With a view to deploying the new financing needed to meet the Paris Agreement targets in the EU, European asset management leader Amundi and EU green bond pioneer the European Investment Bank (EIB) are signing a partnership to launch the Green Credit Continuum investment programme.
Over the last few years, the European green financing market has mainly developed by way of green bond issues from sovereign, quasi-sovereign and large corporate issuers. To finance additional efforts to promote European energy and ecological transition goals, new market instruments are required that enable smaller companies and green projects to access market financing and offer higher yields to investors.
The Green Credit Continuum program therefore has the main goal of fostering the development of the green debt market beyond the existing green bonds, thereby supporting small-scale green projects, SME and mid-cap financing.
Signed at the Paris Europlace 2019 international financial forum, the agreement between Amundi and the EIB has three components. Firstly, it covers the creation of a diversified fund that will invest in green high yield corporate bonds, green private debt and green securitised debt. In parallel, a scientific committee of green finance experts will be formed to define and promote environmental guidelines for these three markets in line with international best practice and legislation derived from the European Commission action plan on financing sustainable growth. Lastly, a green deal network will be put in place to source deals and projects.
The goal of the agreement is to create several funds based on this model and to help establish market standards for these new green finance segments. It aims to raise EUR 1bn within three years, including a EUR 60m commitment by the EIB.
EIB Vice-President Ambroise Fayolle said: “When the EIB issued the world’s first green bond in 2007 as part of its “Climate” bonds programme, it made a major contribution to the development of this market. However, despite this fast growth, a significant financing gap persists and huge potential is still waiting to be tapped in some green debt segments. I am happy to be signing this programme with Amundi today. It will help promote sustainable finance in Europe by including new issuers in the green finance market, making them even more aware of environmental issues and environmentally friendly investments.”
Amundi CEO Yves Perrier added: “We are very honoured to sign this partnership with the EIB. It offers a particularly innovative investment solution to institutional investors wishing to help finance the energy transition and diversify their sources of yield in a low interest rate environment. A responsible investment pioneer, Amundi is therefore strengthening its contribution to combating global warming.”
To meet its climate commitments under the Paris Agreement and finance the associated energy transition, Europe is missing an estimated EUR 180bn in financing a year until 2030. To reach this level of investment, green finance must mobilise all of the debt capital markets. Against this backdrop, the key role played by green bonds is widely recognised.