The ECB’s requirement for banks to issue green bonds, in the context of new, more stringent climate policies, obliges the four Greek systemic banks to make their green policies immediately measurable.
The banking system is more specifically called upon to increase the share of bonds issued to finance the transition to the green economy.
Piraeus Bank is restarting these processes by re-entering the markets with a €500 million senior preferred green bond.
The previous senior preferred bond in the category was issued in 2021, worth €1 billion, and the liquidity raised was used to finance environmentally friendly investments.
Now the bank is re-entering the markets with a €500 million senior preferred green bond, having authorised BNP Paribas as Sole Green Structurer and BNP Paribas, BofA, Commerzbank, HSBC and Intesa Sanpaolo to manage the book of the issue.
This is a 5-year issue with a previous recall period of 4 years. The proceeds are expected to be used to finance or refinance the bank’s “Green Assets” and further strengthen the MREL foundation.
The transaction is expected to occur immediately, subject to market conditions, while the bond is expected to receive a Baa3 rating from Moody’s.
Movement timeline
The National Bank, for its part, in October 2020, successfully completed its first issuance of senior green bonds, raising 500 million, with a coupon of 2.750%.
The resources are mandatorily channeled to the financing of projects related to the green economy. In October 2023, the National Bank established the first Sustainable Bond Framework (SBF) in the Greek banking market.
This framework expands the GBF eligibility criteria, extending its application to additional new eligible green and social categories.
Eurobank has also created a framework for green bonds. This framework sets out the principles for the bank’s issuance of green bonds and describes how the Eurobank Green Bond supports and contributes to the achievement of the UN Sustainable Development Goals.
European banks, through the green stress test they have undergone, must take action regarding the risk strategy they apply for issues related to climate and the environment, as well as governance.
They also need to report on the risk management framework.
ECB Requirements
As is well known, the European Central Bank is actively developing its climate policies. Europe’s systemic credit institutions, to which all four Greek banks belong, must make green policies measurable, as these will now be included in the supervisory monitoring and assessment process.
European banks, through the green stress test they have undergone, must take action regarding the risk strategy they apply for issues related to climate and the environment, as well as governance.
They also need to report on the risk management framework.
From this year onwards, banks began to differentiate their invoices for those customers who do not operate with ESG criteria in their activity and, above all, for those who are indifferent to whether their activity pollutes.
Bank bills are charged around 0.10%-0.50% in terms of the subsidies from the above companies and banks see this increase in two ways:
- As an incentive for companies to change policy.
- As an incentive to their income, since continuing this financing will, at some point, cost them capital.
The green bond dance reopens
Piraeus Edition – Responding to the ECB’s climate requirements for green finance
European banks, through the green stress test, must take measures regarding their risk strategy for ESG issues.
The ECB’s requirement for banks to issue green bonds, in the context of new, more stringent climate policies, obliges the four Greek systemic banks to make their green policies immediately measurable. The bonds are worth €500 million and have a duration of 5 years.
Baa3 will be rated by Moody’s.
Climate stress tests and the protagonists of the transition
The climate stress testing exercise recorded the emissions of the bank’s client companies in combination with the financing they provide to specific clients.
At the same time, it imposed a new order on actions that call themselves green without actually being so, the so-called greenwashing.
The ECB’s guidance on climate and environmental risks requires banks to continually self-assess their current practices against projections determined by the specific conditions served by each country’s climate and the way in which they
business operation.
The ECB assessed Greek banks as having a level of preparedness and capacity to implement the relevant plans and these, in turn, respond to the specific directives.
According to data from the Climate Bonds Initiative, cited by the IENE study “The role of green bonds in strengthening the energy transition in South-Eastern Europe”, 67.5% of the total volume of climate bonds issued in 2023 came from green bonds, which accounted for US$587.6 billion, an increase of 15% compared to the previous year.
In South-Eastern Europe, the green bond market remains very limited, with a small number of private sector companies and financial institutions issuing green bonds.
However, it is estimated that the development prospects are great, as the region is moving towards decarbonization and RES and energy efficiency projects are constantly increasing.