8.5 Further research
10.1.1 Semi-structured Interview Questions
Interview outline
Patrick De Nijs
Introductory questions
Could you tell us briefly about your background and what you do at EIB?
Briefly, can you elaborate on how you work with Green bonds?
In your opinion, what is the best and worst characteristic of green bonds?
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Which industries have you worked with most?
Could you define what ‘green’ financing/lending means to you working at the EIB?
Does this definition change when looking at the energy sector?
Does the EU taxonomy definition of climate action and environmental sustainability vary compared to definitions seen in China or the US?
While you work on the lending side, what do you think the main motivation is for a green bond issuance by an energy sector company?
What benefits and drawbacks do such companies experience post-issuance?
Energy sector Decarbonisation
Could you define what climate action and environmental sustainability means to you in the context of the overall energy sector?
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 the biggest challenge facing the energy sector in the EU in terms of achieving Paris climate goals?
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.
Looking at the role of EIB in the world and referring to the goal of ensuring a just transition for all; in what ways does the EIB take responsibility for creating sufficient demand for green bonds that finance developing country low-carbon energy investments?
Green Bonds Green Finance
Copenhagen Business School Master Thesis 15 Sept 2021
For a corporation, in which case would an EIB loan be more convenient than issuing a green bond for financing?
In theory, how does EIB agree on the cost of debt for the borrowing company?
What benefits do green bonds have over other green finance products such as green funds in driving climate action and vice versa?
Differing risk appetite? Liquidity? Investment horizon?
How effective is invested capital in furthering the green energy transition? To what degree does this vary in these two types of financial vehicles?
Green Bond Energy Market
What is the biggest advantage green bonds have over other financial instruments in fi-nancing green energy projects? (green loan, guarantees)
What is the main disadvantage? As a financial product as well as a means for corporations to finance decarbonisation in the energy sector?
How do you see the global green bond market developing in the coming decades?
Do you think green bonds, as a financing tool mobilizing private capital, will play the most important role in financing a green energy transition?
If not, which financing tool could it be (both private and public)?
Why not CEF Debt Instrument? (In the context of public grant issued by EIB, I read that CEF Debt Instrument supposedly enhances Europe’s energy security while enabling wider use of renewables. In addition to grant, CEF offers guarantees and project bonds, levering the use of EU budget, to attract further funding from the private sector and other public sector actors. CINEA forecasts that the upgrading of existing, and development of new energy transmission infrastructures of European importance will require investments of about€140 billion in electricity and at least€70 billion in gas.)
Is the overall cost of debt of a EIB green loan lower than the one of a corporate green bond for an energy company that wants to fund a green project? This question is similar to the one I have asked before; my actual interest is whether the same answer holds true for energy companies.
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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
Could you elaborate on what motivates different industries to engage in the green bond market? e.g. utilities (grid providers) vs. Fossil fuel vs. Renewable energy
Which metrics/KPIs are used most often when evaluating eligibility of projects in the energy sector? - Does a threshold exist?
Among the difference strategies/funds/pool to finance energy transition, which one do you think will have the most impact result soon?
Alignment of the EIB with EU plans
From “EIB CB road map: Accelerating the transition towards green finance” (pag 20)
“Consistent EU taxonomy, the EIB is now developing its initial environmental sustain-ability eligibility criteria and finetuning its climate action eligibility criteria to align the classification of its lending activities. In turn, the EIB will reflect such alignment to the capital markets via progressive extension of CAB and SAB eligibilities, and – as set out in Chapter 5 – the development of the required due diligence procedures to ensure com-pliance with the EU Taxonomy requirements of SC (substantial contribution), DNSH (do no significant harm) to environmental objectives, and MSS (minimum social safeguard) (as far as necessary).”
How far are the current eligibility criteria from the one that you expect to develop?
The EIB aims for an Alignment of principles in green bonds – What is needed for this to happen?
Regulations?
What about internationally?
What will the benefits and implications be for the broader green bond market?
How does the EU GBS fit in? Does it change anything for global players/issuers in USA and China?
Shades of green: Does the PBOC comprehensive green bonds endorsed project catalogue
Copenhagen Business School Master Thesis 15 Sept 2021
(China) pose a threat to the legitimacy of the definition of green when considering green bonds have been issued in order to fund “clean coal” projects in China?
Is this greenwashing?
Further discussion: Regulation
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. link
Do you think the increase in transaction costs may outweigh the benefits of a green bond issuance?
Does the market reward long-terminism in corporate strategy of issuers sufficiently to negate higher transaction costs?
Does this affect investor appetite or confidence related to green bonds?
Driving the demand for green bonds to close the green transition financing gap:
How does EIB Group help meet green ambitions within the energy sector of the EU through financial products? Here we point to a quote from the EIB Climate Bank Roadmap
“delivery on the mandates will be contingent to (i) market demand for climate and envi-ronmental sustainability financing, as the EIB will only be able to support these activities as long as new policies and regulations set the enabling environment and market actors embrace the low-carbon transition; and (ii) alignment of principles and standards across the financial sector, as well as other multilateral development partners and implementing partners.”
Are green bonds enough to close the financing gap? Investment priorities of the EIB Is it necessary to expand the list of eligible projects to include higher risk projects such as CCUS technology?
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Innovation finance tools similar to InnovFin EDP or CEF Future Mobility for clean mobil-ity solutions (or their successors under InvestEU) will likely remain key to support projects in earlier stages of maturity and presenting higher risk profiles. Such tools address inno-vative, first-of-a-kind green technologies which face a ”valley of death” on the way from demonstration to commercialisation.
Starting June 2020, per the EU Taxonomy Regulation, the proceeds from CABs can be used to support other areas of our work to fight climate change, including research, devel-opment and deployment of innovative low-carbon technologies, electric rail infrastructure and rolling stock, and electric buses.
Does this blur what CAB are? Does it redefine ‘green’ ?
Equity, funds and other innovative financial products can support increased levels of fi-nance related to climate action and environmental sustainability. Greater use of invest-ment in equity funds or subordinated debt/quasi-equity (as well as first-loss provisions) can leverage greater private sector capital and improve the bankability of higher-risk projects.