Behind the World’s First EU Green Bond
In December 2024, the EU Green Bond Standard (EuGBS) Regulation became applicable. This voluntary standard – which aims to become a clear “gold standard” for green bonds - builds on the detailed criteria of the EU Taxonomy to define green economic activities.
With much buzz in the market about this regulation’s implementation, it was Italian utility company A2A that became the first issuer to bring the inaugural EU green bond to market in January 2025.
To mark the dual-listing of this EU green bond on the Luxembourg Stock Exchange (LuxSE) and its display on the world’s leading platform for sustainable finance, the Luxembourg Green Exchange (LGX), we sat down with Patricia Gentile, Group Head of Finance & Insurance at A2A to find out more.
The company aims to achieve 100% debt in Environmental, Social & Governance (ESG) format by 2035, with an intermediate target of 90% by 2030.
Issuing the first ever EU green bond was the natural consequence of our work and represents a new cornerstone in our sustainable finance journey. The application of the EuGBS is a "gold standard" for green bonds in terms of proceeds allocation, reporting and external review requirements.
The EuGBS offers a chance to build even greater trust with investors by adhering to more stringent and transparent criteria for green bonds, particularly in terms of project selection as all projects financed through EU green bonds must meet the strict criteria of the EU Taxonomy.
Issuers of EU green bonds must also commit to external verification by reputable third parties. This helps reduce the risk of greenwashing and minimises the need for investors to carry out their own assessments.
The proceeds of the bond must be at least 85% aligned to EU Taxonomy but the EuGBS has also introduced the concept of flexibility to the market, with the possibility to allocate up to 15% of proceeds to capex or opex that are not aligned to EU Taxonomy.
Lastly, the EuGBS introduces a system of registration and control by the European Securities and Markets Authority (ESMA) for external reviewers, which will be able to impose fines, with verification for factsheet and allocation reports also becoming mandatory under the EuGBS.
Throughout the execution process, we noticed a lot of interest in this new instrument but a bit of confusion still remains around the differences between the International Capital Markets Association (ICMA)’s Green Bond Principles and the EuGBS.
The orderbook stats where quite aligned to the previous ICMA green bond in terms of investor type and geography.
However, we noticed the main difference between our previous ICMA-aligned issuance and this inaugural EuGBS issuance is that the share of dedicated ESG orders has doubled - around 10% of total orders for our EU green bond vs about 5% in the previous ICMA-aligned green bond issued in February 2023.
For the new EU green bond allocation, A2A has selected projects from four categories defined as Green Eligible Projects under our Sustainable Finance Framework:
- (1) Renewable energy and (2) transmission and distribution networks, which represent the majority of the proceeds, accounting for 83%
- As well as (3) pollution prevention and control and (4) energy efficiency.
Regarding renewable energy projects, the bond will finance the development of several solar and wind plants, electricity storage facilities, and the maintenance of hydroelectric plants.
Under the network category, we will support the development of the electricity grid, enabling the electrification of consumption and further decarbonisation.
All selected projects are fully aligned with the EU Taxonomy and, consequently, with the EuGBS. In the future, we will evaluate the option provided under the EuGBS Regulation to use the flexibility pocket - up to 15% of the total allocation - for activities currently excluded from the EU Taxonomy.
This transaction took place after two years of intense work involving different stakeholders at all levels including the European Commission, legal counsels, authorities and banks.
On the documentation side, it’s been very important to have an open and clear dialogue with the regulators. A2A has two euro medium-term note (EMTN) programmes in place, one under the Italian Regulator, Commissione Nazionale per le Societa e la Borsa (Consob) and the other one under Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier (CSSF).
A2A updated both programmes via supplement, in order to include the possibility to issue EU green bond in compliance with the Regulation (EU) 2023/2631. The decision followed consultation with both authorities, Consob and CSSF, which endorsed this approach.
On the use of proceeds side, an issuer must ensure it is ready internally to issue an EU green bond – sufficient projects that are EU Taxonomy-aligned and the internal governance around this.
Other aspects of the EuGBS are the provisions around the mandatory transparency requirements – this is obviously an uplift for all issuers as it is a brand-new requirement - and so it does come with increased compliance and verification costs.
To fulfil these requirements several internal departments at A2A have been involved, in addition to Finance including Sustainability, Planning and Control and Enterprise Risk Management. This process could take time so it’s important to have a clear plan covering all the aspects of the Regulation.
And lastly, an open dialogue with the external reviewer is very important to ensure they will have their review completed and opinion issued ahead of issuance as required by the EuGBS.
We believe that the EU green bond framework holds significant potential for the market - both for issuers and investors - by offering enhanced standardisation and comparability, reducing the greenwashing risks.
Additionally, with the recent Omnibus package, the Taxonomy technical criteria are expected to be simplified, which should increase the usability of the Taxonomy Regulation. This, in turn, could positively impact issuers by providing clearer guidelines for utilising Taxonomy-aligned data and, as a consequence, further fostering the market of the EU green bonds.
A2A will monitor the evolution of this market, but the principal thing is that A2A will be ready to use the most appropriate instrument from time to time.
We added the EU green bond into our well-diversified portfolio of sustainable finance debt instruments to cover more investors’ needs and also trusting the fact that EuGBS will enhance the market reducing the greenwashing risk.
For more information, please visit the bond's security card: https://www.luxse.com/security/XS2986639701/423364
With much buzz in the market about this regulation’s implementation, it was Italian utility company A2A that became the first issuer to bring the inaugural EU green bond to market in January 2025.
To mark the dual-listing of this EU green bond on the Luxembourg Stock Exchange (LuxSE) and its display on the world’s leading platform for sustainable finance, the Luxembourg Green Exchange (LGX), we sat down with Patricia Gentile, Group Head of Finance & Insurance at A2A to find out more.
What motivated A2A to issue the inaugural EU green bond, and what are the primary goals you aim to achieve with this issuance?
For A2A, sustainable finance is a key lever to serve the Group's strategy. As part of this commitment, A2A has set clear targets to integrate sustainability into its debt structure.The company aims to achieve 100% debt in Environmental, Social & Governance (ESG) format by 2035, with an intermediate target of 90% by 2030.
Issuing the first ever EU green bond was the natural consequence of our work and represents a new cornerstone in our sustainable finance journey. The application of the EuGBS is a "gold standard" for green bonds in terms of proceeds allocation, reporting and external review requirements.
To ease market understanding, what makes this bond different from the previous green bonds?
The EuGBS offers a chance to build even greater trust with investors by adhering to more stringent and transparent criteria for green bonds, particularly in terms of project selection as all projects financed through EU green bonds must meet the strict criteria of the EU Taxonomy.
Issuers of EU green bonds must also commit to external verification by reputable third parties. This helps reduce the risk of greenwashing and minimises the need for investors to carry out their own assessments.
The proceeds of the bond must be at least 85% aligned to EU Taxonomy but the EuGBS has also introduced the concept of flexibility to the market, with the possibility to allocate up to 15% of proceeds to capex or opex that are not aligned to EU Taxonomy.
Lastly, the EuGBS introduces a system of registration and control by the European Securities and Markets Authority (ESMA) for external reviewers, which will be able to impose fines, with verification for factsheet and allocation reports also becoming mandatory under the EuGBS.
What have you noticed in terms of investor interest?
Throughout the execution process, we noticed a lot of interest in this new instrument but a bit of confusion still remains around the differences between the International Capital Markets Association (ICMA)’s Green Bond Principles and the EuGBS.
The orderbook stats where quite aligned to the previous ICMA green bond in terms of investor type and geography.
However, we noticed the main difference between our previous ICMA-aligned issuance and this inaugural EuGBS issuance is that the share of dedicated ESG orders has doubled - around 10% of total orders for our EU green bond vs about 5% in the previous ICMA-aligned green bond issued in February 2023.
Can you elaborate on the specific projects or initiatives that will be funded by the proceeds from this green bond? How do these projects align with the EU GBS?
For the new EU green bond allocation, A2A has selected projects from four categories defined as Green Eligible Projects under our Sustainable Finance Framework:
- (1) Renewable energy and (2) transmission and distribution networks, which represent the majority of the proceeds, accounting for 83%
- As well as (3) pollution prevention and control and (4) energy efficiency.
Regarding renewable energy projects, the bond will finance the development of several solar and wind plants, electricity storage facilities, and the maintenance of hydroelectric plants.
Under the network category, we will support the development of the electricity grid, enabling the electrification of consumption and further decarbonisation.
All selected projects are fully aligned with the EU Taxonomy and, consequently, with the EuGBS. In the future, we will evaluate the option provided under the EuGBS Regulation to use the flexibility pocket - up to 15% of the total allocation - for activities currently excluded from the EU Taxonomy.
What challenges did A2A face during the process of issuing the first EU green bond, and how were these challenges overcome?
This transaction took place after two years of intense work involving different stakeholders at all levels including the European Commission, legal counsels, authorities and banks.
On the documentation side, it’s been very important to have an open and clear dialogue with the regulators. A2A has two euro medium-term note (EMTN) programmes in place, one under the Italian Regulator, Commissione Nazionale per le Societa e la Borsa (Consob) and the other one under Luxembourg’s regulator, the Commission de Surveillance du Secteur Financier (CSSF).
A2A updated both programmes via supplement, in order to include the possibility to issue EU green bond in compliance with the Regulation (EU) 2023/2631. The decision followed consultation with both authorities, Consob and CSSF, which endorsed this approach.
On the use of proceeds side, an issuer must ensure it is ready internally to issue an EU green bond – sufficient projects that are EU Taxonomy-aligned and the internal governance around this.
Other aspects of the EuGBS are the provisions around the mandatory transparency requirements – this is obviously an uplift for all issuers as it is a brand-new requirement - and so it does come with increased compliance and verification costs.
To fulfil these requirements several internal departments at A2A have been involved, in addition to Finance including Sustainability, Planning and Control and Enterprise Risk Management. This process could take time so it’s important to have a clear plan covering all the aspects of the Regulation.
And lastly, an open dialogue with the external reviewer is very important to ensure they will have their review completed and opinion issued ahead of issuance as required by the EuGBS.
What impact do you anticipate this green bond will have on A2A's overall sustainability strategy and on the broader market for green bonds in the EU?
We believe that the EU green bond framework holds significant potential for the market - both for issuers and investors - by offering enhanced standardisation and comparability, reducing the greenwashing risks.
Additionally, with the recent Omnibus package, the Taxonomy technical criteria are expected to be simplified, which should increase the usability of the Taxonomy Regulation. This, in turn, could positively impact issuers by providing clearer guidelines for utilising Taxonomy-aligned data and, as a consequence, further fostering the market of the EU green bonds.
A2A will monitor the evolution of this market, but the principal thing is that A2A will be ready to use the most appropriate instrument from time to time.
We added the EU green bond into our well-diversified portfolio of sustainable finance debt instruments to cover more investors’ needs and also trusting the fact that EuGBS will enhance the market reducing the greenwashing risk.
For more information, please visit the bond's security card: https://www.luxse.com/security/XS2986639701/423364
