10.2 Appendix - Anonymous Interview J
10.2.1 Semi-structured Interview Questions
Interview outline
Introductory questions
Briefly, could you summarize your experience in the fixed income market?
Green Bonds in particular
Do green bonds play an important role in financing the green energy transition?
EUR IG CORP (Europe Investment-Grade Corporate)
Compared to other financing vehicles such as the CIP green energy fund ($15bn) and Blackrock’s renewable power fund ($4.8bn) etc.
How should sustainability be incorporated in financial advice? (Fixed income market in particular) What does it mean for you to use sustainable finance as a toolbox for serving as a financial advisor? (Fixed income market in particular)
With the rise of target sustainability linked bonds, what does future growth of the green market look like globally?
How are frameworks such as the GBP, EU GBS, CBI green taxonomy, the PBOCs green bond eligibility catalogue affecting the green market positively and/or negatively?
The EU taxonomy’s role globally? (Here I am thinking of the taxonomy setting a sort of global standard in regulation of what is considered green)
Copenhagen Business School Master Thesis 15 Sept 2021
In your opinion, should green bonds standards/EU Green Bond standard be voluntary?
What benefits could you see emerging from stricter regulation?
What drawbacks? (Here I am referring to increased transaction costs and diminishing motivation by issuers – specifically SMEs)
Corporate Green Bond Issuance and Infrastructure Investment
Transport for London (TFL) case study: “The main driver for issuing the green bond was achieving investor diversification, particularly attracting a more geographically diverse investor base, and promoting TfL’s excellent environmental performance and impressive pipeline of green assets. TfL also achieved its aim of geographic investor diversification, with 61% of the investor funds from the UK, 18% from continental Europe, 15% from Asia and 6% from the Middle East”
How does TfL benefit from having a diversified (more international) investment base?
What about in terms of energy infrastructure, both green, light green and brown and
‘lighter shades of brown’ ? CAN YOU ASK THIS?
Our research
We investigate whether a green bond is an effective tool for financing the green energy transition, in line with the first objective of the EU Commission action plan on financing sustainable growth that is reorienting capital flows towards a more sustainable economy.
Thus, our thesis research question is: Are Green Bonds the Most Effective Financing Tool for a Green Energy Transition?
Investment universe (PRI-research)
We start defining our simple universe, consisting of 3 types of investors Equity investor (risk tolerant investor)
Credit investor (values highly safe cashflows) Sustainable investor (SI)
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SI prefers to invest in sustainable firm (company that provide sustainability disclosure that is reporting on climate-related actions). Here I am thinking about NFRD, which is now being review by means of a public consultation.
As SI values positive corporate governance action and has a long-term investment horizon.
SI is risk averse, therefore prefers to invest to sustainable growth in the credit market.
therefore,
SI assign a premium to Green Bond in contrast to vanilla bond.
If green bond opportunity is not there, SI invests in sustainable equity firms.
HOWEVER
Is there a Greenium?
Do you think that investor would buy into green bonds if the return were not competitive?
Here I am thinking about the tradeoff between financial returns for societal benefits.
Why do company issue green bond if there is not Greenium?
Is it the fact that green energy project is profitable enough to generate competitive returns?
Or do company want to send a signal to the market? Here I am thinking about the large (and growing) literature that shows a positive relation between ESG and performance and a negative relation between ESG and risk. Investor might see a green bond as a credible commitment towards eco-friendly behavior and therefore, a value enhancing means.
Or is it just a very expensive green washing strategy?
Signaling and Green washing investigation
EVENT STUDY: Is green issuer improving its stock price?
What other factors might have determined the increase?
Can other cofounding events have determined the increase? Here I am thinking about the announcement of equity issues, (regular) bond issues, or quarterly earnings.
ENVIRONMENTAL PERFORMANCE Is green issuer improving their environmental per-formance?
Copenhagen Business School Master Thesis 15 Sept 2021
OWNERSHIP Is green issuer improving their equity ownership structure?
What type of institutional investors buy into bonds?
From an institutional investor perspective, what factor are taken in exam when investing in bonds? Is the long-term horizon one of those?
Would be reasonable to think that the issuance of green bonds helps attract specific equity investor clienteles?
ENVIRONMETAL SCORE Is a transitional company (middle range EPS companies’
curve) more propense to issuance than an extreme company?
Energy sector Decarbonisation
Could you define what climate action and environmental sustainability means to you in the context of green bonds in the energy sector?
Our research defines greening of the energy sector (positive impact in line with ICMA GBP etc.) as decarbonisation – as the sector is the largest source thereof.
Do no significant harm
Does this definition change when viewed from the perspective of a carbon intensive green bond issuer vs. a low-carbon issuer in the energy sector? Here I refer to shades of green of a given project.
What is your opinion on less than green bonds in the energy sector specifically I.e. transi-tion bonds (bonds issued by fossil fuel companies), green bonds issued in China financing
“clean coal”? Here, referring to a 2019 article: REDACTED
“It’s somewhat hollow to say that an oil company can’t issue a green bond if you would buy a green bond from any of the major banks (most of whom have significant oil-related exposure on their balance sheets).”
Do no significant harm: prolonging CO2 emissions of coal fired power plants. Here pointing to context of a given national energy mix for example.
How important is the consideration of stranded assets of the energy sector in this discus-sion?
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What is the biggest challenge facing the energy sector in terms of achieving Paris climate goals? Here taking note of the WEF listing climate as the key issue in 2020 and:
We found various estimates on the financing gap that stands in the way of greening the energy sector: “An estimated total$110tn gap stands in the way of greening global energy infrastructure by 2050, averaging around $305bn every year. Of this investment gap, 20% or $22.5tn alone must be dedicated towards greenfield renewable power generation capacity, resulting in an approximate investment of $662bn p.a. However, more recent estimates put this number at$800bn p.a. (IRENA, 2020).”
Are challenges constant across national/regional energy sectors such as China USA vs.
EU? We frame this question in the context of divergent energy mixes.
Final questions and further discussion
Do you think green bonds, as a financing tool mobilizing private capital, will play the most important role in financing a green energy transition?
Are green bonds enough to close the green energy transition financing gap?
In your opinion, what kind of energy-related companies benefit the most from accessing green loans? Primary or secondary energy companies, public or private energy companies.
Highly risky projects or more low risk projects
Will more regulations alongside the EU GBS/EU Taxonomy slow the growth in demand for green bonds?
Quantitative and qualitative environmental impact reporting goes beyond the (simple) requirements in ICMAs GBP; thus, issuers must decide how to balance the cost of prepar-ing a comprehensive impact report against the value it then brprepar-ings to investors and other stakeholders. And in the extensions, the value that stronger relations with your investors may bring