Graubundner Kantonalbank (GKB) issued its first green bond on Monday. It thus makes, as it itself explains, "an important contribution to achieving the climate targets of the canton of Graubunden and Switzerland". How does the bank go about it, and how do green bonds work in general? An interesting case study.
As with standard bonds, issuers of green bonds borrow capital and pay a fixed rate of interest for the term of the bond. The special feature of green bonds is that the money flows into sustainable and climate-friendly projects: for example, into the promotion of hydropower plants and photovoltaic systems or into the construction of energy-efficient buildings.
Graubundner Kantonalbank (GKB) uses the proceeds of its first green bond issue to finance projects in the field of "renewable energy sources" and "green building".
Green bond issuers exist in all sectors – from development and commercial banks to corporations and sovereigns.
Earmarked and environmentally friendly financing
The issuer must meet requirements set forth in a set of voluntary guidelines – the Green Bond Principles (GBP). In addition, the GBP obliges him to provide regular reporting. In addition to the use of funds, investors are shown how the proceeds of the issue affect nature and the environment. It is considered good practice for an issuer to have its compliance with the Green Bond Principles externally assessed.
According to the Climate Bond Initiative, the issuance volume of green bonds in 2020 has reached a record high of 290 billion. US dollar reached (up 246% compared to 2016). This year, the volume is expected to reach 500 billion. US dollar.
In Switzerland, too, green bonds are visibly getting more attention. In the first seven months of 2021 alone, as much new volume came to market as had previously come in almost an entire year. While there were just seven green bonds outstanding at the end of 2018, there are currently already 43.
Green bonds gain in importance
Despite this strong growth, green bonds are still a niche segment of the global bond market, accounting for just under one percent of estimated volume. GKB expects the importance of green bonds to grow significantly in the coming years. This is mainly due to regulatory and political drivers such as the Paris Climate Change Agreement.
It is also important for the expected dynamic development that the issuance of Green Bonds has in many cases become a win-win situation for both issuers and investors.
Issuers often benefit from more favorable refinancing conditions, investors achieve a direct positive impact on the environment in the sense of impact investing. This applies to institutional investors as well as private investors.
Premiere of the Graubundner Kantonalbank
The Graubundner Kantonalbank has on 15. November a green bond worth CHF 100 million. Emits. These are fixed-income securities whose issue proceeds are used for sustainable purposes. With the launch of this first green bond, GKB is responding to rising investor demand.
At the same time, the bank is reaching an important milestone on the road to its net-zero carbon commitment, as well as integrating ESG criteria into the lending process, according to a statement. This applies to corporate lending as well as mortgages.
Green loans and credits to companies and individuals
Green bonds are issued under the new framework of the GKB. These define a pool of suitable projects for green lending in the form of business loans focused on renewable energy, as well as mortgage loans for climate-friendly real estate in Switzerland.
bluetorontodirectory.coms funded support climate change mitigation and have a positive impact on achieving the following UN Sustainable Development Goals:
When it comes to renewable energy, Graubundner Kantonalbank's main focus is on loans to larger power companies. Further financing of smaller production facilities with a focus on wind and hydropower, solar energy and district heating can also be part of the GKB green bonds.
What the bank strives for
By granting mortgages for "green buildings" GKB promotes environmentally friendly development of construction activity. The focus of such mortgages is on property owners who build in an environmentally friendly way or renovate in a climate-friendly way. "This has been proven to help save resources, minimize CO2 emissions and reduce environmental risks", holds the bank.
Green Bonds give investors access to an investment with potentially low volatility. On the other hand, they make an active contribution to the financing of the energy turnaround, on both a large and small scale.