Green bonds, a financial revolution under way
Posté par ITgium le 7 janvier 2020
This was an encouragement announcement in the fight against climate change. China has recently chosen the Paris financial center for its first issuance of green bonds amounting to EUR 4 billions. It is no mere coincidence. As a world green finance champion, France is today the European largest green bonds issuer. Second is the United States, ranked first in 2018, which is down due to their abrupt withdrawal of the Paris climate agreement.
Green bonds embody a relatively new financial tool since the first ones have been issued in 2007. This term encompasses different notions as climate bond or ethical investment. This is a further stage to rethink and to rejuvenate the way of investing. The main purpose is to fund green projects exclusively with positive impact on the environment, as for instance, renewable energies, energy conservation, reduction of carbon emissions and, generally speaking, to accelerate the ecological transition. Green bonds are crucial to control pollution from downstream point sources. They provide a substantial incentive to industrial companies to move on that direction and to engage clearly their manufacturing activities on sustainable investments. Green bonds are a flagship for innovation and a reference model in the way it combines the private and public sector, research and business. Thanks to the financial means thus collected, environmental problems, sometimes unbearable, can be effectively addressed through a pragmatic approach which acknowledges the realities of the present and which focuses on the future. Far away from speculative operations, it forces all players to undertake concrete actions. Unlike many financials support designed to short-term return on investment, green bonds are played out over the long term. Such extended period allows sufficient time for large projects to mature and be successfully achieved. Unlike traditional equity and bond markets, the issuers commit all parties to respect the fund particular use. Every year, a detailed financial report is scheduled for release. It set out the selected projects environmental value in all their aspects.
Notwithstanding these constraints, green bonds have been growing exponentially. 200 EUR billions have been collected in 2019 compared to the already exceptional 2017 and 2018 volumes.
Under this scheme, China involvement as a green bonds issuer in Europe has a dual function. Firstly, that indicates the country awareness on environment issues and the urgent need to implement concrete actions. Incidentally, that shows China clear commitment to comply with the Paris climate agreement. Despite the US withdrawal, want it or not, the “wheels are turning” as witness by the increasingly green bonds raising. Secondly, that demonstrates that the french-chinese partnership and, by extension, the euro-china axis, is already an achievable reality, even more promising. At the end, green bonds herald the new technologies under development as well as the arrival of new hope.
François de la Chevalerie
Jean Pierre Duport, Energy savings expert
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