McCann FitzGerald has advised the National Treasury Management Agency (NTMA) on the landmark issuance of Ireland’s first sovereign green bond which will be used to finance Ireland’s transition to a low carbon, climate-resilient and environmentally sustainable economy.
What is a green bond?
Green finance generally refers to the financing of investments that are designed to provide environmental benefits in the broader context of environmentally sustainable development. Green bonds have to date been the most widely used form of green finance and involve the issuance of debt securities to raise funds for new and existing projects that have environmental or climate-related benefits.
Ireland’s Sovereign Green Bond Framework
Sovereign green bonds are designed to provide investors with the financial features of a standard sovereign bond combined with specific green bond features usually relating to the use of proceeds and reporting requirements. For this purpose, in advance of the issue of its green bond, the NTMA developed and published an Irish Sovereign Green Bond Framework (the Framework) which describes:
- how proceeds will be allocated to finance or refinance certain ‘green projects’ across a wide range of projects including sustainable water and waste water management, clean transportation, climate change adaptation, renewable energy, natural resources and land use, and built environment and energy efficiency treatment;
- a project selection and evaluation process in relation to eligible projects; and
- reports that will be made available to investors with respect to the allocation of funds to eligible projects and the environmental impact of those projects, to demonstrate that bond proceeds are being invested in compliance with stated green criteria.
The Framework is designed to be aligned to the Green Bond Principles 2018 published by the International Capital Markets Association which is the industry body for capital market participants. The Green Bond Principles are voluntary guidelines aimed at promoting integrity in the development of the green bond market by clarifying the approach for issuance of a green bond.
A globally recognised specialist firm was engaged to review the Framework and found it to be credible, impactful and aligned with the four core components of the Green Bond Principles 2018, namely: use of proceeds, project evaluation and selection, management of proceeds, and reporting.
Green finance has emerged as a method of unlocking private capital and directing it into green investments. It can take a number of forms all of which are aimed at the financing of investments that provide environmental benefits. Green bonds have to date been the most widely used form of green finance with volumes of green bond issuances increasing year-on-year and reported to have reached a record $161 billion (€138.8 billion) last year, up four-fold from 2015. However other forms of green finance such green loans are now emerging with the Loan Market Association publishing its Green Loan Principles earlier this year with a view to promoting the development of the green loan market.