Learning Diaries: Class 28/10/2024
Student: Alexandre Cipriano
Green bonds
Last class we focused on discussing green bonds, one of the best ways to fund the
sustainable development of the world. Despite having green on its name, when we
talk about green bonds, we usually refer to Climate Bonds that scope a more diverse
range of investment that are known as GSS+ Bonds, referring to Green, Social,
Sustainability Bonds or Bonds linked to those categories.
That range of classification aligns with its nature of having a broader approach when
issuers come to underwriters to expose their projects or intentions to invest the
capital raised. It is important to emphasize that this less bureaucratic approach for
green bonds aims to incentivize issuers to use that approach, considering that
usually companies see green bonds with a lot of risks involved, and creating an
incentive such as an easier issuance helps more bonds to be issued.
Another instrument to facilitate issuers is the framework for green bonds, where we
learn that the key aspects to managing such financial assets lie in the capability of
identifying eligible assets to be invested, having a solid project evaluation to select
the best options for funding, managing the fund capital that has not been allocated
yet, and finally reporting transparently what projects were funded and the impact
generated.
A key part of the class was about the NextGenerationEU as a leading arm of the
European Commission to support environmentally friendly investment on its
members. After looking at some countries, we can see that European countries have
different approaches to utilizing those funds; for example, Germany wants to invest
nearly half of its NextGenerationUE funds on digital transformation and the other half
on green transition, while France goes for a much more diverse fund allocation,
focusing almost equally on green transition, digital transformation, but social as well.