Malta’s first ‘Green Bond’ to finance project already completed with EU funds in 2021

Aqra dan l-artiklu bil-Malti

Malta’s ‘first green bond’ has been dubbed by experts as “no more than an exercise in greenwashing” for the benefit of Environment Minister Miriam Dalli, while concerns have also been raised over discrepancies in funds’ disbursement.

The Green Bond was issued for €25 million with a term of 10 years and an interest rate of 4.25% by the Water Services Corporation (WSC) in July 2023 to finance several green projects around the country.

When the bond was issued onto the stock market, the government stated that “proceeds from the Green Bonds will be used to finance several green projects, such as Gozo’s cutting-edge reverse osmosis plant in Ħondoq.”

However, the Ħondoq plant was finished and inaugurated by Prime Minister Robert Abela in November 2021, almost two years before the bond was issued. It was co-financed with money from the European Union.

Contrary to what was stated in the bond’s prospectus, in November 2021, the WSC issued a statement declaring the new Ħondoq plant open, leaving no doubt that it was up and running before the bond was issued.

Instead, according to the public statement, “The first Reverse Osmosis plant in Gozo has been officially inaugurated with an investment of €11 million, co-financed by European funds. Thus, Gozitans will be enjoying independent production of high-quality water that reaches their homes and businesses”.

The Shift asked CEO of WSC Karl Cilia, who had previously called the bond a “landmark initiative”, whether this was a mistake.

“As you rightly note, the Ħondoq project was co-financed by the EU. The shortfall and financing gap that was due to be covered by the WSC shall now be financed through the Green bonds – €1.7 million – to be exact,” he said.

“This was only possible due to the alignment of the Green Bond principles with the state-of-the-art plant’s indicators,” Cilia added.

This example has led to concerns that funds from the bond will be used to make up for money spent on projects that have already been completed and that are usual rather than innovative.

Malta has been using reverse osmosis plants since the 1970s. “There is nothing innovative or green in this initiative,” according to experts consulted.

They also expressed surprise at the announcement that the already functioning plant would be funded via this instrument despite already being co-funded by the EU.

“This is just a greenwashing exercise to raise funds by the WSC for other projects,” they said.

According to the prospectus, funds will also be used to develop more solar farms and wastewater treatment plants and improve the water network.

“The WSC has been implementing these initiatives for many years. They should have been honest and said they wanted the public to lend the agency more millions through a normal bond and not camouflage it as some innovative green initiative.”

The EU has just warned member states about greenwashing initiatives, particularly the so-called green bonds.

Members of the European Parliament are currently discussing legislation to establish a ‘European green bond standard’, the first in the world, to help prevent companies from presenting themselves as more environmentally friendly than they are.

It will be available to companies and public entities wishing to raise capital market funds to finance green investments and meet strict sustainability requirements.

All the money raised by bonds issued under the European green bond standard must be invested in activities aligned with the EU taxonomy for sustainable activity.