The green market in France is driving increased activity following the 'repackaging' of French Treasury notes. Isabelle Millat (pictured), head of sustainable investment solutions for global markets at Societe Generale spoke to SRP about the bank's newly launched green structured note and how it aligns yield pick-up with sustainable investment.

The OAT 2039 is a fixed-income note collateralised by the French green OAT, delivering a customised coupon to investors. Listed on the Irish Stock Exchange, the note can be redeemed early 18 months after inception by Start Issuer, SG's repackaging special purpose vehicle, in which case investors get a 2.24% coupon, instead of 1.75% on the green OAT 2039. The collateral (the OAT) is a bond issued by the French Republic, backed by the 'full faith and credit' of the French State.

The yield pick-up offered by the structure makes it particularly appealing to investors, as does the contribution to sustainable development, according to Millat. "Investors are attracted by the customised coupon allowed by the repackaging solution," said Millat. "At the same time, this product meets investors' growing interest in being part of sustainable development initiatives. An investment in the notes implies an equivalent investment in the green OAT 2039, which supports the French State's commitment to finance or refinance Green Eligible Expenditures, including: buildings, transport, energy, living resources and biodiversity, adaptation, pollution control and eco-efficiency."

These green credentials went through an independent review by rating and research agency Vigeo Eiris, which delivered, upon its issuance in January 2017, the "Second Party Opinion" on the green OAT 2039, "in line with the Green Bonds Principles", according to Millat.

The size of the green bond market and its liquidity is increasing steadily, supported notably by very large issuances from sovereigns, which entered this market in late 2016, according to Millat. "This creates opportunities to offer more repackagings of green bonds, with attractive coupons, " said Millat.

The bank is also increasing and diversifying its unique 'positive impact notes' offer, a product range for clients seeking to invest in a structured note while promoting positive impact finance. "These notes are bespoke investment solutions for which Societe Generale, as the issuer, commits to holding positive impact finance assets in its books, for an amount equivalent to the nominal invested in the note and throughout the life of the note," said Millat. "Positive Impact Financings deliver a positive contribution to sustainable development, once any potential negative impacts have been identified and mitigated. Structuring 'positive impact notes' to support the financing of small and medium-sized enterprises (SMEs) is among Societe Generale's latest innovations in that space."

The green market is bound to grow rapidly, spurred by investors' desire to support sustainable development, and driven by the supply of competitive investment solutions, making it possible to do good and do well at the same time, according to Millat. "Regulation acts itself as an added incentive," said Millat. "Article 173 of the French Energy Transition law, and the European Commission's Action Plan on sustainable finance, unveiled on March 8, 2018, are key step to broaden this momentum."

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