France will become the world’s first state to issue “green bonds” in 2017, as part of its effort to finance environmentally friendly investments. EURACTIV’s partner La Tribune reports.
Market conditions permitting, the French state will next year issue its first green bonds. Designed as a source of financing for environmental projects, these financial products have previously been the preserve of businesses and a select group of public institutions.
France is “confirming its position as the driving force behind the continued ambition of the Paris Agreement, concluded last December, by becoming the first state in the world to issue green bonds”, Ségolène Royal, the French minister for ecology, said on Friday (2 September) in a joint statement with Minister of Finance Michel Sapin.
“The arrival of the French state on the bond market will help accelerate its development, to make Paris one of the major financial hubs for supporting the energy transition,” Sapin added.
A €9 billion commitment over three years
In reality, this announcement is merely a confirmation: at an environmental conference on 25 April this year, President François Hollande said that the country was preparing its entry into the green bond market.
The joint statement vaguely mentioned “an operation worth several billions of euros”. Wildlife NGO WWF France specifies a more precise figure of “€9bn over three years”, with the aim, concretely, of financing the “green” investments in the third round of France’s Investments for the Future programme.
The independent environmental protection organisation said it “welcomed” this step by the French state. Pascal Canfin, the director-general of WWF France, said he sees “two important positives” in the decision.
Firstly, it secures “€9bn of public financing for the ecological transition, whatever the result of future elections”. And secondly, France’s example could inspire other countries, like China or the United Kingdom, to invest in green bonds.
A booming market
The young green bond market first appeared in 2007, with bonds issued by public institutions like the European Investment Bank and the World Bank to finance renewable energy and energy efficiency projects, among others.
More recently, companies like EDF, Air Liquide, Engie and Schneider Electric have joined the market as a means of both financing their energy transition and diversifying their investors.
Local authorities have also joined the party, with, for example, the green bonds issued by the regions of Île-de-France, Nord-Pas-de-Calais and Provence-Alpes-Côte d’Azur to finance public transport projects and energy efficiency renovation.
The global market for green bonds grew from just $13bn in 2013 to $48bn in 2015, and is predicted to hit the $100bn mark this year, according to French government figures.
But the meteoric rise of the green bond should not draw attention away from the lack of transparency that mars many of the projects they are supposed to finance.