Trade credit insurer Euler Hermes has launched a new insurance product that covers green transactions and invests the related premium in green bonds.
The Green2Green single risk credit insurance solution is designed by Euler Hermes transactional cover unit (TCU) to support its bank and corporate clients in the green finance sector.
The solution focuses on providing insurance to green transactions that qualify for cover based on a “bespoke environmental evaluation”, reveals a statement by Euler Hermes. The initial sectors that qualify under the scheme are renewable energy, energy efficiency, recycling, water treatment and public transportation.
“To be eligible for the Green2Green single risk solution, an underlying project or policy will have to comply with one or more of the six environmental objectives defined in the EU Taxonomy, whilst at the same time ‘doing no significant harm’,” a spokesperson for Euler Hermes tells GTR.
The six objectives of the EU Taxonomy, a classification system for sustainable finance, are climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, waste prevention and recycling, control and prevention of pollution and protection of ecosystems.
“Taking ESG risk as a whole, we also integrate as part of this review a social and governance risk review to ensure that the project complies with minimum social safeguard requirements,” they add.
The investable premium from the transaction is put back into the green economy in the form of certified green bonds that support green projects.
This approach is transparent, states the trade credit insurer, as a certificate of investment is issued by Euler Hermes Asset Management which ensures the traceability of the invested premium throughout the transaction tenor.
The first two institutions to use the scheme are Natixis and La Banque Postale, both for renewable energy projects.
Isabelle Girardet, Euler Hermes global head of transactional cover and investment solutions, says: “The reinvestment of premiums into green bonds provides our clients with recognition for contributing to the green economy, as well as tangible results for each party involved. We look forward to welcoming more bank partners and TCU clients on board.”
“Most national governments have made strong commitments to transition to low carbon economies, and companies have a key role to play if we wish to meet the Paris agreement’s goals,” says Florence Lecoutre, board member, and in charge of digital transformation, human resources and ESG.
In July, Saudi Arabia’s ministry of finance signed a green export credit agency (ECA)-backed loan with Euler Hermes, HSBC and Crédit Agricole CIB worth US$258mn for the procurement of buses from Germany.
The facility was the country’s first ECA-supported green loan because of the use of the proceeds and because its reporting features make it compliant with the Green Loan Principles, outlined by the Loan Market Association in 2018, HSBC revealed in a statement at the time.