Green bonds: a sustainable financing option for SMEs

In times when sustainability is becoming increasingly important, small and medium-sized enterprises (SMEs) are faced with the challenge of making their projects both financially and environmentally responsible. Green bonds – fixed-interest securities whose proceeds are used exclusively for environmentally friendly projects – offer a promising option here. But what makes green bonds so special and what advantages do they offer compared to conventional bonds?

What are green bonds?

Green bonds are used to finance or refinance projects with a positive environmental impact, such as renewable energies or energy-efficient infrastructure. For investors, they are an opportunity to achieve financial returns and at the same time make a contribution to environmental protection.

Requirements for green bonds

The issuance of green bonds requires compliance with the ICMA Green Bond Principles. These include:

1. Use of proceeds: financing of clearly defined, environmentally friendly projects

2. Project evaluation and selection: transparent process for selecting suitable projects

3. Management of proceeds: earmarked management of funds in separate accounts

4. Reporting: regular reports on the use of funds and the environmental impact achieved

A central element is the so-called Second Party Opinion (SPO), an independent report that assesses the company's sustainability performance and confirms compliance with the Green Bond Principles. EurA AG supports companies in the preparation of frameworks and accompanies the SPO process.

In addition, the European Union has introduced the EU Green Bond Standard, which has been in force since December 2024. This standard requires increased transparency requirements and external audits.

Why green bonds instead of conventional bonds?

While both instruments raise capital, green bonds offer clear advantages:

1. Sustainability focus: use of funds is strictly linked to environmentally friendly projects

2. Transparency: higher reporting and traceability requirements

3. Attractive investor groups: access to sustainable investors who specifically want to promote green projects

4. Image and competitive advantage: strengthening of market position through sustainable action

5. Financial advantages: Studies show that green bonds often offer more favorable conditions, a phenomenon known as “greenium”.

Practical examples from the SME sector

Encavis AG, an operator of wind and solar parks, successfully placed a green promissory note loan for 210 million euros in 2023. The funds flowed into the expansion of renewable energies and at the same time strengthened the company's market position. The example of our client shows that green bonds are not just a financing solution, but also a strategic instrument for sustainable growth.

Conclusion

Issuing green bonds offers SMEs the opportunity to finance sustainable projects, strengthen their corporate image and attract new groups of investors. However, it requires careful preparation, transparent reporting and compliance with strict standards. However, with the right support, e.g. from consulting companies such as EurA, SMEs can benefit from the many advantages of this instrument. Feel free to contact our sustainability consulting.

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Would you like to find out more about the topic and/or do you need appropriate training? Do you have to fulfill direct or indirect requirements as a supplier? Would you like to proactively develop a sustainability strategy and are looking for support? Get in touch with us!

Text: Daria Ezhkova