Green Bonds – a bet for Portugal?

Green Bonds are bonds designed to finance projects associated with sustainability, which can be issued by either states or companies and which offer more attractive interest rates than traditional bonds.

States such as China, Germany, France and Italy, among others, have already issued green bonds. The European Union itself issued 17 billion euros in 2021.

What about Portugal? Would you gain from issuing green bonds?

The answer is yes, and it could be a valuable tool for the Portuguese state to deal with the major challenges facing the country, be it climate change or the war in Ukraine.

First of all, the country has to show solidarity with international efforts to reduce emissions and the first line of decarbonization is the energy sector. We have also recently been confronted, through the war in Ukraine, with the need to have energy sovereignty.

One way of tackling these challenges is through massive funding for solar and wind micro-production, with storage systems, as the President of the European Commission has already mentioned. This type of investment would also have positive social effects, as people and communities would be producing their own energy and benefiting economically from it.

Another area in which we need to focus is energy efficiency and the fight against energy poverty. As we know, around 20% of the population is unable to meet the heating and cooling needs of their homes. It would be important for the state to make a significant investment, accompanied by a simple-to-use tool with technical advice, so that the most vulnerable population could enjoy energy-efficient housing. It would also be possible to create a repayable financing instrument for investments in energy efficiency for the rest of the population and micro and small businesses.

Why not issue green bonds for these purposes?

How can Green Bonds be useful for Portugal?

We should be aware that while Portugal contributes around 0.1% to global greenhouse gas emissions, it is also one of the European countries that will feel the effects of climate change the most.

First and foremost, the rise in sea level, in a country where most of the infrastructure is located near the coast. An effort needs to be made in terms of territorial planning so that, on the one hand, no more infrastructures are implemented in areas at risk of submergence and, on the other hand, to analyze the best solution for existing infrastructures. Billions of euros could be needed to meet this challenge and green bonds could be a valuable tool in this regard.

Another important challenge we face is water scarcity. I’m not going to elaborate on the planning requirements in this area, from the use of water to international conventions on its origin, such as the Albufeira Convention, but I would like to stress the importance of studying and possibly implementing alternative ways of obtaining this scarce resource, which is drinking water and which has historically led to so many wars. Here too, green bonds could play an important role.

Finally, I would like to highlight the risk of desertification in around 60% of our territory. To deal with this scourge, we need, among other measures, a new forestry reorganization. Bearing in mind that around 90% of our forests are privately owned, it would be necessary for the Portuguese state to make a significant investment, which could involve issuing green bonds, in order to prevent the desertification of our territory.

In short, there are many needs, green obligations and all possible financing instruments to help us face humanity’s greatest challenge, which is our own survival.

Sandra Enteiriço
Senior Commercial Advisor at Get2C