Only green future for green bonds? Facts, analyzes and scenarios
What will happen to green bonds? The deepening of Emanuela Rossi
They are relatively young and their market is constantly growing but the risk is that they do not respect the reasons for which they were born. We are talking about the green bonds which even in the year of the Covid-19 pandemic showed a good level of diffusion but which according to the Bank for International Settlements do not always help to reduce polluting emissions. A thesis that has also found a sponsor in the number one of the ECB, Christine Lagarde.
WHAT ARE GREEN BONDS
Green bonds or “green bonds” were first issued by the European Investment Bank (EIB) in 2007 as a climate awareness initiative. They are bonds like the others, the issue of which is however linked to projects that have a positive impact on the environment, such as energy efficiency, the production of energy from clean sources, the sustainable use of land. At first, green bonds mostly came from supranational financial institutions, such as the World Bank or the European Investment Bank, then bonds issued by individual companies, municipalities and state agencies also arrived on the market.
HOW IT WENT IN 2019
According to an analysis released by Banca Imi and carried out by the Studies and Research Department of Intesa Sanpaolo , in 2019 at a global level the issue of green bonds, i.e. bonds linked to environmental sustainability projects, reached an estimated value of 250 billion dollars. , with a growth of almost 50% compared to 171 in 2018. Italy exceeds the world trend by almost doubling, from 2.8 billion in 2018 to 5.4 billion in 2019. So the sustainability debt market, that is, the one in which debt financial instruments are dealt with, is growing strongly as well as the obligations linked to ESG objectives (environmental, social, governance), therefore to responsible and sustainable investments from an environmental, social and corporate governance model. In this universe, green bonds represent, again globally, 80% of new issues, while 15% is due to bonds relating to sustainability projects in general and 5% to social issues.
In 2019, the analysis released by Ca 'de Sass still points out, in our country nine green bonds and approximately 1.8 billion social and sustainability bonds were issued, including the 750 million sustainability bond issued in November last year by Intesa Sanpaolo is focused on the circular economy. At the same date, the green bonds in place amounted to 11.4 billion, to which 2.8 billion of social and sustainability must be added.
The main issuers of green bonds, with 64% of the total, were utilities, i.e. companies providing public services (water, gas, energy), insurance companies at 14%, industrial companies at 13% and banks at 9%. Utilities are also firmly in the lead in terms of the value of bonds outstanding in November 2019 (around 74% of the total), followed by industries (11%), banks (9%) and insurance companies (7%).
WHAT IS HAPPENING IN 2020
The green bond market continued to flourish also in 2020 and is in full development as more and more companies, governments and multinationals seek to raise funds to carry out environmentally friendly projects and that investors are attracted to these assets. For example, more than 30% of the 750 billion euro Recovery Plan launched by the European Union was allocated to “green” projects. In the year that is about to end, the Climate Bonds Initiative has foreseen the placing on the market of another 350 billion dollars. At the end of last June, the corporate green bond market was worth $ 468 billion.
GREEN BOND AND ENVIRONMENT
If these are the numbers, however, there is a question of substance recently raised by the Bank for International Settlements. In the “Quarterly Review” released in September, the three analysts Torsten Ehlers, Benoit Mojon and Frank Packer analyze the relationship between green bonds and carbon emissions. As Nicola Borzi points out in the Fatto Quotidiano, "green finance plays a key role in the transition to a sustainable economy and green bonds, 'green' bonds that are attentive to the environment and climate, are the most important tools for this transition" but the study della Bri "dismantles this myth: for those who issue them, green bonds are almost always just a tool for greenwashing, the remaking of a non-existent environmental 'virginity' for communication purposes".
The three experts examined the green bonds issued by 16 thousand companies whose overall capitalization is equivalent to over 99% of that of all listed companies. The survey found that "so far green bond projects have not necessarily resulted in relatively low carbon emissions or a drop in emissions at the individual company level." For this reason, the Bri scholars have proposed a sort of sustainability rating of green bonds to verify the effective environmental effectiveness and push the companies that issue green bonds to pursue it. Not only that: "Ratings could also be applied to companies' products" so that "consumers could be interested in them" and choose "whether to buy from low carbon companies or from companies with better ratings".
In essence, they add, “although climate change mitigation is a key policy goal, this does not mean that other environmental goals such as water security, biodiversity or climate adaptation are less important. We explore a rating system designed to help reduce corporate carbon emissions – conclude Ehlers, Mojon and Packer – but some of the principles – particularly the focus on simple results-based measures – may also be applicable to other environmental objectives. ".
THE DOUBTS OF LAGARDE
The numbers of green bonds, even if growing, are still judged insufficient by Christine Lagarde, president of the European Central Bank, who during a videoconference on the UN program for the financing of environmental policies also pointed the finger at the level of certification, judged low. The former director of the International Monetary Fund cited the BRI study and stressed that "most green finance is not going in the right direction". Furthermore, he said, “in Europe we need 290 billion euros a year in green investments for an extended period of time if we want to achieve the objectives set in the Paris agreements. But if we look at the financial situation, we are barely 100 billion, so two thirds of the amount that would be needed is still missing ”. Lagarde, however, noted that this is a "clearly emerging market in the Eurozone and that we hope it will still grow significantly", citing the "Next Generation Eu" recovery plan, on which the European Parliament and Member States have reached an agreement. on 10 November: "30% of investments will be green, for a total of 270 billion euros".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/futuro-solo-verde-per-i-green-bond-fatti-analisi-e-scenari/ on Fri, 01 Jan 2021 06:16:54 +0000.