By Silvia Marchetti
ROME (MaceNews) – Italy’s government is honing its first-ever green bonds issuance plan to be launched soon to fund environmental projects, according to ruling coalition sources.
Key investment areas have been identified but the framework, containing the standards and list of specific projects, is still to be defined, though sources say it will likely be approved by year end with the goal of launching a first issuance in 2021.
The issuance amount, target, and potential maturities are yet to be defined but a series of euro-denominated debt offerings is likely. It is also likely to be directed at both retail and institutional investors.
“We’re honing the technical aspects, we need to have clear guidelines and metric to make sure that state-funded investments backed by the issuance will actually have a positive impact through environmental-friendly projects that support and boost economic sustainability. It’s important we best frame this new type of issuance within a set calculation method to maximize its outcome,” said an official.
A special inter-ministerial committee has been set up to coordinate among government sectors that will likely be involved in the green investment plan, from the environment ministry to the economic development ministry.
One official noted that it might be too late into the year, with year-end festivities approaching, to be able to approve a framework agreement and also issue Italy’s first green bonds before year end.
“The framework guidelines will need be approved through a special law before they can be adopted, so I think we can be optimistic in saying that for the moment, by year-end, we might get this approval which is step one towards the issuance,” said the source.
Six key investment sectors have been identified: renewable energy, green transport, anti-pollution projects, energy saving (green buildings), biodiversity, and related research projects covering the five areas.
Sources stressed that the green bonds have a two-fold objective: diversify the toolbox of Italy’s already existing different types of state securities and lure new investors to support and expand the green economy.
Following EU-wide successful case studies sources said Rome was eyeing other European countries’ green bond issuances to take as a reference model with regard to the framework rules, particularly France.
In 2017, Paris launched a green bonds issuance plan worth E7.5 billion which was a success as all bonds were sold almost immediately with demand three times higher than the actual offer. The first European country to issue green bonds however was Poland in 2016, but with a lower size of roughly E750 million.
Both Poland and France adopted the Green Bond Principles (GBP) of the International Capital Market Association (ICMA) with tight requirements for what kind of projects qualify as having a key environmental impact, a standard Italy is keen to prioritize.
Germany also recently launched its first-ever green bonds, raising E6.5 billion.
Green bonds timing is good due to the European Central Bank’s purchase of environmentally-friendly securities with its Pandemic Emergency Purchase Program (PEPP) program, said sources.
“Green bonds debt is perceived as more sustainable than ordinary debt as market operators see it as an investment on long-term environmental sustainability that will have a high economic impact,” said one source, noting how an increased appetite for green securities can also be seen in the private sector where over the last two years many Italian and European firms have issued similar funding instruments.