Mediobanca was among the first Italian financial institutions to enter the green finance market, both in the form of bonds and credit lines.
It participated in the first green issue ever made in Italy, the one made by the Bologna municipality, Hera, for a total amount of EUR 500 million, used for green projects. Mediobanca structured the EUR 500 million issue of Assicurazioni Generali, the proceeds of which were used to finance the CityLife tower in Milan, as well as the EUR 300 million bond launched by Aeroporti di Roma (Mundys) linked to the CO₂ reduction also in connection with the construction of the new Fiumicino terminal.
Moreover, Mundys was one of the first companies in the mobility and aviation sector to adopt a sustainable finance framework, linking financial collection to the industrial and development objectives defined in its Climate action plan. Mundys is now the corporate leader that will guide “Financing the airports of tomorrow”, the cornerstone of the initiative of the World Economic Forum and Airports Council International that aims to identify industrial solutions and hybrid forms of financing that accelerate the green transition of airports to zero emissions by 2050.
The motivations that can lead to the issuance of debt, be it bond or loan, linked to ESG issues (environmental, social, governance, ed.), can be numerous up to and including the refinancing of the disbursements envisaged by the Decreto Italia in support of the post-Covid economy.
The variety and breadth of purposes make the boundaries of this world still very permeable. Marco Spano, managing director and co-head of Debt Capital Markets and Financing group at Mediobanca, is one of Italy's leading experts in the field and a pioneer of green investments. “We catalogue bonds and loans according to how the proceeds are used,” Spano explains. “If they are used to finance a specific project, the financing will be called project-based, while if the remuneration is linked to the achievement of certain objectives, they are called ‘Kpi (key performance indicators) linked’. The bond is certainly a more sophisticated instrument because it is governed by rules based on the International Capital Market Association (ICMA) and because it is subject to the European taxonomy and the European Union's green bond standard.”
When we talk about green investments, we always end up talking about greenwashing. The risk of a bubble is also present due to an excessive self-centredness of the industry in setting rules for itself. But the industry has rules that should reduce the risks. “We, like the vast majority of issuers, work in a context of market standards, of self-regulation, because all banks that have self-regulated and self-imposed standards belong to ICMA,” Spano emphasises. “The European regulator, lagging behind the market, created the taxonomy, which for the time being only applies to green bonds. This provides a classification of sustainable economic activities based on scientific parameters. It is now possible to structure an ESG framework to support the issuance of a green bond by aligning its contents with the EU taxonomy. The frameworks of the companies are very detailed and precise in order to be credible and to overcome the judgement of the so-called second part opinion providers, agencies that certify the goodness or otherwise of the structure within which the operation is embedded. This applies a little more to bonds. The loan is a transaction between a bank and an entrepreneur, it is a bilateral agreement that could be looser on the level of ESG content.”
The numbers in the world of green investments are still quite small although they will inevitably grow. “The percentage of bonds that have an ESG content compared to the total of those issued in the last quarters is around 13%, which is a low number,” Spano observes. ESG financing accounts for more than 60% of the total. This says that the standard for giving an ESG certification to bonds is probably a bit stricter than the standard agreed on for loans between lenders and borrowers. Regulation of certifiers would help and give the market a little more peace of mind. Then there is an issue of greenwashing related to the way bonds are accounted for by investors. Recently we have seen a few scandals related to the classification of investments originally classified as ESG that in reality were not, by very large European investment houses, because in order to attract capital dedicated to ESG, they aim to have a much stronger ESG footprint.