Oil Giant Repsol Launches Green Bond
Spanish company Repsol has become the first major oil company to issue a green bond—although this raises a question of what exactly a green bond is.
The €500 million issuance has drawn some criticism from those who feel such bonds should be reserved solely for zero-emission projects that provide an alternative to fossil fuels. Repsol’s bond though is destined to reduce emissions from the oil refinery business rather than find an alternative to oil.
Money raised from the bond issuance will be used on energy efficiency projects at its existing oil refineries and chemical works, with a pledge to use none of the green bond money on constructing new plants. An independent report by environmental ratings agency Vigeo Eiris states that efficiencies made will annually save some 1.9 million tonnes of carbon emissions at Repsol’s facilities in Spain and Portugal, and concludes that the issuance meets the requirements for approval as a green bond in line with the Green Bond Principles.
The principles were introduced to bring clarity to the market and help investors identify which bonds actually deserve the term green bond – but now the Climate Bond Initiative is refusing to back the Repsol issuance.
In a blog, Andrew Whiley of the pressure group which provides investors with advice and information on environmental investments, said: “While Repsol’s bond does not directly invest in increasing fossil fuel output (an obvious no no), refineries are still processing fossil fuels and any investment in making refineries more efficient, as this bond is aiming to, will likely extend plant operating lifetimes and therefore indirectly increase emissions over time.”
He goes on to say: “From a climate perspective, Repsol’s business strategy should aim for greater change – for example by transitioning to bio-feedstock. This needs to be an urgent focus for industry (subject to bio-feedstock certification) and would allow quick re-use of existing refineries.”
The Repsol bond is the latest issuance in a burgeoning sector now worth around US$96 billion a year. At OPEN Cleantech we focus on renewable energy projects with zero-emissions in mind. Recently launched on the Irish Stock Exchange, the OPEN Cleantech bond programme provides a shining example of the green bond ethos.