Investment | 17 August, 2018

Bonds and loans to finance green technologies

Héctor Ferreiro Portfolio Manager

Green technologies, such as renewable energies, energy efficiency and electric vehicles, can help to reduce the impact of human action on climate change. In 2007, the European Investment Bank issued the world’s first green bonds aimed at financing and developing these technologies. In Spain, BBVA signed its first green loan in 2017, worth 500 million euros.

The green bond market aims to enable and develop the key role that debt markets can play in funding projects that contribute to environmental sustainability. Climate change currently poses one of the main global risks for the world’s population. Around 12% of the planet is not fit for habitation because of the climate.

One of the most worrying facts of recent decades is the increase in extreme weather, leading to phenomena like desertification and the melting of the polar ice caps.

There has been a demonstrable advance in these types of assets. 2017 was the fifth year in a row to set a new record in green bond issuances, clearly confirming the upward trend in these instruments.  The market currently stands at USD 282.5bn in active bonds, while the universe comprises more than 550 issuances, 49 countries and 20 different currencies.

The voluntary process guidelines for issuing bonds are known as the “Green Bond Principles (GBP)”, published by the Zurich-based International Capital Market Association (ICMA). The ICMA is responsible for defining the GBP, which promote integrity in the green bond market through guidelines that recommend transparency, disclosure and reporting. The GBP are intended for use by market participants and are designed to drive the provision of information needed to increase capital allocation to such projects.

The most common projects funded by green bonds are renewable energy companies (39%), followed by energy-efficient buildings, transport, water and waste.

BBVA is an active member and a benchmark in sustainable finance. The Group has the capacity, knowledge and experience to provide its customers with specialist advice on sustainable finance solutions, including green bonds and loans.

The Bank is the most active participant in the Iberian Peninsula green bond market as well as one of the largest worldwide. In the green loan business, the Bank was the world’s most active issuer in 2017, with a total of 11 operations in Europe and Latin America for diverse customers. For example, BBVA was the structuring bank for the inaugural issues by both Scottish & Southern Energy (the largest ever by a British company) and by Avangrid in the USA.

Recientemente, BBVA debuto como emisor en 2018 captando 1.000 millones de Euros, siendo la demanda mucho mayor alcanzando esta los 3.000 millones de Euros. La emisión ha sido hasta el momento la mayor realizada por una entidad de la Eurozona.