Green Bonds are securities designed to finance projects that have a sustainable and ethical environmental impact. These are tools relating to green economy aimed at supporting businesses in facing the challenge of climate change.
WHAT ARE GREEN BONDS?
Green Bonds are “financial tools meant to finance projects that have a positive environmental impact, such as the production of energy from clean and renewable sources, sustainable use of land, industrial processes with zero emissions, electrical transportation, use of recycled material and so on.
According to Borsa Italiana, the European Commission has recently highlighted the capabilities and the functioning of the Green Bond market, presenting a package of measures called ” Clean Energy for All Europeans”, according to which from 2021 an additional 177 billion euros per year will be needed to achieve the 2030 climate and energy targets identified, for which these new financing and investment mechanisms are likely to play an essential role.
FEATURES OF A GREEN BOND
Currently, there is no standard for certifying a bond as Green. However, the International Capital Market Association (ICMA) has emanated some guidelines for issuers that actually identify the four characteristics that differentiate these from traditional bonds:
- Indicating clearly the use of the proceeds of the issue
- Following specific procedures in the evaluation and selection of projects
- Providing full transparency in communicating the use of funds made available by investors
- Ensuring the drafting of reports on the progress of projects
WHO CAN ISSUE THEM?
Initially, this type of bond was issued primarily by supranational financial institutions such as the World Bank or the ECB, subsequently they were joined by individual companies, municipalities and state agencies.
In recent years there has been a strong expansion thanks to the drive resulting from climate change issues and environmental agreements. In fact, many countries, including China, are trying to balance the impact of fossil fuels with new investments to reduce greenhouse gas emissions.
WHO HAS ALREADY DONE IT?
The Green Bond market continues to expand thanks to increasing investor demand, evolving legislation and a growing number of issuers.
In 2019, the Green Bond market grew by approximately 180 billion euros (up 50% from 2018). Government bonds represent only 9% of the total: among the most active countries are France, the Netherlands and Ireland; with Italy in eighth place.
The expansion seems likely to continue, thanks also to the resilience shown by these assets in the current crisis. Focus on climate change leads more and more participants to prefer this type of instrument, providing the possibility for many companies to evolve their business model and aim at an increasingly sustainable and zero impact production.
Borsa Italiana’s CEO, Raffaele Jerusalmi, in an interview with Il Sole 24 Ore stated: “Our role is to facilitate the encounter of companies and investors, the raising of capital for sustainable enterprises and instruments and to spread the culture of sustainability on the Italian market. A commitment that will grow in the coming years. For example, last July Borsa Italiana organized the Italian Sustainability Week, a roadshow entirely dedicated to this topic. Fifty companies, for an aggregate market capitalization of about 290 billion euros, 55% of the Italian markets, met 180 investors to discuss their strategies for sustainable growth. We launched this event three years ago, the first stock exchange in the world to organize an all-Esg roadshow, and now we see results beyond our highest expectations”.
SOCIAL AND SUSTAINABILITY BONDS
Ethical finance, a constantly expanding market, also promotes the use of securities that guarantee investors adequate remuneration and at the same time allow them to support projects that satisfy general interests: namely, Social and Sustainability Bonds.
Social Bonds are obligations designed to support value-creating initiatives in the community, such as projects to reduce poverty or develop fields such as education, healthcare, agriculture and infrastructure. C&G Capital is currently preparing a Basket Bond for Campania Healthcare, to finance the modernization and expansion of hospital facilities to address the COVID-19 healthcare crisis.
Sustainability Bonds are a combination of green and social projects. They are therefore aligned with the four core components that characterize both green bonds and social bonds, and offer investors the opportunity to help finance sustainable projects.
If you have circular economy plans or you want to make your company greener, contact us, we will analyze your business and understand together if you can access sustainable finance solutions.