Green Bond

Interesting notes about Green Bonds

• The world’s first green bond, created by Italian Aldo Romani, was issued by the European Investment Bank on 4 July 2007;
• The International Capital Market Association (Icma) issued the Green Bond Principles, a list of characteristics a bond must comply with to be defined as green;
• The first global green bonds were issued by supranational organisations. Later, bonds issued by private companies such as Enel and IntesaSanpaolo in Italy also came into play.

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Compared to traditional bonds, green bonds require a selection of the project to be financed based on environmental impact criteria. In addition, bond proceeds must be tied to that project and deposited in an escrow account or transferred to a tracked portfolio of the bond issuer. Annually, a statement of the use of the proceeds is made, which must indicate the projects for which they are used. Finally, unlike a traditional bond, green bonds require an external auditor to certify documents and objectives.
All these measures serve to ensure that these financial instruments are actually used to support environmentally positive projects and thus drive the ecological transition.
However, the Green Bond Principles established by Icma are a form of self-regulation that does not provide for sanctions for non-complying issuers beyond reputational repercussions. The European Commission has drawn up special standards for EU Green Bonds that, unlike the Icma’s standards, also provide for a register of certifiers. The external auditor providing the ‘second opinion’ must belong to this register managed by the European Securities and Markets Authority (Esma).