12 November 2020

Agence France Trésor: EU taxonomy a 'powerful tool' but challenges remain

The EU's taxonomy of sustainable activities is a "powerful tool" for impact reporting, but the data is not always there to enable reporting in alignment with it, Environmental Finance's ESG in Fixed Income Europe 2020 virtual conference heard.

The EU taxonomy sets a common language between investors, issuers, project promoters and policy makers, in order to help investors assess whether investments are meeting robust environmental standards and are consistent with high-level policy commitments such as the Paris Agreement on Climate Change.

"As a sovereign issue, some of our eligible expenditure is rather unusual" said Alexandre Vincent, manager, green bond unit of Agence France Trésor. "And there is not necessarily readily available metrics to assess the environmental impact."

Agence France Trésor, which handles public debt and treasury management at the French Government, launched the first French sovereign green bond in January 2017 with an issuance amount of €7bn.

To oversee their impact reports, Agence France Trésor established a council of independent, international specialists in the areas of environmental science and green finance.

Appointing this specialist council has allowed Agence France Trésor to manage with these challenges but also go beyond reporting on emission reductions, Vincent said.

Speaking of the environmental impact assessment report that was published last year on the subsidy granted to the French Waterways Office, Vincent said: "We figured out that waterway systems' environmental impact went beyond the minimal requirements [of emissions reductions] and had a positive impact on biodiversity as well. Even though the report was more qualitative on this respect, we thought it was important to deal with that as well."

Looking ahead to a forestry management impact report that the specialist council is now working on, Vincent said that despite challenges here as well, the report will consider both carbon dioxide sequestration and biodiversity impacts.

Speaking on the same panel, Eila Kreivi, director and head of capital markets department at the European Investment Bank (EIB), said the EIB is currently working on a Climate Road Map that will align the EIB group's activities with the goals and principles of the Paris Agreement.

The roadmap, which takes effect from 1 January 2021, will also ensure their environmental lending activities are aligned with the EU taxonomy.

"There is a lot of work to do," she said, adding that: "It's not only how you align it, but also how you show that it is aligned. The reporting of it is very important too."

The EIB will be running a live discussion group on sustainable bonds issuance roadmaps tomorrow.

The panel discussion was moderated by Philip Brown, Managing Director – Capital Markets Origination, Citi.

More information about the event is available here.