A2A Issued the First European Green Bond: Will It Lead the way?

On January 23rd, Italian utility A2A made history by issuing a €500 million bond, the first ever European Green Bond. Fully aligned with the EU taxonomy, the bond will finance projects in renewable energy, grid infrastructure, energy efficiency and waste management.

With a final order book of over €2.2 billion and no new issue premium, the strong secondary market performance underscores solid investor demand.

A few days later, French state-owned Île-de-France Mobilités followed suit, issuing a €1 billion European Green Bond to modernise and decarbonise one of the world’s largest transport networks. These landmark deals demonstrate the rapid market adoption of the European Green Bond Standard (EuGBS), which came into force on December 21st, 2024.

Called the “gold standard” for sustainable debt, the EuGBS is designed to combat greenwashing, improve transparency and accountability, and ensure alignment with the EU taxonomy.

Is this the start of a wave of European green bonds?

We remain cautious. On the positive side, strong investor demand and potential pricing benefits could offset the additional reporting costs associated with the more stringent requirements. The European Green Bond Standard also has the potential to drive greater harmonisation in disclosure and reporting, benefiting investors seeking clearer information on the environmental impact of their green bond holdings.

With standardized data, investors will soon be able to compare and assess impact more effectively across issuers, leading to greater transparency and accountability. We also expect higher quality assessments from second-party opinion providers, which will further enhance the credibility of green bond frameworks and market confidence.

However, significant uncertainties remain. Both A2A and Île-de-France Mobilités have issued green bonds in the past and have signalled their intention to align with the EuGBS well in advance. The real test will be when issuers start using the 15% flexibility for activities not covered by the EU taxonomy. Will investor enthusiasm remain as strong if the purity of the standard is diluted? That is not yet clear.

Utilities and mobility companies are naturally eligible for full alignment with the EU taxonomy, but tackling climate change requires substantial investment across all sectors. For high-emitting companies that are truly committed to the transition, making a significant contribution to the EU taxonomy targets is challenging but achievable. However, many issuers still struggle to access accurate data to ensure compliance with the mandatory “do no significant harm and minimum social safeguard” requirements.

The real test will come when less predictable aligned issuers enter the market. In any case, we do not believe that investors will be willing to pay a significant premium for European Green Bonds compared to the more widespread and consolidated ICMA -aligned green bonds .

A victory for transition finance

Perhaps even more important for the promotion of sustainable investment is ESMA ’s recent last-minute decision to reverse its position on the application of the exclusion criteria for green bond funds based on the Paris-Aligned Benchmark (PAB). In a victory for common sense, European green bonds are now effectively outside the scope of the PAB exclusions.

ESMA has also provided much-needed clarity by confirming that sustainable funds can continue to invest in green bonds outside the EU’s green bond regulatory framework through a “look-through approach”, in order to “support companies that are converting to more sustainable business practices by providing them with important sources of financing”, if not directly financing the excluded activities.

While this is a positive development, the prolonged regulatory debate has highlighted the difficulties in balancing supervision with the practical needs of market participants. That said, ESMA’s decision brings more coherence to the regulatory framework, providing much-needed clarity for both investors and issuers. With this issue resolved, attention can return to what really matters: financing the acceleration of a low-carbon economy and promoting meaningful climate action.

__

(Featured image by Christian Lue via Unsplash)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in ESG NEWS. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.