PostNL recently announced the offering of its first green bond. So what is a green bond, what does green finance mean for the postal and delivery sectors, and has PostNL secured a competitive advantage with its green bond?
There are two drivers of green finance: borrowers who want to emphasise their environmental credentials, and lenders who want to have part of their portfolio dedicated to environmental causes.
Green bonds may be green in name and declared purpose, but otherwise they are the same as conventional bonds. They’re not cheaper for the borrower, either!
There are currently four Green Bonds Principles that define a green bond:
Use of proceeds: the issuer details the eligible green project categories the bond will be used for and those projects’ environmental benefits.
Process for project evaluation and selection: how the issuer determines the eligibility of individual investments using the green bond’s proceeds.
Management of proceeds: the proceeds should be moved to a sub-portfolio or otherwise attested to by a formal internal process that should be disclosed.
Reporting: the issuer should report at least annually on the investments made from the proceeds.
An industry striving to be green
Postal and delivery companies are trying to out-do each other in promoting their environmental and social responsibility values. To date, the focus has been on initiatives such as electric vehicles, solar cells, community engagement, alternative fuels, and sustainable supply chain.
In PostNL’s case, it has stated its twin aims of delivering all parcels and letters within the Benelux region emission-free in the last mile by 2030, and making its deliveries emission-free in 25 city centres by 2025.
PostNL’s green bond issue stands out among other green schemes - even if all it does is fund some standard, run-of-the-mill environmentally friendly projects - as it’s rare for postal operators to venture into green finance.
Across the border, PostNL’s neighbour (and one-time suitor) bpost signed a sustainability-linked credit facility in October 2017. The loan is structured so that the company’s sustainability score has an impact on the loan’s interest rate.
PostNL’s green bond offering
In September, PostNL issued €300 million fixed rate notes with a seven-year term. Funds will be used to finance green projects focused on green kilometres, sustainable buildings and innovation and efficiency.
The allocation of proceeds will be overseen by PostNL’s Green Bond Committee and will be reported annually.
So does the green bond give PostNL an advantage over its peers? In October, Poste Italiane agreed a €400 million loan with the European Investment Bank. The loan will fund a variety of projects, including the installation of solar panels at 661 post offices and the improvement of energy efficiency standards across the network, with the aim of reducing carbon emissions.
Funds will also be used to underwrite investment in post office infrastructure and equipment modernisation in “cohesion regions” - meaning parts of southern Italy with a GDP per capita under 75% of the EU average.
In other words, Poste Italiane has secured a loan that covers infrastructure development, environment initiatives, and social inclusion.
Is the (finance) future green?
Governments, shareholders and stakeholders are placing increasing pressure on postal operators and delivery companies to reduce emissions and grow their focus on social responsibility. While green bonds offer no financial advantage over regular bonds for now, using green finance could help the delivery sector boost its environmental credentials.
There is no clear regulatory framework for green bonds. European Parliament and Council negotiators are still discussing rules defining green investments. Eventually the EU will impose standards on the green finance sector, specifying what the financial industry can consider environmentally sustainable.
In the absence of regulatory standards, it seems the companies that are benefiting most from green finance are those that assess and evaluate the purposes and deployment of green bonds.
One final comment. It is vital that the delivery promise for e-commerce parcels is re-examined. The growth in super-fast delivery and the shipping of small individual purchases will have a substantial impact on the costs and environmental impact of the last mile.
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