 1.00% of the nominal value and maturity on 16 September 2024.
Borsa Italiana is also aware of the importance of the so-called ‘climate-aligned’ bonds, which are issued by companies whose activities fall within the sectors that support the transition to an economy with a low environmental impact.
Although these instruments are not included in the list of “green” and / or “social” bond instruments, they can be deduced from the sector to which the ExtraMOT PRO issuer belongs.
Milan, 18 January 2019
FTA Online news
Source Borsa Italiana
