Interview: The Green Bonds Market

What if France becomes the first state in the world to issue green bonds? On September 2, the French government announced it intended to launch a sovereign green bond. What is it all about exactly? What are the stakes involved? Analysis with Philippe Zaouati, CEO at Mirova, and Orith Azoulay, Head of SRI Research at Natixis.

What are the specificities of green bonds?

Philippe Zaouati - What is specific with green bonds is that the money raised is dedicated to projects or innovation related to energy transition in the broad sense, i.e. energy efficiency or renewable energy. The money goes directly to the projects, whereas traditional bonds finance the overall activity of the company or the issuer.


The European Investment Bank issued the very first green bonds, closely followed by large companies and the local communities. Where are we today?

Orith Azoulay - On the issuer side, market diversification is growing although not enough. With the announcement made by the French government, we are expecting the issue of sovereign green bonds in 2017.


The market experienced strong growth this year, with issues close to 55 billion dollars versus 35 to 40 billion last year. What is the reaction of investors?

Orith Azoulay - On the investor side, the green agenda is climbing to the top of the hierarchy of a number of big financial institutions. The appetite for green bonds or impact bonds is growing. We see new investors in that space which, historically, were not very big players of the SRI*or ESG**, or even green markets.

*SRI: Socially Responsible Investment

**ESG: Environment, Social and Governance


About the French financial players: what is their position on green bonds?

Philippe Zaouati - The French players were at the forefront of the development of the green bond market. In fact, the French market is number One in terms of issuance with 15 billion dollars. The Ile-de-France region, ENGIE and EDF were the first to issue green bonds. The major French banks, including Natixis, are very active in this area and in the asset management sector, Mirova is very well positioned. Paris has everything it needs to become the capital of green finance thanks to green bonds.


What more can be done to grow this market?

Orith Azoulay - The big debate of the green bond market is standardization. This implies coming to a common definition of a green bond, setting eligibility criteria for projects and measuring the environmental or social impact of the projects financed. At the moment, those measurements are not standardized. Standardization would allow investors to make choices based on the impact of the projects.

The second lever would be to convince industrialists to issue green bonds and finance projects that would enhance energy efficiency or reduce their carbon footprint.