International Capital Markets Newsletter Issue 2 – Winter 2020: Euronext’s Green Bond Offering

Dechert LLP

[co-author: Nick Quarrie]

In November 2019, Euronext announced the launch of its Euronext Green Bonds Offering across its six regulated markets in Amsterdam, Brussels, Dublin, Lisbon, Oslo and Paris. The Green Bonds Offering was the first product launch under Euronext’s three-year strategic plan “Let’s Grow Together 2022”, which targets the building of leading pan-European market infrastructure, connecting local economies to global capital markets, with a focus on innovation and sustainability.

The Euronext Green Bonds Offering is operated out of Euronext Dublin and is designed to encourage and promote more sustainable investment in Europe. Under the initiative, information on green bonds from all of Euronext’s markets are displayed in one area on the Euronext website, aimed at facilitating investor access to sustainable investment opportunities.

According to information published by Euronext, as of January 2020, 250 green bond issues were listed on Euronext’s markets from 110 issuers, including sovereigns, local governments, government-based entities, financial corporates, development banks and asset backed security issuers.

Eligibility Requirements

In order to be eligible for inclusion in Euronext’s Green Bonds Offering, green bonds must:

  • be listed on a Euronext market (EU regulated or exchange-regulated);
  • be aligned with recognisable industry standards, such as the International Capital Markets Association’s Green Bond Principles, the Climate Bond Initiative Taxonomy or another framework accepted by Euronext;
  • have an external review performed by an independent third party, which is submitted to Euronext (such external review to be consistent with the ICMA Guidelines for External Reviewers and the external review documents to be constructed by Approved Verifiers under the Climate Bonds Standards or other industry recognised standards, or by an entity demonstrating sufficient experience and expertise);
  • be accompanied by a Green Bond Declaration Form; and
  • be accompanied by a commitment by the issuer to submit updated frameworks and external reviews to Euronext.
Euronext Green Bond Declaration Form

As part of the application process, issuers must submit a Green Bond Declaration Form setting out the “green” credentials of the bonds (including the green framework to which the bond is aligned, details of the external review and details regarding any certification of an independent third party verifier) and making a number of declarations, including (among others):

  • that the issuer is not aware of any future event that will have an adverse effect on the green nature of the bonds;
  • that the issuer will submit relevant green-related documents and reports for filing to Euronext in a timely fashion or provide a link to an area on the issuer’s website where current and future green-related documentation and reports are accessible; and
  • that the issuer will provide any information to Euronext that may cause the green bond(s) to no longer qualify for Euronext Green Bonds.
Next Steps

Euronext has announced its intention to expand its Green Bond Offering to include sustainable bonds, to explore trading and index creation opportunities and to align the entry criteria for the Euronext Green Bonds Offering to the EU Taxonomy Regulation.

Green Developments by Other European Exchanges

The launch of Euronext’s Green Bond Offering marks the most recent green bond segment established by the major European stock exchanges.

London Stock Exchange

The London Stock Exchange was the first major exchange to launch a dedicated green bond segment in 2015.

In October 2019, the London Stock Exchange expanded its efforts to promote sustainable finance by:

  • adding new sustainability and social segments to its existing “green bond” market segment to create a new “Sustainable Bond Market”;
  • creating a new “Issuer-Level Segment” on the Sustainable Bond Market for bonds by issuers whose core business activity is aligned to the green economy (i.e., with more than 90% in green revenues);
  • introducing mandatory post-issuance reporting requirements for issuers on the Sustainable Bond Market to provide transparency regarding use of proceeds and continued eligibility for the Sustainable Bond Market over the life of the bond; and
  • separately, introducing a new “Green Economy Mark”, which will be used to recognise publicly-traded companies (both on the Main Market and the Alternative Investment Market (AIM)) that generate at least 50% of their revenues from products and services that contribute to the global green economy (based on methodology incorporating the Green Revenues data model developed by FTSE Russell).

Luxembourg Stock Exchange

The Luxembourg Stock Exchange launched its Luxembourg Green Exchange in 2016, which is exclusively dedicated to sustainable finance, with classifications for green, social and sustainability bonds.

In 2018, the Chinese domestic Green Bond Channel was launched, a collaboration between the Luxembourg Stock Exchange, Shanghai Stock Exchange and the Chinese Interbank Market permitting Chinese issuers of domestic green bonds on one of these two markets to be displayed on the Luxembourg Green Exchange if information is provided in English and ongoing reporting is provided. The Green Bond Channel is designed to provide increased opportunities for investors seeking to finance green projects in China.

In 2019, the Luxembourg Green Exchange platform was also extended for socially responsible investment funds (in addition to bonds) in order to respond to growing market demand.

Written by:

Dechert LLP

Dechert LLP on:

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