The EBRD has now invested €1bn in green bonds since 2017, with €524mn allocated in 2021 alone, as it supports emerging green capital markets across Central and Eastern Europe.
Its most recent investment of €65mn in a green covered bond from Poland’s PKO Bank Hipoteczny (PKO BH) took it over the €1bn mark, while the value EU-supported green bonds has reached €7bn.
Proceeds from PKO BH’s green covered bonds will be used to finance low-carbon residential buildings.
The green bond market has accelerated in recent years in the economies where the EBRD operates. The bank invested a record €524mn in 17 green bonds in 2021 – more than half of its total investment in green bonds to date.
The EBRD said that investing in green bonds was just one of the ways it promotes green capital markets in the economies where it operates.
It also fosters green bonds by providing technical assistance to help individual issuers, offering credit enhancement to attract international institutional investors to new countries and sectors, thereby paving the way for further green bond issuances.
Many of the EBRD’s investments have been in green bonds that were the first from a particular issuer, country or sector.
“Increasing access to green finance in the countries where we work requires the EBRD to help more of our clients come to market and more local and international investors to invest in their green bonds,” explained Harry Boyd-Carpenter, the EBRD’s managing director for Climate Strategy and Delivery.
“Doing so can help educate issuers and investors on what makes for a green investment and ultimately to green the whole financial system.”
Indeed, Europe has become the global leader in green and sustainable bonds, and Central and Eastern Europe (CEE) is now surfing the green wave.
The European Commission is counting on green bonds to mobilise private sector finance to help the bloc achieve its European Green Deal target of becoming carbon neutral by 2050.
As part of its Action Plan on Sustainable Growth, the Commission has drawn up a common taxonomy to classify sustainable activities, together with benchmarks to measure their impact. This will prevent companies “greenwashing” their activities – making misleading claims about environmental benefits to lure unsuspecting ethically minded investors.
The Commission is also forcing larger companies to report how environmentally sustainable their activities are, so investors can check their claims against performance. It is also working on a European green bond standard.
This latest investment in PKO BH is in the first euro-denominated green covered bond from Poland and the first out of the EBRD’s EU region.
It follows a PLN50mn EBRD investment in a PLN250mn green covered bond issued by PKO BH in 2019, which was the first such bond from a major Polish financial institution.
This latest green covered bond saw PKO BH return to the market, this time issuing in international markets in a challenging post-pandemic environment, and with a larger €500mn offering, further diversifying its investor base. It opens the door for other Polish issuers of green covered bonds to follow suit.