Finance Minister Gernot Blümel (ÖVP) announced on Aug 30 that Austria will begin offering green bonds in 2022, a new investment opportunity where the funds raised are earmarked for initiatives that benefit the environment.
Blümel, who made the announcement at the annual European Forum in Alpbach, went on to explain that such green projects could potentially include “the expansion of public transport and renewable energy, research and development or the strengthening of sustainable agriculture,” according to the Austrian Press Agency (APA). He has already commissioned the Austrian Treasury to form an inter-ministerial task force that will define parameters and draft concrete plans.
The bonds themselves will be part of Environment Minister Leonore Gewessler’s (Greens) finance agenda, which aims to encourage Austria’s transition to a sustainable economy by supporting climate-friendly investments.
Blümel noted that the move was a collective decision by both coalition partners – the ÖVP and Greens – which marks a rare occasion, as the current administration has not always seen eye to eye on environmental measures, hampering progress on several campaign promises like plastic bottle returns, carbon taxing, and the “1-2-3 Ticket” public transit scheme.
How Green is “Green?”
The notion of issuing sovereign bonds to finance environmental projects is not a new idea, with several countries like the UK, France, Germany, Hungary, Indonesia and Nigeria having already taken the lead. Austria’s federal government will use international market standards as a guide, but it remains to be seen just how climate-forward their projects will be.
“Austria has great expertise in sustainable financing projects, and our portfolio already contains a very high proportion of green investments,” Blümel assured. Indeed, up to 65% of government investments offered this year were rated environmentally responsible by the Forum for Sustainable Investments. However, the benchmarks set across the industry are notoriously vague, non-standardized and open to interpretation, according to the European Commission.
The potential for “greenwashing” – where a product is made to appear more environmentally friendly than it actually is – remains a major concern. And while currently in the works, at present there is no single governing body in the EU to determine if publicly-funded green projects align with climate targets – for example, those set in the Paris Agreement. One study found that a country could have high ratings for sustainable finance while still emitting more greenhouse gases per person than those with lower ratings.
In other words: buyer beware. Climate conscious investors will still have to do some digging to find out how their money is used – at least for the time being.