AMSTERDAM (Reuters) - The European Union could raise a third of the cash needed for its 750 billion euro ($858 billion) recovery fund by issuing “green” bonds, which would back projects that help the environment, ratings agency S&P said in a report on Wednesday.
Several big global investors have joined environmental activists in urging EU nations and others to ensure plans to help their economies recover from the coronavirus crisis are sustainable and support Paris climate accord goals.
The EU’s plans for a 750 billion euro recovery fund has won support from investors who say it would create safe euro zone assets to rival German government bonds. Issuing green bonds as well will make the plans more attractive, they add.
S&P estimated 225 billion euros of the fund could be raised via green bonds, basing its figure on last week’s EU Commission proposal which said it 30% of the recovery funds would target climate-friendly projects.
The ratings agency said a green issuance of that scale would boost the size of the global green bond market by 89%. About $53 billion sovereign green bonds have been issued so far, it added.
Green bonds have so far made up just 3.7% of global bond issuance, making it “difficult for central banks or regulators to ask market participants to build green bond portfolios”, the S&P economists said in their report.
“The availability of an EU green safe asset could help investors, as well as policymakers, achieve their goals to ‘green’ their portfolios and the economy,” they said, adding such an EU move could encourage private green bond issuance.
European Central Bank chief Christine Lagarde opened the door last week for the bank to use its bond buying programme to pursue green objectives.
France believes it is possible to reach an EU deal on the recovery plan at the end of the week, the office of the French presidency said on Wednesday.
Reporting by Yoruk Bahceli; Editing by Edmund Blair and Nick Macfie