Following suit with Poland, France has become the second country to start issuing Green Bonds. The French government seeks to make Paris a center 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 Green Bonds. France aims not only to finance climate and environmental policies in an innovative way, but also to help develop the market.
The EU green bond market has developed well compared to other green bond markets because it is built on top of the existing finance infrastructure. The EU market has experienced participants and an increasing political support from the EU institutions even though significant differences exist between EU Member States. According to a study published by the European Commission last November, the green bond market was worth a total of $41 billion in 2015. But this value could double for 2016. Despite of its rapid growth, globally the green bond market still only a very small share of the total bond market. Thus, there is a huge potential for unlocking further growth, which could contribute to the commitments to the UN’s Sustainable Development Goals.
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 to a record $72 billion. France is aiming for a maturity of 15-25 years, depending on investor demand. The aim was eventually to offer a wide range of bonds, as in the traditional bond market. 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.
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