France to launch inaugural 'green' bond this month

France aims to launch its first "green" bond by the end of the month, Finance Minister Michel Sapin said on Tuesday, as the government seeks to make Paris a centre for financing environmentally friendly projects. As host of the 2015 Paris Agreement to combat global warming, France's government had hoped to be the first sovereign borrower to venture into the fast-growing market for so-called "green bonds".
Although Poland beat France to the draw with a 750 million euro ($780 million) five-year issue last month, Sapin said the French bond would be significantly larger, and therefore much more liquid. "With this issue, the French state aims not only to finance climate and environmental policies in an innovative way, but also to help develop this market," Sapin told journalists.
What sets green bonds apart from more traditional issues is that their proceeds are earmarked for use in financing specific environmentally friendly projects or initiatives that mitigate the impact of climate change. The French bond will be verified by a specialised agency, and an independent committee will check that the funds are being used for environmental protection. While green bonds have been around for a decade, sovereign borrowers had been notably absent from the market, which was traditionally dominated by international development banks.
The green bond market has enjoyed strong growth in the last two years, with issuance jumping 105 percent last year alone to a record $72 billion, according to data compiled by Thomson Reuters and the Climate Bond Initiative. France is aiming for a maturity of 15-25 years, depending on investor demand. Sapin said the aim was eventually to offer a wide range of bonds, as in the traditional bond market.
He declined to say how much France intended to raise but said the issue would be big enough to be included in international indices, which generally means 2.5 billion euros or more. The government has mandated banks to sound out investors about demand, and is to hold a series of roadshow visits with potential buyers in Europe and Asia in the coming weeks.