A phenomenon, that of green economy, which was accompanied by greater investor awareness of environmental policies and sustainable financing after the alarm launched by Greta Thumberg on the worsening of the planet's climatic conditions. Good intentions that have made the game of the parties: on the one hand, the investors most predisposed to lend money to companies with the declared purpose of investing it in renewable energy or in projects with low environmental impact, on the other the issuers that have taken advantage of the moment to raise new funds at low cost.
The green bond is also the intervention number one of the Bundesbank, Jens Weidmann: "A monetary policy that commits itself to environmental objectives risks being overburdened – he said, during a conference – And, in the long run, its independence could be questioned". In short, buying a disproportionate number of green bonds as suggested by some members of the ECB would violate the principle of market neutrality. No preference, therefore, much less with the instrument of QE towards which the German banker already does not have particular sympathies, should be granted to green bonds. "Of the incentives for the protection of the environment – it has emphasized Jens Weidmann – if it must occupy the politics".
Green bonds no longer discounted
Thus the strong pressure of the demand for new "green" financial instruments – he points out Mark Gilbert, columnist of Bloomberg – has allowed issuers to check returns that today are no longer convenient. To put it in jargon, they are no longer discounted compared to traditional bonds, in fact they are even at a premium. What does this mean? It means that the return offered by the latest green bond issues does not justify the risk. Or rather, the theory that investors would be willing to sacrifice some of their earnings in exchange for the promise that the money lent will be destined for the sustainable economy is beginning to waver.
The 2030 Generali green bond
An example is given by the recent issue of Assicurazioni Generali that at the beginning of the month he successfully completed the placement of his first green obligation of Tier 2 from 750 million euros with coupon of 2.124% and expiry in October 2030. The issue at par, reserved for institutional investors and investment funds (minimum tradable denomination of 100,000 euros), was accepted by the market with requests from around the world for € 2.7 billion, equal to 3.6 times the offer, reflecting the high demand for this type of investment, also in consideration of the solidity and the notoriety of the Italian issuer (Baa3 ratings for Moody's and BBB for Fitch). The Generali green bond, however, has a duration of 11 years, is a subordinated type and offers a low return compared to the risks associated with this type of unsecured bond.
Risks are not offset by returns
That the risk on green bonds has narrowed over time is also visible from the performance of the Bloomberg Barclays Euro Green Bond Index which shows a return of 18% until 2014 and then decreases from year to year up to 9% today. Returns that go down even more if you consider green bond issues in euros. This can be seen in particular on the European green bond par excellence, that issued by the French Government in January 2017 and increased in tranches thereafter to reach 21 billion euros size on the market. At the time of the launch it was priced with a yield of 13 bps over the French OATs of equal maturity to arrive today to offer a yield equal to the same government bonds. And so in Germany is Holland.
Even in the United States the trend is no different and one wonders to what extent green bonds can still show attraction for investors. David Larcker is Edward Watts of the Stanford University have shown that 85% of green bonds issued by US municipalities today offer returns identical to traditional bonds, which leads to the conclusion that interest in the sustainable economy is diminishing for investors. Pursuing interests linked to environmental projects no longer has the initial appeal and therefore the impulse to sell green bonds given by awareness of the planet's crisis now seems destined to run out.
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https://www.finanzaonline.com/notizie/green-bond-verso-lo-sboom-ultime-emissioni-a-premio-non-giustificano-i-rischi-il-caso-del-green-bond-tier-2-2030-emesso-da-generali
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