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Green Bond, the first step of Italy

22 April 2021
- Di
Alessia Petrucci
Tempo di lettura: 3 minuti

GREEN BOND -  The green revolution is a process that started long ago, but to which more and more people today are sensitized. The various nations and organizations of states are also trying to take steps in this direction. Just think of the European Green Deal (EGD), as Oliver Camponovo reminds us, with which Europe wanted to start 2020. As for Italy, we are beginning to take the first steps towards green thinking, first with the establishment of the new ministry for ecological transition, now with the issuance of the first green bond.

Let’s start from the beginning: what are the Green Bonds

Green bonds are nothing more than securities issued by public bodies or companies with the aim of financing environmental and climate projects. We look at energy efficiency, renewable energy sources, water treatment, Green emissions are a recent and growing phenomenon, linked to an increase in demand. This growth seems to be linked not only to a greater sensitivity to the issue, but above all to the fact that, compared to other government bonds, premiums will not have to be paid in the future.

To date, however, there is no standard global certification to define "green" a certain bond but there are guidelines outlined by the International Capital Market Association (ICMA). According to these principles at the time of issue of of the the securities must clearly state where the proceeds will go. The projects that will be financed will have to be chosen meticulously and fall into the green categories. Transparency in the use of money must be guaranteed and the investor will periodically have the opportunity to consult an update report with all the news regarding the management of the project and revenues.

The Italian green bond

At the beginning of 2021 the first green bond was issued in Italy. With these bonds will be refinanced expenses made in the two-year period 2018/2020 and financed new projects for 2021 up to a maximum of 35 billion. The MEF, together with a commission created for the occasion, decided on the projects to be financed.Davide Iacovoni, head of the management of the public debt to the Ministry of Economy said:

"Italy will finance state expenditure intended to contribute to the achievement of one or more of the following environmental objectives - reads the document -, as outlined by the European taxonomy of sustainable activities:

  1. Climate change mitigation;
  2. Adaptation to climate change;
  3. Sustainable use and protection of water resources and the marine environment;
  4. Transition to a circular economy;
  5. Pollution prevention and control;
  6. Protection, improvement and restoration of biodiversity, ecosystems and environmental services.

To report, pointed out the technicians of the Mef, that the super bonus of 110% will not end under the hat of the green Btp but the Next Generation Eu."

A success that goes beyond the borders of the peninsula

The Ministry of Economy and Finance has communicated the details of the issuance of the first tranche of BTP Green, which expires on 30 April 2045. Around 530 investors took part in the operation with a total demand of over 80 billion euros, reaching the record demand for the inaugural issuance of sovereign Green Bonds in Europe. Significant was the participation of investors ESG (Environmental, Social and Governance) who have subscribed over half of the placement.

Overall, the fund managers were allocated 53.1% of the placement, while the banks subscribed to 18.5%. There was also a high level of investor participation with a long-term investment horizon. The geographical distribution of the stock has been extremely diversified, with a participation that has seen the involvement of more than 40 countries: foreign investors have been awarded about 73.7% of the issue, while domestic investors have subscribed 26,3%.

Not only green bonds but also social and sustainable bonds

Green bonds are not the only securities with a significant impact on society. In fact, social bonds have also taken hold for some years, or issues aimed at social development. These two bond categories have found a meeting point in sustainable bonds, which are nothing more than a mix of the other two. The green, social and sustainable bonds find inspiration for projects to be funded by the UN Agenda 2030 and the 17 goals. For nations there is an obligation to meet these goals, but not necessarily all. The Mef and the Interministerial Committee have selected seven.

Objective 6: Clean Water and Hygiene;

Goal 7: Clean and Accessible Energy;

Objective 11: Sustainable Cities and Communities;

Goal 12: Responsible Consumption and Production;

Objective 13: Climate action;

Objective 14: Underwater Life;

Goal 15: Life on Earth.

Recently the European Commission has emphasized the potential and the operation of the Green Bond market, presenting a package of measures entitled "Clean energy for all Europeans"according to which from 2021 a supplement of EUR 177 billion per year will be needed to achieve the 2030 climate and energy targets for which these new financing and investment mechanisms could play an essential role.

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