The Finance Ministry is looking into issuing its first green bond in the first half of next year, during which the ECB's emergency bond buying program (PEPP) will not be suspended. The success of the issue is considered certain and the aim is to determine how the funds will be used from this new financial tool. From initial talks the Public Debt Management Organization (PDMA) has had with large foreign banks, the conclusion drawn is that the market is welcoming to the prospect of an initial green bond issued by the Greek state, as there are large amounts of funds from institutional investors looking for exposure to sustainable developments.
In fact, market officials are urging the Greek government to formulate the 2022 lending program, by giving a priority to the issuance of a green bond, in connection with the ECB's planning for the pandemic bond purchase program. This is because the PEPP expires in March 2022 and it is likely that there will be changes in the way the ECB intervenes in the market, which will be decided in the autumn. In any case, the first three months of next year, when it is certain that securities purchases by the ECB will continue unchanged, are considered the most appropriate for the Greek green bond to hit the market.
Minister of Finance, Christos Staikouras, said earlier this week that the ministry and PDMA have started looking into creating a framework for issuing green bonds, adding that the first issue will be part of the state’s lending strategy for the next year. The main concern for government officials on the issue, seen raising 2-3 billion euros, concerns the projects that will be funded by the bond.
Already, most of the grants that Greece will receive from the Recovery Fund will be directed to projects that fall under the Commission's ranking for green transition projects, while the same applies to many loans from the Recovery Fund.
Given that billions of dollars are already being spent on green transition projects and investments, the big question that needs to be answered is what actions would be appropriate to finance with a green bond. Market officials tell Business Daily that the most interesting element in the Commission's green bond specifications, which is voluntary in Europe, is that a fairly strict framework has been set for the private sector but for the states the rules are much looser.
In particular, for private sector securities issues, the European Green Bond Standard (EUGBS) stipulates that only actions falling within the commission's classification for green transition investment should be financed. That is, a private company, in order to be able to issue a green bond with European standards, must have chosen (and this is certified by a rating agency) an investment activity that is considered green based on the classification made by the commission.
However, the commission gives states issuing green bond considerable flexibility: as it has announced, there is a possibility of exemption from the obligation to align with the Commission's green project classification for certain public expenditure programs, such as funding or grant programs and tax relief plans.