CO2 QUOTE Closing from Cierre del 28-05-2024 72,80 €/T

The EU begins in October its plan to issue 250,000 million in green bonds

The European Union (EU) will make its first issue of “green bonds” in October within a strategy that will lead it to capture at least 250,000 million euros in the market until 2026 and thus become the largest issuer in the world of this type of securities, destined to invest in climate or environmental projects.

The European Commission (EC), in charge of going to the market, will issue in green bonds 30% of the 800,000 million in debt that it will put into circulation to finance the recovery fund for the pandemic “Next Generation”, which has among its main objectives to promote the climate transition of the old continent.

At least 268,000 million of it will be channeled for this purpose through the Recovery and Resilience Mechanism, since it obliges States to allocate 37% of the endowment of their recovery plans to ecological initiatives such as renewable energies, clean mobility or energy efficiency.

“This framework will make the EU the largest issuer of green bonds in the world, making it the world leader in sustainable finance and doubling the number of green bonds in the global market,” Budget Commissioner Johannes Hahn said on Thursday, presenting the framework that determines what the proceeds of these bonds can be used for and how investors will be informed about it.

The EU and its member states already account for 50% of the global sustainable bond market, which reached a value of €1.1 trillion in 2020. By the end of that year, green bond issues had totaled €850 billion and social bond issues were close to €170 billion.

The EC, which had a first successful experience in this market in 2020 by raising some 90,000 million in social bonds for the temporary anti-unemployment fund SURE, considers that “the EU’s determination to promote sustainability corresponds to the growing market demand” and expects that there will be “great appetite for more green bonds”, according to Hahn.

The first European issue of this type of securities will arrive in October, explained the commissioner, who at the moment did not set a date or amount to the operation. It will be a syndicated broadcast, community sources later said.

The financing obtained can be used for renewable energy, energy efficiency, adaptation to climate change, waste treatment and management or clean transport projects, among many other initiatives, following the criteria set for countries to benefit from the Recovery and Resilience Facility.

Among other things, it requires that no project harm the environment, gives a sustainability coefficient to each activity and is aligned with the European taxonomy, a list of activities considered sustainable that is not yet finalized in the absence of the EU deciding how to treat nuclear energy and gas.

In this sense, Hahn explained that the rules of the recovery fund do not allow the use of aid for nuclear energy, but for activities linked to gas when considering transitional energy. However, Community sources pointed out that these transition activities are not accounted for within the 37% of investments considered ecological and cannot be financed with the financing obtained through green bonds. “There is no nuclear covered, zero. There is no natural gas covered, zero. It is a very ambitious and very stable framework,” said a senior EU official.

Brussels hopes to definitively adopt the taxonomy “in one or two years”, but the status of the bonds that investors now acquire will not change even if it is modified, the commissioner clarified.

Nor will they do so if the EU adopts in the future its new European standard for green bonds – which are being negotiated by countries and the European Parliament – since, to give security to investors, green bonds for the recovery fund will follow the standard of the International Capital Markets Association (ICMA). The Commission shall report annually on how the financing obtained from the bonds has been used and on the environmental impact of the investments.

Source: Five Days