imported>Doug Williamson |
imported>Doug Williamson |
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| ''Securities - borrowings - pricing - ESG.'' | | ''Financial reporting - IFRS 16''. |
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| A green curve describes the prices of green securities trading in the secondary market, differentiated by their maturities.
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| Green curve is an abbreviation for green ''yield curve''.
| | The lessee's Incremental Borrowing Rate is a key concept in financial reporting for leases under IFRS 16. |
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| The difference in yield between the green yield curve and the comparable conventional conventional yield curve is known as the "green premium" or ''greenium''. | | The incremental borrowing rate is the rate the lessee would pay to borrow: |
| | *Over a term similar to the lease term |
| | *With a similar security |
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| :<span style="color:#4B0082">'''''UK to build out green curve'''''</span>
| | When the interest rate implicit in the lease cannot be determined, the IBR shall be used instead, to discount the related lease liabilities and assets for reporting under IFRS 16. |
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| :"It was announced at Budget 2021 that the government will issue its first sovereign green bond - or green gilt - this summer, with a further issuance to follow later in 2021 as the UK looks to build out a 'green curve'."
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| :''Green gilt issuance, UK Debt Management Office''
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| | Note that a lessees's incremental borrowing rate is likely to differ from their existing borrowing rate under other borrowing arrangements. |
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| :<span style="color:#4B0082">'''''Germany to create a green curve'''''</span>
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| :"Germany's green debt plan differs from peers such as France and the Netherlands in that each green bond sold will be matched with a conventional twin...
| | ==See also== |
| | *[[DIA]] |
| | *[[IFRS 16]] |
| | *[[Incremental]] |
| | *[[Internal rate of return]] |
| | *[[Interest rate implicit in a lease]] |
| | *[[Lease]] |
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| :The structure will show investors the exact cost of going green. Until now, gauging the green premium meant examining an issuer’s regular yield curve to gauge where a hypothetical conventional bond identical to the green bond in question might trade.
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| :'For the first time, we will be able to exactly see what the (green) premium looks like without having to do any maths, except for a simple "minus" calculation, one yield minus the other,' said Christoph Rieger, head of rates and credit research at Commerzbank in Frankfurt...
| | ==Other links== |
| | | [https://www.treasurers.org/thetreasurer/definitive-guide-to-deriving-ifrs-16-discount-rates Definitive guide to deriving IFRS 16 discount rates: The Treasurer] |
| :... accurately gauging relative issuance costs should convince more borrowers of the financial benefits of going green, said Piet Christiansen, chief strategist at Danske Bank in Copenhagen. | |
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| :So Germany’s structuring of this issue could well be key in drawing more borrowers to the green market.
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| :'When Germany will (create) a green curve, then this is what we will price the green projects off of. So it is really that there will be a benchmark of where green pricing will be, going forward,' Danske’s Christiansen said."
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| :''Reuters - Yoruk Bahceli - 2 September 2020''
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| The size of the green premium (greenium) - and even the rationale for its existence - are subject to some debate, as discussed here by the Climate Bonds Initiative.
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| :<span style="color:#4B0082">'''''26 out of 33 green bonds priced on or inside their yield curves'''''</span>
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| :"The new issue premium is the [difference in yield] for a new bond compared to where seasoned bonds from the same issuer are trading in the secondary market at the time of issuance... | |
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| :There is no reason why a bond being green should impact its price, since green bonds rank pari-passu (on equal footing) with bonds of the same payment rank and issuer.
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| :[However, there] is no credit enhancement to explain pricing differences and issuers of green bonds often incur costs such as Second Party Opinions and Certification, although these are typically negligible.
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| :Green bonds and vanilla equivalents are subject to the same market dynamics..."
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| :''Green bond pricing in the primary market - July to December 2020 - Climate Bonds Initiative''
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| == See also ==
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| * [[Bond]]
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| * [[Green bond]]
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| * [[Green gilt]]
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| * [[Greenium]]
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| * [[Maturity]]
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| * [[Premium]]
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| * [[Secondary market]]
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| * [[Yield curve]]
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| [[Category:Accounting,_tax_and_regulation]] | | [[Category:Accounting,_tax_and_regulation]] |
| [[Category:The_business_context]]
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| [[Category:Corporate_finance]]
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| [[Category:Investment]]
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| [[Category:Long_term_funding]]
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| [[Category:Compliance_and_audit]] | | [[Category:Compliance_and_audit]] |
| [[Category:Ethics]]
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| [[Category:Identify_and_assess_risks]]
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| [[Category:Manage_risks]]
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| [[Category:Risk_frameworks]]
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| [[Category:Risk_reporting]]
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| [[Category:Financial_products_and_markets]]
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