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Alternative Market Briefing

Other Voices: Will green bonds be enough to meet carbon reduction targets?

Thursday, October 07, 2021

By Gael Binot and Herve Chatot, respectively Emerging Markets Fixed Income Manager and Cross Asset Manager, La Francaise AM

At the end of 2020, the European Union decided to revise its environmental objectives upwards by targeting a 55% reduction in greenhouse gases by 2030 compared to 1990 levels, replacing the previous target of 40%. This new objective, "in line with the Paris agreement to contain the temperature rise well below 2°C" has led to a firmer commitment from EU Member States to accelerate investment in the green transition to fight against the negative impact of climate change.

A third of the €750 billion NextGenerationEU (NGEU) European recovery plan will be used to finance environmental projects by 2026. To achieve this target, the European Commission will issue €250 billion in green bonds over the next five years, thereby becoming the largest issuer of green bonds. European Commissioner Valdis Dombrovskis said that " "Europe will need around €350 billion euros of annual extra investment to meet its 2030 emissions target in energy systems alone."

The EU is developing a set of regulatory measures to ensure market transparency and guide investors towards genuine green investments.

In Europe, pending the future European standard (taxonomy) on green emissions which will not be available for at least a year, the first European green issuances will be based on current market practices. These practices are based on the voluntary standard of the Interna......................

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