Green bonds: How the “green” makes a difference?

By Stefano Ramelli

Green bonds are considered a potential channel to overcome the financing barriers for climate mitigation, adaptation and other environment-friendly projects. The issuance of green bonds has been experiencing a rapid growth over the last few years. The green bonds market was created in the period 2007-2008 by multilateral development banks (the European Investment Bank and the World Bank, in particular) and has started to expand since 2013 with the entrance of private sector issuers. Examples of corporate green bonds include the USD 1.75 billion note issued by Toyota in March 2014 and the USD 1.5 billion note issued by Apple in February 2016. Cities and local government bodies are also important actors of this market. In April 2015, for instance, Transport for London issued a green bond to fund investments in low-carbon transport. The latest asset class to join the green bond euphoria is sovereign debt. In December 2016, Poland issued the first ever sovereign green bond (EUR 750 million), followed by France in January 2017 (EUR 7 billion).

The Green Bonds buzz

Why all this buzz about green bonds? The main benefit of green bonds is often referred to as “additionality”, the ability to attract new investments in low-carbon projects. The idea is simple: taken as given the risk profile of an institution, the presence of a dedicated financing channel for low-carbon projects should lower their cost of financing relative to more traditional projects and, in turn, increase their attractiveness. This idea makes sense, because the cost of financing is an important element of all investment decisions, especially for more innovative ones. The key question is: are large investors willing to pay a premium for having a green bond rather than an identical normal bond of the same institution?

This is difficult to say given the recent history of green bonds and the current very low-rate environment in many countries. According to various market reports, however, green bonds have tended so far to price in line with the respective issuer’s curve, meaning that they have not been offering better financing conditions to the issuer. In the secondary market, green bonds seem to trade at slightly higher prices than comparable normal bonds, with a difference equal to an approximately 20bp according to a 2015 research by Barclays. However, the returns in the secondary market cannot play much of a role in influencing the investment in green projects, of course.

Demand for Green Bonds

Overall, the existence of any financial benefits of green bonds – and thus their ability to stimulate large new investments in the green economy – is far from clear. What is clear is the demand of investors for this type of products, as suggested by the observed oversubscriptions. This could be interpreted as a signal that pricing differentials may materialise in the future as the market matures, if investors will show some willingness to pay for green features. In the meantime, it is probably worth focusing on “softer” benefits of the market, which may not be irrelevant. By issuing green bonds, corporations can communicate more convincingly to investors their commitments to environmental issues, and be kept accountable for them. Likewise, public institutions and policy makers can reinforce the message on their environmental agenda, increase awareness and stimulate private investments in strategic sectors.

Most importantly, green bonds may be beneficial in bridging the communication gaps between the sustainability and the finance communities, beyond what already done so far in the context of responsible finance. The issuance of a green bond is, in fact, a quite complex involving different actors who rarely interact with each other: sustainability and corporate finance professionals, bond underwriters, CEOs and NGOs, extra-financial and financial analysts of investment teams, just to give a few examples. Time will tell how far the green bond market will go. For the moment, an enhanced dialogue between sustainability and finance experts around the topic of green bonds is certainly mutually advantageous and may hopefully prepare the ground for further and even more innovative solutions towards a sustainable economy.


References:
– Barclays, “The Cost of Being Green”, U.S. Credit Focus September 2015, available at: www.environmental-finance.com
– Climate Bonds Initiative, “Climate Bonds 2016 highlights”, available at: www.climatebonds.net
– Unicredit Research, “Green Bonds: The Chartbook”, September 2016, available at: www.research.unicredit.eu
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oikos International

posted February 22, 2017

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oikos Young Scholars Finance Academy

oikos and the Department of Banking and Finance at the University of Zurich will convene the 7th oikos Young Scholar Finance Academy from September 4 to 6, 2017, in Zurich, Switzerland. More information is available here.

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oikos International

posted February 15, 2017

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Social Responsibility in a Context of Globalization of the Markets: Comparative Study of Public Policies Articulation in the Pharmaceutical Industry of Brazil and Spain

Capitalist society faces one of its greatest challenges in the beginning of the millennium: How can sustainable social, economic and environmental development be reconciled with capitalist drivers of efficiency and generation of profits? With increasing international integration and pressure from financial markets, typical of the current neoliberal power model, it calls into question the extent to which corporations can make elections truly free in order to build a more responsible world. Furthermore, it is worth questioning whether it is possible to demand or even expect that states and governmental institutions participate and intervene more in society with increasing budgetary constraints and loss of autonomy. Based on these concerns about the role of corporations and about the validity of the concepts of corporate social responsibility and sustainability, this research aimed to evaluate CSR practices by using the pharmaceutical sector as an empirical reference and analyzing social and environmental performance indicators, the influence of the institutional framework of national systems and strategic execution case studies of two pharmaceutical corporations within the institutional frameworks of Brazil and Spain. The study demonstrated the importance of legal and regulatory frameworks by conditioning and limiting decision-making about access to medicine, which foster or undermine responsible behavior by organizations. The research concludes that the institutional framework has a paramount effect on the result of the interaction between corporations and society, through public policies intelligently conceived to promote the highest possible level of general welfare. In the case of the pharmaceutical sector, policies to adequately remunerate capital to offset the business risk of investing in research and development and, at the same time, promote the general public’s highest possible level of access to advances in biotechnology and biomedical research.

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oikos International

posted February 14, 2017

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oikos Newsletter February 2017

February is a busy month indeed! In the northern hemisphere, the world begins to defrost and glides slowly into warmer times, adding a bit of sunshine to our lives. And the oikos community always knows how to make hay while the sun shines!
We kick off February with the oikos Asia Meet in Kolkata and subsequently visit the oikos Winter School in Witten. March is going to be about taking sustainable decisions, with the Spring Meeting and Legislative Meeting taking place in Hamburg. If you wish to broaden your network, don’t forget to have a look at the alumni portrait of Varun Sarda from oikos London, who is now with RBS. Meet our newest EB Member, Prudhvi Gadiraju, the person in the limelight, in the 30 seconds section.

Read the full oikos Newsletter.

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oikos International

posted February 13, 2017

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Sustainability Cycle

Join oikos Barcelona event: SUSTAINABILTY CYCLE. The Sustainability Cycle will take place in ESADE from 13th March to 15th March 2017.

ESADE students are invited to new Sustainability Cycle!
1 ECT for every participant, talks, workshops, food, prizes, case competition, final dinner and much more!

More information read here.

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oikos International

posted February 7, 2017

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oikos Alumni Meet Across Europe

“Berlin is a ‘hotspot’ for everyone interested in sustainability – be it related to academia or work.”, says Axel Bozier, who is organizing the second meeting of Berlin-based oikos alumni in April. No wonder that there are plenty of oikees from all generations in the German capital.

Axel is alumnus of the oikos Chapter in Reims and has teamed up with Sophie Reinbold, who continues her studies in Berlin after having been a member of oikos Tübingen in Germany’s academic south. They want to use the opportunity in Berlin to strengthen the oikos network. The first meeting of 2017 took place in January (pictured).

“It’s especially interesting to see that alumni from eight different oikos Chapters came together”, Axel says. “They fell right back into the oikos mode: intensive exchanges, but a relaxed and friendly atmosphere.” Sophie and Axel are excited to keep the momentum going and invite interested alumni to the next meeting on April 7. You can join the conversation on Facebook. We’re also looking forward to see where these informal meetings may lead, perhaps to the founding of a new Chapter in Berlin.

The oikos ambassadors, a gathering of alumni who take the lead in international alumni activities are working to open new Chapters in cities where alumni form a larger group – Paris among them.

oikos alumni meet current members in Warsaw, Christmas 2016

Cities with oikos Chapters and alumni can also be a platform for exchange: oikos Warsaw’s Christmas Dinner was another opportunity for oikos alumni to interact with each other. Mikolaj Dujinski and Kate Negacz were joined by oikos St. Gallen alumnus and new addition to the Swiss embassy in Warsaw, Guido Beltrani. Together with the current members, the alumni engaged in conversations about their oikos experience, past events, and plans for the future semester. Another meeting, engaging more alumni, is planned in spring.

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oikos International

posted February 7, 2017

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oikos Alumnus Varun Sarda: “oikos developed my interest in sustainable finance”

“At the Winter School, I experienced the spirit of oikos”

I first came across oikos while studying at university. A friend of mine who was active in oikos London told me about the organisation, and a couple of weeks later, I joined the oikos London team at the London School of Economics. I really enjoyed this experience and, a couple of months later, I subsequently participated in the oikos Winter School at the University of St. Gallen. There I experienced the spirit of oikos and was impressed by the outreach of the organisation and what it was trying to achieve at leading schools around the world. With this in mind, I subsequently joined the oikos International Executive Board and experienced the same oikos spirit internationally, discovering what all can be achieved when a group of like-minded individuals come together to drive change collectively within their sphere of influence.

“You’re never far away from an oikos Alumnus in the professional sphere”

As time would tell, this was the beginning of a life-long friendship with oikos and its alumni. I think it would be fair to say that my experience with oikos while at university played a role in helping me to develop an interest in sustainable finance. Importantly, I’ve made some great friends from my involvement with oikos and continue to want to remain involved with oikos London. I’ve also learnt that you’re never far away from an oikos Alumnus in the professional sphere, so it’s always great to be able to meet fellow alumni in meetings, share experiences and learn about how oikos has played a role in their own careers!

“After four years of consulting, I wanted to gain experience on the client side”

During my studies, I completed various internships – for a development non-governmental organisation, for a mining company in their health, safety and environment department, and at Innovest (since absorbed into MSCI ESG Research).  This gave me a pretty good idea that I was interested in the area of sustainable finance.  So after completing my Masters, I went to work for EIRIS (now VigeoEIRIS) as an analyst of the Resources and Pharma sectors.

After 18 months, I took up a deferred place at PWC in London and joined their Sustainability & Climate Change consulting practice where I focussed on financial services.  Here I worked with different banks, private equity firms and asset managers helping them to evolve their sustainability approach and develop policies and procedures in this space.  The whole area was very new for many of them and so there were lots of opportunities to help them define their strategy, approach and implementation as well as capacity-building.

After four and a half years, I decided that it would be good to gain some experience on the client side.  So, I jumped ship and joined the Environmental, Social & Ethical Risk (ESE) Advisory Team at The Royal Bank of Scotland (RBS). This involved identifying and assessing the ESE and reputational risks presented by customer activities in different sectors (for example, Oil & Gas, Power, Mining & Metals, Agribusiness, Defence, etc) and advising senior approval committees. This was a great introduction into the world of how sustainable finance really works.

“Today, I am a senior ‘Sustainability Ambassador’ for RBS and handle socially responsible investors”

After two and a half years, I was looking to pursue a role that would allow me to both leverage on my skills and experience in sustainability and reputational risk management, but also allow me to work on (corporate) sustainability strategy and investor engagement. With this in mind, I moved into RBS’ Sustainability / Sustainable Banking function. I’ve now been in the team for two and a half years. I lead RBS’s engagement with socially responsible investors (SRI) on sustainability-related topics and the bank’s approach to sustainability reporting. I am also responsible for leading the review of RBS’s environmental, social and ethical (ESE) risk appetite positions, identifying emerging sustainability and reputational risks and engage with relationship and risk management teams. Other responsibilities include strategy work, engaging with external stakeholders and representing RBS at industry fora. For example, I am a senior ‘Sustainability Ambassador’ for the bank at the Banking Environment Initiative, which is run by the Cambridge Institute for Sustainability Leadership. As part of this I get involved in their work on the Soft Commodities Compact with various banks.

What would your perfect weekend involve?

My wife and I have a toddler who is an absolute bundle of joy! So, he has our full attention on the weekends. Beyond that, it’s often about trying to find some time to do the things that I enjoy doing beyond the usual weekend chores: for example, socialising with friends and family, going for a long run in the park or exploring the outdoors. I love trekking but this has taken a bit of a back-seat in recent months.

Varun Sarda, oikos Executive Board Member and Member, oikos London. Each month, we feature one of our alumni. Read more Alumni Portraits.

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oikos International

posted February 6, 2017

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oikos LEAP Webinar “Leading for More Sustainabile Education”

Join one of three opne Webinars of the oikos LEAP Leadership Program

Up next is Geoffrey Scott, Emeritus Professor at the University of Western Sydney. Geoffrey will take us through his life-long experience in pushing universities to implement sustainability at its core — past its imagined boundaries.

His desire is to make students co-creators – instead of victims – of their curricula.

For the past two years he has been working as a National Senior Teaching Fellow with Australia’s Office for Learning and Teaching and in that position helped to bring about the platform “FLIPCurric”. Visit http://flipcurric.edu.au/.

How can I join?

Join our Facebook event here and click attend. We will post the call details there on the debate of the call. If you’re not an oikos member, but you would like to attend, email Adrian. You can also stay updated by following the event on the oikos Intranet.

Dr Geoff Scott is Emeritus Professor of Higher Education and Sustainability at Western Sydney University, Australia. From 2004-12 he was Pro Vice-Chancellor (Quality) and Executive Director of Sustainability at UWS.
He is a widely published author on change leadership, professional capability, assuring achievement standards and quality assurance in higher education. His book Turnaround Leadership for Higher Education with Canada’s Michael Fullan (2009) was nominated for the 2010 US Colleges Bellwether Award.

He is a former director of the Australian Council for Educational Research. From 2014-16 he was a National Senior Teaching Fellow with Australia’s Office for Learning and Teaching. In 2007, he was the Recipient of the Australian Higher Education Quality Award.

Learn about the oikos Leadership Program LEAP here: https://oikos-international.org/programmes/leap/

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oikos International

posted February 6, 2017

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Sustainability In The Concrete Jungle

Join the oikos London for their sustainability pop-up event!

If you want to come and hear speakers discuss their efforts and commitment to sustainability, check out oikos’s photography competition finalists, and speak with other students on topics related to oikos’s mission in a fun and elegant setting, then this is the event for you.

Send oikos London photographs relating to the theme “Sustainability in the Concrete Jungle” by the 10th of Feb and stand a chance to win some great prizes!

Speakers include;

**Ms. Etienne Cadestin** – Managing Director at Longevity

**James Beale and Leo Morris** – Deloitte Sustainability

**Mr. Aexander Monk** – Schroders

**Maria Trujillo Olaiz** – Founder of AQUI

**Representatives from the Green Bonds sector

and others!

A reception of drinks and canapes will be provided.

There will also be a activites and games with prizes to be won!

Please check back for more information! If you have any questions, email su.soc.oikos@lse.ac.uk.

Read more information here.

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oikos International

posted February 5, 2017

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Business Meets Politics

„The one and only business of business is increasing its profits.“

Join the event organized by oikos Konstanz.

Read more information in German here.

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oikos International

posted February 5, 2017

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