[ad_1]
The first Italian green bond matures. This is the ten-year bond issued by the multifunctional utility Hera on July 4, 2014, with a coupon of 2.375%. The bond was issued at a price slightly below 100 (99.464): two ten-year BTp with similar maturities (September and December 2024) were priced at 101.14 and 103.11 respectively at the time. “Hera’s green bond was issued at a lower spread than the BTp, so subscribers accepted a lower yield to pursue green goals. In fact, the annual yield of Hera’s green bond at the time of issuance was 2.436%, while the annual yield of the BTp due in September was 3.42%”, highlights Marcello Rubiu, sole director of the consulting company NoRisk.
Rarity and Risk
The first Italian green bond benefits from a scarcity effect. In fact, in 2014, even at the European level, there were very few such bonds (both corporate and government), “so the so-called greenium was much higher than it is today”, adds Rubiu, who analyzed the Hera Green Bond. Greenium refers to the higher price that investors are willing to pay for sustainable financial instruments compared to similar but traditional financial instruments.
Another factor worth mentioning is that “Hera Green Bonds are ‘bought and held’ by institutional investors who wish to mature them. Green bonds have lower volatility compared to BTPs of the same maturity. Therefore, investors perceive lower risk in this case.” So much so that in 2014 the demand for the stock was three times the supply.
project
Turning from finance to the specific projects supported by green bonds, it is important to remember that until today, before the EU legislation, there was only one regulation to comply with: that of the International Capital Market Association (Icma), which provided for the possibility of also using financing for ecologically sustainable projects already underway. In fact, in the press release at the time it was clearly stated that green bonds would also be used to “early repay part of the existing debt contracted by the company for the financing of certain ecologically sustainable projects” as well as to support new projects.
Work completed in 2017
Green bonds have thus financed both old and new projects. The table details the use of the 500 million raised for “green” issues: from the Imola thermal power plant, the most impressive in terms of financial size, to district heating networks in some regions. The Emilia project was closed in 2017, long before the green bonds matured. From that year on, Hera’s reporting obligations ended, as required by ICMA regulations.
[ad_2]
Source link
