Cross Regional: Market Feasibility Study to evaluate the potential of leveraging Green and Sustainability-linked Bonds for municipalities in Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland and Romania under the EU Cohesion Policy

Overview
Project Summary Document

TCRS 18515

Status Approved

Location

Regional

Business Sector

Capital and financial markets development

Notice Type

Public

PSD Disclosed

14 Dec 2023

Project Description

Rationale

Almost all cities and their municipalities in EBRD’s EU Countries of Operations face significant investment needs to build more sustainable infrastructure, to increase levels of environmental protection and improve climate resilience. These challenges necessitate municipalities and other sub-national governments to increase their investments in green infrastructure and leverage innovative ways to finance the development gap. One of the key measures to address this gap is to expand the sources of financing for these sub-sovereign entities. Capital markets financing instruments like Green bonds and Sustainability-Linked bonds can serve as a catalyst to mobilise and allocate financing together with EU’s scarce public funds to finance climate-related activities.

The main objective of this project is to evaluate the market potential and feasibility of implementing Green and Sustainability-Linked bonds for municipalities within Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland and Romania. This project will help to identify the existing market and legal barriers preventing municipalities from leveraging capital markets, including eligibility requirements for accessing capital markets via bond issuance processes, capacity needs for tapping the debt capital market instruments, pipeline development of underlying Green and Sustainability-Linked projects, green awareness in the local industries; and setting up the Green and Sustainability-Linked Frameworks and processing of third party opinion processes for an issuer. In view of the above, this project will explain how tapping the Green and Sustainability-Linked bond market would provide key benefits to municipal issuers and will develop a Green and/or Sustainability-Linked bond pilot to be issued by a municipality, including the mapping of environmental/climate eligible projects, leveraging EU Cohesion Policy funds and subject to demand on a best-efforts basis.

TC Services

This project will consist of the following activities:

• Activity 1: Assess the Market Potential for Green and Sustainability-Linked Bonds Issuances by Municipalities.

The aim of Activity 1 is to assess the current market status, identify structural barriers for Green and Sustainability-Linked bonds issuances by municipalities, and quantify the market potential of these financial instruments in the selected Member States.
The following tasks will need to be undertaken:

(a) Assess the current market status of plain vanilla and thematic bonds, specifically Green and Sustainability-Linked bonds issued by municipalities, including public utilities (such as municipal water companies, etc.), in the selected Member States. Pay particular attention to local-denominated and hard-denominated currency issuances and differentiate between public issues and bonds converted via loans.

(b) Conduct country visits to the Member States covered by the project and hold interviews with relevant stakeholders (e.g., municipalities/subnational governments, institutional investors, regulators, financial institutions) to support the gap analysis.

(c) Identify existing legislative, financial, administrative capacity, and other technical barriers that limit municipalities, including public utilities, among others, from accessing the public debt capital markets for financing.

(d) Assess the potential for issuing Green and Sustainability-Linked bonds by municipalities in the selected Member States and determine which green bond standard (EUGBS or other) is most suitable. Identify the main issuers with the highest potential for tapping the debt capital markets and related listings. Also, evaluate the feasibility of developing municipal bond aggregators, especially in jurisdictions with fragmented markets.

(e) "Diagnostic Review Report", that will summarise the findings and outcomes of Activity 1, including quantifying the market potential for Green and Sustainability-Linked bond issuance by municipalities in the selected Member States.

• Activity 2: Legal Framework Recommendations to Facilitate the Issuance of Green and Sustainability-Linked Bonds of Municipalities

The aim of Activity 2 is to provide recommendations on potential improvements to the legislative framework to address identified shortfalls for implementing Green and Sustainability-Linked municipal bonds in the selected Member States.

The following tasks will need to be undertaken:

(a) Thoroughly examine the existing legislative and regulatory framework related to municipal bonds in the selected Member States and prepare a summary of key legal barriers that hinder the issuance and implementation of Green and Sustainability-Linked municipal bonds.

(b) Based on the legal analysis, stakeholder input, and best practices, draft a set of specific, actionable recommendations for improving the legislative framework to facilitate the issuance and utilization of Green and Sustainability-Linked municipal bonds.

(c) Evaluate the potential impact of the proposed legislative improvements, considering both short-term and long-term implications.
(d) “Legal Framework Improvement Report”, that will summarise the findings and outcomes of Activity 2.

• Activity 3: Design Strategies for Developing Green and Sustainability-Linked Bonds of Municipalities and Develop a Potential Pilot Initiative.
The aim of Activity 3 is to outline processes and uses of Green and Sustainability-Linked municipal bonds, explore the best ways by which the EU Cohesion Policy Funds leveraged in future programming periods, define needed investment, and develop a toolbox for municipal bond markets, including pilot initiative for a Green and/or Sustainability-Linked bond to be issued by a municipality/sub-sovereign entity.

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

Enquiries

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

TCRS 18515

Status Approved

Location

Regional

Business Sector

Capital and financial markets development

Notice Type

Public

PSD Disclosed

14 Dec 2023

Project Description

Rationale

TC Services

This project will consist of the following activities:

• Activity 1: Assess the Market Potential for Green and Sustainability-Linked Bonds Issuances by Municipalities.

• Activity 2: Legal Framework Recommendations to Facilitate the Issuance of Green and Sustainability-Linked Bonds of Municipalities

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

Any competitive selections for business opportunities relating to this project will be published on the EBRD's website: Consultancy Procurement Opportunities.

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

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Cross Regional: Market Feasibility Study to evaluate the potential of leveraging Green and Sustainability-linked Bonds for municipalities in Croatia, Czech Republic, Estonia, Latvia, Lithuania, Poland and Romania under the EU Cohesion Policy

Project Description

Understanding Transition

Business opportunities

Enquiries

Business opportunities

General enquiries

Project Description

Understanding Transition

Business opportunities

General enquiries

Access to Information Policy (AIP)

Independent Project Accountability Mechanism (IPAM)