Who will issue (and how they will go) the green bonds. Report
Numbers, trends and scenarios on green bonds according to the Intesa Sanpaolo research department
Investors are willing to earn less to hold a green stock in their portfolios. It is on this evidence, confirmed by an analysis by the ECB staff, that the report on green bonds by the Intesa Sanpaolo Studies and Research Department focuses. The analysis estimates the offer of euro area government green bonds during this year at 83 billion euros. Only 30 billion should come from European Union emissions relating to the NGEU program.
What are green bonds?
Green Bonds, in Italian " green bonds ", are financial instruments whose issue is linked to projects with characteristics of environmental sustainability, such as energy efficiency, the production of energy from clean sources, the sustainable use of land, related initiatives to the prevention and control of pollution or the sustainable use of water. They are relatively new products that have experienced a high growth rate over the past decade.
Who issues green bonds
Initially green bonds were mainly issued by 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. In the last decade there has been a significant expansion also thanks to the push given by the Parisian COP21 and the climate agreements.
Greener even if less rich
The ECB study "estimates a negative aggregate greenium coefficient equal to -5", reads the report. This signals the presence of investors willing to obtain a less rich return in order to own a green business . Green bonds issued by governments in the euro area confirm this trend and these securities are listed more expensive than a conventional bond. "The difference between the z-spread of a green security and a synthetic one obtained from the interpolation of two conventional bonds" reads the Intesa Sanpaolo report "varies from – 2 bps of OAT 06/2044 and Bund 08/2031 up to -7 bp of the Spanish green government ".
The volatility of green stocks
The growing geopolitical tensions caused by the Russian-Ukrainian conflict has caused an increase in the volatility of green government bonds in the euro area as well. “The green BTP was more defensive than a conventional BTP during the risk-off phase and the differential of the Z-spread decreased from -5 to -8 bps – continues the report -. As the 10-year BTP-Bund spread increased, the differential decreased and, with the tracing of volatility in recent days, it returned to pre-conflict levels ". The composition of the investor base also influenced the trend of the green BTP. The green BTP, in fact, benefited from a base of so-called real money investors "characterized by a long-term investment perspective (about 20% of the total placed on the primary market), and from specialized investors defined as ESG (more than 50% of the total), sensitive to the green component of the stock ".
EU interventions
In the post-pandemic world, European and national institutions have tried to accelerate the energy transition and the gradual downsizing of dependence on fossil fuels. The energy crisis and the Russia-Ukraine war are two factors that accelerate the energy transition even more quickly in order to reduce dependence on Russian gas imports. On 8 March the European Commission presented the RepowerEU plan aimed at encouraging the diversification of gas supply sources and greater use of renewable energies, such as biomethane and green hydrogen, accelerating the implementation plan of the “Fit for 55” program.
Issues of European green bonds
The EU intends to finance around 30% of the EU Next Generation program with Eurobonds, for a total of around 250 million euros, in order to promote projects in line with international agreements (Paris Agreement). To this end, the first European green bond was placed in October for € 12 billion and subsequently reopened in January 2022 for € 2.5 billion. “During 2022 – reads the Intesa Sanpaolo report – we expect the European Union to place around 30 billion euros in green bond issues . This forecast could be revised upwards if the EU decides to increase green emissions to finance the new RepowerE plan ”.
Green bonds of euro area governments
In 2021 the governments of the euro area issued green bonds for about 50 billion euros and currently the amount in circulation has reached 120 billion . "The offer of green government bonds increased during 2021 also thanks to the entry of new issuers such as Italy, which issued the first green BTP for 13.5 billion euros and Spain with 5 billion euros placed in last September to finance projects aimed at promoting environmental sustainability – continues the report -. Germany is the only government issuer with a green curve present on four different maturities (Bobl 10/2025, Bund 08/2030, Bund 08/2031 and Bund 08/2050) while France has the outstanding amount of green bonds highest among the countries of the euro area with 45 billion euros ".
The prospects for 2022: confirmations and new issues
EU countries in 2022 will follow the trends that emerged in 2022. Denmark in January placed the first green bond for DKK 5 billion (equivalent to approximately 670 million euros) with a 10-year maturity. Germany announced. which intends to place 12.5 billion of Green Federal Securities, in line with 2021, and to issue a new bond with a maturity of 10/2027 on 28 June. Belgium has announced in the annual funding plan that it will place a new green bond with a duration yet to be defined. France declared eligible expenses of 15 billion for projects aimed at environmental protection and improvement equal to the amount allocated in 2021. The countries of the Mediterranean area will also align themselves with the choices of the Nordic countries. Italy's guidelines for 2022 predict the reopening of BTP 04/2045 and the issuance of a new green bond probably with a shorter duration. Spain placed 1.2 billion of the 07/2042 bond in February and will carry out other reopenings in the course of 2022. Finally, the entry of new government issuers is expected such as Austria which plans to place a green bond in the second quarter and Greece in the second semester.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/chi-emettera-e-come-andranno-i-green-bond-report/ on Fri, 01 Apr 2022 06:40:31 +0000.