Italy issues world’s largest sovereign green bond ahead of COP26

If it was aiming to send a strong sustainability signal to the markets, the community and the world, Italy just sent a message worth €8.5bn in green bonds.

With its inaugural €8.5bn 24-year green Buoni del Tesoro Poliennali, or BTP, as the Italian long-term treasury bonds are called, the Republic of Italy has issued the world’s largest sovereign green bond on 3 March. BNP Paribas was joint bookrunner on the green bond issue.

“Italy enters the market of sovereign bonds that finance sustainable development through the issuance of the new “BTP Green“, widening the country’s commitment to the European Commission’s framework for achieving climate neutrality by 2050 and the goals set out in the European Green Deal,” the Italian Ministry of Finance said. “The first Italian Sovereign Green Bond will finance Italy’s Green Transition strategy already started in the past years.”

This is of particular significance as Italy is the co-chair of this year’s 26th UN Climate Change Conference of the Parties (COP26) in November. Co-hosted by the UK, COP26 will be held in Glasgow, where governments, industry leaders, scientists, and non-governmental organisations (NGOs) will meet to discuss how to accelerate climate action will be on top of everyone’s agenda.

“As we look ahead to COP26, it is clear from the record demand on this deal that investors are mobilising support towards sovereigns that bring their climate ambitions to the capital markets,” said Vittorio Ogliengo, Executive Chairman of BNP Paribas CIB Italy. The green BTP was over 9 times oversubscribed.

In addition, this landmark green bond highlights Italy’s key role in putting climate change on top of the agenda of the G20 for which Italy has assumed the 2021 Presidency since December 2020. “With this debut green bond, Italy also shows on a practical basis how a sovereign issuer can use sustainable financing solutions as an effective tool to drive the sustainability agenda ahead of multilateral meetings like the G20 and COP26,” noted Delphine Queniart, Global Head of Sustainable Finance & Solutions, Global Markets, BNP Paribas.

Ogliengo added: “Italy’s leadership on harnessing sustainable finance to accelerate the ecological transition is important for the global climate agenda and progressive within the financial markets. This landmark sovereign green bond highlights the diversity of environmental levers which need to be tackled to address the climate and biodiversity crisis.”

Italy’s Framework for the Issuance of Sovereign Green Bonds

The landmark bond follows a robust framework targeting six core areas to drive forward the country’s climate agenda and support global sustainability objectives.
The framework will target six core areas:
  1. Renewable electricity and heat
  2. Energy efficiency
  3. Transport
  4. Pollution prevention and control as well as the circular economy
  5. Protection of the environment and biological diversity
  6. Research
The Green Bond Framework aligns with the “Green Bonds Principles” issued by the International Capital Market Association (ICMA) and, as much as possible, with the draft EU Green Bond Standard.

The green BTP’s use of proceeds will be reported annually and the methodology used to report the progress will be publicly disclosed, highlighting the transparency of this deal.

The Framework was reviewed by V.E. (former Vigeo Eiris) who provided a Second Party Opinion, and confirmed the alignment with the Green Bond Principles administered by ICMA.

Sustainable finance, and in particular sovereign sustainable issuance, will be key in funding the projects that will help achieve the Paris Agreement targets. This ground-breaking bond supports Italy’s sustainability strategy and aligns with the Paris Agreement for signatory nations to transition towards a more sustainable economy.

At a country level, Italy has endorsed the European Commission’s long-term strategy to achieve climate neutrality by 2050 and is committed to achieving the goals set in the European Green Deal. Italy has a binding target of an at least 40% domestic reduction in GHG emissions by 2030 compared to 1990 through its National Climate Energy Plan.

Supporting sovereign sustainable finance issuance

BNP Paribas continues to support its clients with sustainable finance issuances, especially with sovereign deals, recently including:

  • The Republic of Chile’s $4.25 billion social and green bonds
  • The first ever SDG sovereign bond with Mexico
  • The Government of Hong Kong SAR’s $2.5bn green bonds

The Bank ranks #1 in euro sovereign bonds (source: Refinitiv league tables for 2020) and #1 in the 2020 Sustainable Bonds ranking, supporting issuances for clients across the SSA, FIG and corporate sectors (Bloomberg).