A bright future for Green Bonds? Challenges and recent proposals

Written by Gabriele Tringali

President Francois Hollande announced that France will be the first country to issue green bonds and will implement a base price per ton of coal for electricity generation. France will be the pioneer in the development of the “green bond” market and this is a subject very close to Hollande which, during the Environmental Conference, explained that France will ask the main investment banks, to launch green bonds dedicated to environmental projects.

The challenge for the success of COP 21 is to give a “fair price” for carbon which looks more like a “minimum price” to coal in the field of electricity production that will give more visibility to investors. The French Government will propose how to structure the issue of green bonds before the end of the year. In Hollande’s view an European carbon market reform is heavily needed as the overall functioning of this market is threatened by the current low price per ton which is not sustainable in the medium term.

During the Environmental Conference Hollande also announced changes to the nuclear energy area: EDF will propose after 2018 the closure of some nuclear power plants combined with the development of others within the framework of what can be defined as a new phase for France’s energy policy. These proposals will take place after the opinion of the nuclear safety of France, expected by the end of 2018.

This will make green bonds even more competitive from a financial standpoint:  an asset class which is likely to turn from a niche product, to a fast growth product, since the traditional bond market is showing signs of saturation and low yield.

And, after COP 21, Apple announced a 1.5 billion issue to finance renewal energy projects: is this a sign that green bonds will actually be a thing in the near future?