Introduction section BTP Green
Green BTPs are the new sustainable finance government bonds designed to support, through their proceeds, public expenditures with positive environmental impact contributing at the same time to the country’s ecological transition.
Green BTPs are medium-long term government bonds with the same features of the other nominal BTPs: hence, they guarantee fixed semi-annual coupon payments determined by the coupon rate and the reimbursement of the face value at maturity. The first BTP Green was issued the last 3rd March 2021 by the Italian Treasury, with maturity 30th of April, 2045.
Moreover, Green BTPs are listed and traded both on the regulated wholesale secondary market (MTS) for trades greater than 2 million of Euros, and non-regulated markets, while individual investors, through intermediaries, can trade the bond on the MOT, the regulated electronic retail market managed by Borsa Italiana, for trades with a minimum lot purchasable of 1,000 Euros, or on other trading platforms according to the best execution principle introduced with Mifid directive.
|MATURITY||> 10 years.|
|REMUNERATION||Semi-annual coupons in arrears and possible discount at issuance.|
|TYPE OF PLACEMENT||At the discretion of the Italian Treasury and based on market conditions, Green BTPs will be launched via syndication or marginal auction with discretional determination of allocation price and quantity issued.|
|REOPENING OF OUTSTANDING BONDS||Via auction or syndicated placement.|
|SETTLEMENT DATES||On the primary market, the settlement day is set according to the type of placement (usually T+2 for bond issued via auction and T+5 in case of syndication).
On the secondary market, the settlement day is T+2, as for the other BTPs.
|MARKET CONVENTIONS||Actual/actual for yield and accrual calculation.|
|REDEMPTION||At par, single payment at maturity.|
1. Green Bond Framework
The four mechanisms of each BTP Green issuance are illustrated in the “Green Bond Framework”: the eligibility criteria for the expenditures included in the Italian State budget and classified as eligible, the use of proceeds of each issuance, the monitoring and the environmental impact of these expenditures. This Framework aligns with the “Green Bonds Principles” issued by the International Capital Market Association (ICMA) in June 2018 and, as much as possible, with the draft “EU Green Bond Standard”, currently under discussion by the European Union.
Through the issue of Green BTPs, Italy is committed to financing public expenditures with positive environmental impact, selected through the support of the Inter-ministerial Committee (set up by the Decree of the President of the Council of Ministers issued on the 9th of October 2020) and included in the Italian State budget. Eligible expenses include tax expenses, capital expenditures, current expenses and transfers in favour of subjects external or internal to the public administration insofar as they are financed by general taxation.
Through the issue of Green BTPs, Republic of Italy will finance public expenditures intended to contribute to the achievement of one or more of the following environmental objectives of the “EU Sustainable Finance Taxonomy”, currently under discussion:
- Climate change mitigation;
- Climate change adaptation;
- Sustainable use and protection of water and marine resources;
- Transition to a circular economy;
- Pollution prevention and control; and,
- Protection and restoration of biodiversity and ecosystems.
Moreover, the use of Green BTPs’ proceeds will help Italy support the Sustainable Development Goals 2030 (SDGs), by contributing to the achievement of the following goals:
- Goal 6: Clean Water and Sanitation;
- Goal 7: Affordable and Clean Energy;
- Goal 11: Sustainable Cities and Communities;
- Goal 12: Responsible Consumption and Production;
- Goal 13: Climate Action;
- Goal 14: Life below Water; and,
- Goal 15: Life on Land.
In terms of cash flows, Green BTPs’ proceeds are treated exactly in the same way as all other government securities, e.g., they are transferred to the general Treasury Cash account kept by the MEF at the Bank of Italy. The abovementioned Inter-ministerial Committee is responsible for ensuring a correct monitoring of the effective use of the funds - for amounts equal to the net proceeds of the issuances - periodically and throughout the lifetime of the bond. This entails both the traceability of the allocation of the proceeds and the monitoring of the continuing application of eligibility criteria throughout the lifetime of Green BTP.
2. Minimum lot purchasable
Green BTPs can be subscribed for a minimum amount of 1,000 euros or multiples thereof.
3. Type of placement
At the discretion of the Italian Treasury and based on market conditions, Green BTP can be issued through syndicated placement or marginal auction with discretional determination of price and quantity issued. In the latter case, the issuances characteristics will be announced in every issuance decree together with the supplementary placement’s terms reserved to Specialists in Government Bonds, technically treated as a subsequent tranche. As for nominal BTPs, the amount of each of the five bids that every intermediary can place cannot be less than 500,000 euros. Bidders can submit prices with a minimum tick of one euro cent or multiples thereof.
For each security to be issued, auction fees are applied based on residual maturity, which are set according to the number of days between the auction settlement date and the maturity date, as currently indicated in the Director General of Public Debt announcement.
5. Auction announcements
6. Post Issuance documentation