Quarterly report reveals how European Taxonomy and Green Bonds are interlinked with a focus on Real Estate sector.
Link to the report: GSS Bonds Market Trend, Summer 2023 by MainStreet Partners
Today, MainStreet Partners, the independent London-based ESG Advisory and Portfolio Analytics firm, has released its latest quarterly GSS Bonds Market Trends report.
This comprehensive report uncovers compelling insights that demonstrate the pivotal role of European Taxonomy and Green Bonds, with a particular focus on the dynamic Real Estate sector.
The EU announced earlier this year that it would launch a framework to standardise Bond products that specifically fund the low-carbon transition. This would be known as the European Green Bond Standards (EUGBS).
Key takeaways from the Report:
· MainStreet Partners’ analysis reveals that 28% of outstanding green and sustainability bonds could claim the upcoming EU Green Bond Standard label, with the lowest share coming from government bonds and the highest from non-financial corporates.
· Corporate revenue and CapEx Taxonomy alignment place Utilities as the fastest transitioning sector – and Real Estate as one of the potentially most aligned sectors.
· Real Estate accounted for over 12% of GSS Bonds issuance in 2022. Physical transition and regulatory risks are just some of the incentives for accelerated investments in buildings’ renovation, a key project financed by the Green Buildings Use of Proceeds.
· MainStreet Partners’ Impact Results database shows that GSS Bonds proceeds from the real estate sector have contributed towards renovating or constructing approximately 3,200 football fields worth of green floorspace, as well as to save an amount of energy equivalent to the energy used to power approximately 700,000 US households for a year.
Focus Areas of the Report;
1) The European Taxonomy and the European Green Bond Standard. The report delves into the interconnectedness of these regulatory frameworks with the GSS Bonds market, and their collective role in driving sustainable investments to address climate change challenges.
2) The Real Estate sector accounts for over 30% of total greenhouse gas emissions globally. GSS Bonds dedicated to Green Building are on the rise and display significant environmental impact
Jaime Diaz-Rio Varez, Research Associate at MainStreet Partners, says:
“The European Union, both as a regulator and as an issuer, has shown real interest in the Green Bond Market, proposing a “gold” labelling scheme and establishing the largest Green Bond scheme in the world.
“Closely monitoring the credentials of Green Bonds and their environmental impact will be key to facilitating a smoother transition. This is especially true for the Real Estate sector, where substantial risks and opportunities will support a strong growth in the issuance of GSS Bonds.”
Since 2010, MainStreet Partners’ proprietary GSS Bonds databases have provided a comprehensive set of tools to Asset Managers to measure and manage sustainability risks and KPIs. The main products applicable to GSS securities are:
· Impact Results – impact data reported by GSS Bonds issuers are aggregated and normalised, based on a set of environmental and social variables.
· Bond Ratings – GSS Bonds are analysed according to a proprietary framework that focusses on issuer-specific and bond-specific factors.
· EU Taxonomy Alignment – environmental projects financed by GSS Bonds are measured against the regulatory criteria. Like ‘Bond Ratings’ and ‘Impact Results’, the data can be aggregated at portfolio level and provide a quantitative indication of its sustainability.
· Use of Proceeds: the use of the capital of the bond, taken from official reports published by the issuer, both on the allocation by category type (e.g. Renewable Energy) and by geographical location where the proceeds are spent.
