No green bonds have yet been listed on the Malta Stock Exchange, despite a legal framework for bonds in industries serving climate change mitigation and adaptation, the circular economy. and restoring biodiversity.
Malta’s inertia in these green financial instruments was explained by Central Bank experts who interviewed both potential issuers and investors, who said it should be up to the government to relaunch investment in this sector with its own green bonds.
Economists found a mismatch in the market, marked by apparent demand for green bonds from potential investors, but reluctance from issuers who “lack the knowledge and interest to exploit this type of opportunity. of investment”.
Indeed, only 13% of financial issuers have considered issuing green bonds to finance sustainable projects. Of these, 80% said they were likely to issue a green bond within the next five years. This indicates that most issuers are “reluctant to issue green bonds anytime soon and not until they perceive a significant increase in investor awareness within the local green market.”
In contrast, 90% of potential investors said they were willing to invest in locally issued green bonds in the future.
And despite the absence of such bonds, 36% have already invested in green finance elsewhere – of these, 60% said they would prefer an investment in green bonds to an identical conventional counterparty.
From the survey results, it appears that “a market leader is needed to revive the local green bond market, as such a move could reduce uncertainty in this market for both issuers and investors. , encouraging more active market players”.
As the largest bond issuer in the Maltese capital market, the government could take the lead in introducing the first green bonds to the market, paving the way for growth in this sector.
The authors of the study contrast the local situation with a global scenario in which green finance has grown exponentially since its inception in the late 2000s.
Since its inception, the sector has surpassed the $1 trillion mark in cumulative green bond issuance.
“These instruments have become so popular and sought after that some investors are willing to take less, yield-wise, just to acquire the asset in their portfolio.”
Also despite the efforts of the local authorities, so far no green instrument has yet been listed on the Malta Stock Exchange. Only a small percentage of Maltese investors have invested in green finance and are considering buying more green bonds if the opportunity arises.
Those interviewed were also unaware that the Malta Stock Exchange had established laws allowing the listing of these instruments.
Just over 100 questionnaires were sent to the targeted respondents, of which 56 were successfully completed. The response rate was rated as “somewhat satisfactory”, with the results providing “useful insight, reflecting the perspective of stakeholders directly involved in a niche market”.
The study was conducted by Alistair Borg, an executive in the Central Bank’s Monetary Operations Unit and senior research analysts Therese Lethridge, Kimberley Charlie Mifsud, Alan Psaila and Emmanuel Farrugia.