Real estate investors and developers across Europe are increasingly turning towards green bonds to help build portfolios of sustainable assets that accommodate a lower consumption of resources in the long term and have a limited impact on the environment. This trend is also clearly visible in the Central and Eastern European region, where a growing number of high-profile companies are choosing to finance their expansion plans with the help of green bonds, writes Property-forum.eu.
In short, green bonds are fixed-income securities that companies can issue to fund investments that benefit the environment. Companies across Europe sold $53.37 billion worth of green bonds in Q2 2021, up 30% year-on-year, according to data from S&P Global. Proceeds from the sales of such bonds can be used for green buildings or renewable energy projects. Banks can sell these bonds to provide green loans for sustainable projects or companies can tap the bond market to fund their own investments.
Certain indicators have to be reported by companies that fund projects via green bonds such as the estimated annual energy savings and reduction of carbon emissions, or the amount of energy covered from renewable sources.
Both lenders and property companies see room for green development in CEE, where the real estate sector potentially accounts for up to 50% of total energy consumption, according to European Bank for Reconstruction and Development (EBRD) experts. Across the EU, buildings account for 40% of total energy consumption and 36% of carbon emissions.
The EBRD has been spearheading efforts to finance green bonds issuances in Central and Eastern Europe. Last April, the bank invested €67 million in a green bond sale of industrial and logistics developer VGP. The company aims to reach net carbon neutrality by 2025 and sold €600 million worth of green bonds.
In Romania, the EBRD has successfully subscribed to a €24.7 million ticket as part of an inaugural €300 million green bond issuance by MAS Real Estate. The company is jointly developing several retail and residential projects in Romania with Prime Kapital. Last May, the EBRD also invested €11 million in green bonds issued by Raiffeisen Bank Romania. In total, the bank raised €81 million from the bond sale that will back climate and environmental projects.