ESG investing saw another year of extraordinary growth in 2021, fuelled by a range of factors. The world witnessed increasingly common extreme weather events, including Madrid’s heaviest snowfall in 50 years and Cyclone Ana displacing more than 10,000 people in Fiji.

The finance sector is a vital contributor to the global sustainability agenda, which is more important than ever, given the current pressing challenges. It empowers sustainable finance by incorporating environmental, social and governance (ESG) factors into investment decision-making.

As a result, investors are motivated to become a force for positive change by buying stock from socially responsible issuers. Not only is it the right thing to do for the planet, but it helps to futureproof organisations in a world where attitudes and systems are under constant scrutiny from customers, investors and regulators. 

Euronext continues to prioritise projects relating to environmental, social and corporate governance (ESG) issues. In 2021, it facilitated the issuance of:

• €298 billion worth of ESG bonds, a 44% increase on the €206 billion listed throughout 2020. 
• more than 400 new ESG bonds, compared to the more than 200 listed in 2020.

Euronext also launched a brand-new sustainability strategy that will help achieve its ESG goals as well as empower sustainable practices across its markets, called “Fit for 1.5°”. 

This article reviews Euronext’s approach to sustainability and discusses several ESG best practices shared by its team of experts.

Fit for 1.5°: Euronext’s ESG commitment

Fit for 1.5° is Euronext’s commitment to developing services and products that help its business, partners, clients and the European economy in general to curb the increase in global temperatures from pre-industrial times. The company’s goal is to help ensure this increase remains below the 1.5°C target, as set out in the Paris Agreement. 

An integral part of Euronext’s 2024 ESG strategy, the “Fit For 1.5°” climate commitment involves the exchange setting science-based quantitative climate targets that will inform in-house climate action efforts. This includes relocating Euronext’s Core Data Centre to a new green facility, powered entirely by renewable energy. This transformative move sets the standard for the industry and brings Euronext’s Core Data Centre, which handles 25% of European trading volumes, back to the European Union.

In addition, Euronext will leverage its ESG performance to help issuers to take action on their environmental impact, promoting sustainability. This will be achieved by further developing services and products that help investors and issuers meet the goals outlined in their ESG strategies.

Sustainability strategy: Why Euronext started the Fit for 1.5° commitment

Euronext is a part of an ecosystem and, as such, it wants to join the investors who are already taking action to address the issue of climate change. As both a listed company and a market infrastructure provider, the company intends to use its influence to accelerate the transition that is already underway.

Euronext is in a unique position to create an impact in this chosen aspect of the ESG arena and to drive forward the European financial community’s response to what it calls the “highest ambition under the Paris Agreement” – aiming to limit the increase in global temperature to just 1.5°C.   

The Paris Agreement, as well as the outcomes of the COP26 conference in Glasgow, show the urgency with which action must be taken, illustrating why Fit for 1.5° is such an important initiative. 

“Many of our issuers are already leaders, and many investors are leaders too, in the space of climate change,” explains the spokesperson for the Euronext Group ESG team. “What we are trying to do is scale up these first initiatives and first attempts to measure the impact of finance in a way that can be useful across all our markets, to our investors and within the regulatory requirements.”

Setting ESG goals

Euronext is an official signatory of the Task Force on Climate-Related Financial Disclosures (TCFD) and has been reporting to the TCFD since 2020. It has also taken the lead in promoting this initiative that aims to improve and increase reporting of climate-related financial information.

In addition, Euronext aligns its ESG practices with the UN Sustainable Development Goals (SDG). This includes a particular focus on the following SDGs: 

Euronext has also backed Business Ambition For 1.5°C, in combination with the UN Race To Zero initiative, where signatories have pledged to commit to targets aimed at limiting the temperature increase to 1.5°C and for a net-zero carbon future. 

How Euronext takes action to reach its ESG goals

In order to meet Euronext’s ambitious targets, both internal and external, the company has set the following actions in place:

ESG Best Practices: 4 steps to improve your ESG impact and performance as an issuer

The Euronext Group’s ESG team of experts shared several ESG best practices.

1. Think long-term

The battle against climate change will not be easily won, and it will not be over quickly. Climate is a long-term project and your goals should reflect that you are committed to sustainability going forwards. This shows your credibility in the sector, as does aligning your ESG strategy with an established methodology. 

Investors need to be able to easily understand which issuers are making real progress and which might be greenwashing. That’s why you should be able to show your metrics within a framework that is trusted and transparent.

2. No ‘perfect’ methodology

Different ESG ratings agencies have different methodologies for generating their scores. Each bases its ratings on different indicators and criteria, and there is no such thing as a ‘one size fits all’ approach. 

You must pick the criteria that are important for you in terms of creating your goals and setting non-financial KPIs. The targets you choose should fit your company and its mission. In addition, you should be able to communicate why you chose that methodology, how it helps your organisation make a real ESG impact and how that benefits investors and other stakeholders.

3. Integrate sustainability into your business 

Producing only stand-alone sustainability initiatives does not create the culture shift that is necessary to make real, impactful, long-term change. When it comes to embracing ESG, sustainability must run in the veins of the company. You could make some big, headline-grabbing moves, but if you don’t address all the elements of the business where you can improve your environmental performance, it is superficial. 

Examine your business closely and see where you can make the relevant adjustments. For example, it might mean replacing your paper-based meeting process with an online meeting portal. Not only does this cut your carbon footprint, but it also brings other business benefits, including increased ease of collaboration, improved record-keeping and more. 

4. Focus on continuous improvement

Linked to the previous point, you are never finished with the job of instilling sustainability in your business. The bar continues to rise as new risk factors emerge, so make sure your sustainability strategy takes this into account. 

Conclusion

The planet’s climate is in crisis and it needs help from all of us if we are to meet the targets of the Paris Agreement. Therefore, Euronext is setting its own goals while also creating platforms for its partners, investors and issuers that will help them with their efforts towards sustainability.

Fit for 1.5° will allow Euronext to focus its strategies on this ambitious goal, with the confidence that it will gather momentum across the European financial sector. Companies must seek new ways of achieving growth with an impact that facilitates real positive change in the battle against climate change. With this bold commitment, Euronext aims to be the preferred partner of issuers across the world who are serious about sustainability. 

References and Further Reading

• Why ESG is (increasingly) important
• How issuers can respond to increased investor interest in ESG 
• ESG reports and their benefit
• Euronext’s ESG Advisory service
• Our commitment to empowering sustainable growth

Euronext is proud to be nominated in the 2022 Institutional Investor’s Survey ‘Developed Europe and Emerging EMEA Executive Team’, Specialty & Other Finance category.



The survey is an independent platform for investment and sell-side professionals globally to evaluate credibility, communication and financial stewardship, among other  criteria, of corporate leadership, as well as IR effectiveness across multiple activities.

Our Investor Relations and Executive Management teams will be evaluated by various key performance metrics to be qualified for the award.

How you can vote for us?

The vote is open to investors and sell-side with a registered profile, to  participate and vote:

Vote 2022 Institutional Investor’s Survey

How we enhance financial communication:

Data:

• Standardised Consensus Template quarterly
• Consensus available on our IR website
• P&L Spreadsheet updated every quarter
• Historical Trading Data updated every month, including Borsa Italiana data
• Disclosure of monthly Post-Trade Data

Presentations:

• Streamlined and standardised results presentations
• Dedicated presentations for major acquisitions (Borsa Italiana Group, VP Securities, …)
• Major releases made after market close to enable information-gathering prior to Investors Call the following day

Tools and documentation:

• Comprehensive Investor Toolbox providing a one-stop-shop experience
• Euronext equity story and financial profile
• Dedicated CSR Investor Toolbox
• Best-in-class Universal Registration Document (including pro forma figures and ESG KPIs)

Meetings:

• Regular attendance of top management at leading industry conferences
• Non-deal roadshows twice a year covering the US and Europe
• Large Q&A slots during Earnings Calls

2021 a strong year for Euronext:

2021 was a strong year for investor engagement, despite continued restrictions on travel due to Covid-19.

• More than 330 investors met from 20+ countries
• 12 investor conferences attended
• 1 Investor Day in Milan, with more than 400 attendees both in-person and online, including a plenary session and 3 dedicated workshops to present the new strategic plan “Growth for Impact 2024”
• 1 successful rights issue and 1 successful bond issue, including related equity and debt roadshows, to finance the acquisition of the Borsa Italiana Group.

Our team

Our Top Management combine more than 30 years of experience in capital markets and financial market infrastructure with:

• Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board, joined in 2015
• Giorgio Modica, Chief Financial Officer, joined in 2016.

Our Investor Relations team combines more than 15 years of experience in Investor Relations and financial communication with:

• Aurélie Cohen, Chief Communications and Investor Relations Officer, joined in 2017
• Clément Kubiak, Investor Relations Manager, joined in 2017
• Judith Stein, Investor Relations Officer, joined in 2021.

Contact us

euronext.com/investor-relations

14, place des Reflets | CS 30064 | 92054 Paris La Défense Cedex | France

ir@euronext.com |  +33 1 70 48 24 27

Vote 2022 Institutional Investor’s Survey

As of 3 January 2022, Euronext Securities will change its physical location and move to new premises.

The new address will be:

Euronext Securities

Nicolai Eigtveds Gade 8

1402 Copenhagen K

Denmark

Please note that the CVR number and legal name VP Securities A/S remain unchanged.

If more detailed information is needed, please do not hesitate to reach out to your contact person in Euronext Securities.

New email addresses:

Please note that all email addresses have now changed to a new longer format for each name, and also the ending @euronext.com. Redirections will be in place for a short period from the ‘old’ VP email addresses, but we recommend that you update your address book with the new addresses as soon as you can.

In August of this year, the UN’s Intergovernmental Panel on Climate Change (IPCC) released a report that made headlines around the world. In what has been called a “code red for humanity”, the report stated that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach.”

Slowing climate change is nowadays definitely on the top of everyone’s agenda. We’ve already seen some of the ambitious targets set on EU and national levels. For example, the European Green Deal aims to make Europe the first climate-neutral continent. Coming closer to home, Denmark has set the goal to reduce CO2 emissions by 70% in 2030. Delivering these “rapid, large-scale reductions”, will require significant investments from both the public and private sectors. In fact, the European Commission estimates that the EU needs to invest an additional €260 billion a year in order to achieve the collective commitment to cut carbon emissions by 55% by 2030. In this context, the role of investors is key in urging decision-makers and businesses to commit to sustainable investments. And financial markets have a central role to play in the transition to a net zero carbon economy: for example the European Central Bank (ECB) has been implementing this year a “centre for climate change” which has also recently set an action plan with nine accurate measures.

How we finance the transition

So how can we, as market participants in the post-trade industry, do our part to fund the transition to a blue and green economy? As early as 2018, the EU’s Technical Expert Group (TEG) highlighted that the financial sector would need to play a significant role in facilitating this transition. More than any other industry, we have the capacity to influence the reallocation of private capital towards more sustainable investments. Our role is to promote the transition of companies to more sustainable business models, and as such we advocate for improvement. That is why we support the TCFD, and we are signatories of the UN Global Compact and the UN Ocean Principles.

One of the most effective instruments at our disposal is the green bond, which the United Nations has called “one of the most significant developments in the financing of low-carbon, climate-resilient investment opportunities.”

The Nordic region: first-movers in green bond investing

The Nordic region actually features quite prominently in green bond history. It was a group of Swedish pension funds that approached the World Bank in late 2007, looking for a way to invest in projects that would help the climate, that led to one of the world’s first green bonds. And it was the Oslo-based Centre for International Climate and Environmental Research (CICERO) that provided the now standard second opinion for that bond – verifying the positive impact the potential investment project would have on the environment.

Nordic exchanges have been pioneers in this space as well. For example, Oslo Børs was the first exchange to implement a list for green bonds back in 2015. They created the list in response to increasing investor interest in sustainable investment opportunities, with the goal of making it easier for investors to identify green bonds. The day the list went live, it contained five listed bonds having a combined issued amount of over NOK 3 billion. To qualify for the list, the issuer needed to have an independent evaluation of the project for which the bond’s proceeds would be used. The evaluation needed to be made public so market participants could understand the project’s environmental impact. Issuers were also obligated to keep investors informed about updates to the project the bond was intended to finance. These requirements are now a part of established best practice and standards for issuing green bonds.

Interest in green bonds accelerates

In 2020, the Oslo Børs green bond list became an integrated part of Euronext ESG Bonds, an online platform which combines all eligible and consenting ESG bonds issuers and securities in our markets in one location (ESG standing for environmental, social and governance). The list now contains over 850 ESG bonds from more than 280 issuers across the globe. This platform connects investors and issuers, creating an international financial community for those actively involved in sustainable investments. Issuers on this platform have raised in excess of €600 billion, representing approximately 44% of total global sustainable issuance.

Since the start of the year, Euronext has added over 250 ESG bonds – which shows that investors’ appetite for sustainable investments is only accelerating. Based on our experience with green bond investing, we see that investors are not only interested in supporting established green bond issuers. They’re also looking to invest in companies just starting their ESG transition. In other words, there’s never been a better time to enter the ESG issuance space. As we see it, embarking on the ESG journey involves three key elements: strategy, visibility and communication.

A clear ESG strategy helps companies avoid the “greenwashing” trap

Investors are becoming increasingly critical of sustainability and eco-friendly claims. In fact, one of the aims of the new European Green Bond Standard (EUGBS) is to protect investors from “greenwashing” – when companies claim they’re doing more for the environment than they actually are. While compliance with this standard is voluntary, it demonstrates the importance of incorporating ESG principles into your long-term corporate strategy, as opposed to approaching ESG initiatives as standalone projects. And, as with any strategy, this needs to be developed in cooperation with your company’s stakeholders and include concrete targets that investors can easily follow.

Visibility is crucial to attracting the right investors

The growth of the green bond market over the past 10 years testifies to private and professional investors’ interest in sustainable investment opportunities. However, work is still needed to make green investments more visible, and to help investors understand what “green” actually means. The biggest issue barring investments into a greener economy is the lack of visibility and transparency for market participants. This is one of the reasons the EUGBS is introducing a shared EU Taxonomy ¬– a common classification system for sustainable economic activities. The hope is that by creating a shared standard for issuers, investors will be able to identify sustainable investments more easily.

The need for greater visibility is also one of the driving factors behind our dedicated bonds platform. By consolidating green bonds in one location, and employing a shared taxonomy based on recognised standards, we can help investors who have the capital to find the ESG projects they want to finance. This visibility is also key for issuers, as it helps you connect with an international investor pool and get the funding you need.

Life beyond Green: the Blue Economy

Being a leading listing venue for companies that operate in ocean industries and other businesses related to Blue Economy, Euronext became in 2020 the first and only Exchange signatory of the UNGC Sustainable Ocean Principles that provide a framework for responsible business practices across sectors and geographies. Furthermore, it has contributed to the UNGC Blue Bond Reference Paper, with the scope of identifying opportunities to use the ESG bond market to secure capital for ocean-related projects and companies that have made, or are planning to make, a significant contribution to the UN SDGs especially the Sustainable Development Goal 14 “Life Below Water”. Mid 2021, we had 162 companies listed in sectors related to the Blue Economy, in all Euronext countries. These companies had a market capitalisation of over 675 billion euros, with total revenues of over 840 billion euros, and employed over 1,4 million people.

Communicate the right information to the right people

For investors interested in sustainable investments, analysing a company’s relevant ESG criteria is a fundamental part of assessing the value of an ESG investment. This information gives them insight into how the company is performing with relation to its ESG goals and the company’s level of commitment regarding its ESG projects. However, different investors require different types of information. And depending on a company’s jurisdiction, a wide range of ESG reporting requirements might apply. So, as an issuer, when determining how much to report, you need to identify your stakeholders and investors, analyse their interests and needs, and consider which information is relevant for them. This will help you define the scope of your reporting and put the necessary reporting tools in place to capture the right data.

As an example, we offer issuers tailored programmes to increase ESG knowledge, connect them with relevant stakeholders and advocate for their goals and interests, and also a set of guidelines on ESG reporting. This last one draws on recommendations from the UN Sustainable Stock Exchanges Initiative, and are designed to help listed companies structure their approach to ESG.

Board the ESG train before it leaves the station

Globally, green bonds have been issued for over €850 billion. Of that, €227 billion was issued in 2020 alone. Analysts expect €340 billion in green bond issuance in 2021. And the bond market isn’t the only area where we’re seeing an increase in ESG investment. The same trend is evident in stocks and indices as well. For example, the recent launch of the CAC 40 ESG®, a sustainability-oriented version of the French national benchmark index, CAC 40®; the MIB ESG Index on Borsa Italiana, Italy’s first blue-chip index dedicated to ESG practices; and Euronext’s ESG WORLD Index chosen by the German Government, all demonstrate that ESG will be the dominate theme in the investment market for the foreseeable future. Whether we’ll see similar dedicated indices in the Nordics remains to be seen. What is clear is that there has never been a better – or more critical – time for issuers to solidify their ESG strategies and do their part to fund a sustainable future.

Facts

ESG is about more than the environment. While projects to reduce carbon emissions and switch to green energy sources garner most of the attention, there are other types of bonds in this category. For example, 2021 has been a good year for social bonds (the ‘S’ in ESG) – where the proceeds finance socially beneficial activities, such as affordable housing or building essential facilities. In the first four months of this year, Euronext listed 18 social bonds, as compared to 18 in all of 2020.

Source for article:

• Climatebonds.net
• Worldbank.org
• Euronext.com
• Ec.europa.eu
• Forsikringogpension.dk

Contact

Bjørn Stendorph Crepaz

Head of Issuance & Issuer Services at Euronext Securities

Phone: +45 2969 2815

Email:  BSCrepaz@euronext.com " rel="nofollow"> BSCrepaz@euronext.com

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We want to create value for our customers by understanding their business

- Bjørn Stendorph Crepaz , Head of Issuance & Issuer Services at Euronext Securities

The issuance sets a record and is the largest Euro-denominated green bond from a non-financial issuer to be issued with VP Securities. Proceeds from the new bond will be used in accordance with European Energy's new Green Finance Framework to invest in wind and solar energy production.

European Energy has issued corporate senior bonds through VP Securities since 2014. Since that time, interest in renewable energy investment has increased significantly. By issuing a Euro-denominated corporate bond through VP, European Energy has been able to capitalise on the growing interest for sustainable investment opportunities and reach an international investor pool. Flemming Jacobsen, Head of Group Treasury and FP&A at European Energy, comments on the bond’s performance, saying, “The bond was significantly oversubscribed with a solid interest from both Nordic and European investors.”

Financing the blue and green economy

This latest issuance from European Energy also highlights the role corporates can play in funding the transition to a more sustainable economy. Flemming Jacobsen comments, “As front-runners in combating climate change, we have been scaling up our organisation to be able to grasp the growing opportunities in renewable energy projects. This means that we have quadrupled the construction of green energy capacity to more than 1.1 GW since last year. With our new financing structure, we will be able to further accelerate the growth of the company and keep up with the increasing demand for green projects.”



For Euronext, this issuance is another example of how the capital markets play a key role in delivering on Europe’s climate ambitions. “By supporting cross-border issuance in multiple currencies, we help connect Nordic-based corporates with international investors interested in funding green projects,” comments Bjørn Crepaz, Head of Issuance Products & Data Analytics at VP Securities. “There is a profound shift in the market towards green and sustainable investment opportunities, from both investors and issuers. As the leading stock exchange by both the number of issuers with ESG bonds listed and the outstanding issuance amount of ESG bonds listed, Euronext is proud of its long-standing cooperation with European Energy. We look forward to helping more companies raise the financing they need to transition to a more sustainable economy.”

Contact

Henrik Høj

Senior Relationship Manager

Phone: +45 4358 8794

Email:  HHoj@euronext.com

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Bjørn Stendorph Crepaz

Head of Issuance & Issuer Services at Euronext Securities

Phone: +45 2969 2815

Email:  BSCrepaz@euronext.com

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The Covid-19 pandemic has disrupted many aspects of our professional and personal lives. The annual general meeting (AGM) season is no exception.

A historic AGM season

VP already hosted 160 virtual AGMs in 2021

Read more about how VP can support your annual general meeting:

General meeting services, virtual as the new market standard (PDF)

In this article, we look at how the global pandemic accelerated the digitisation of general meetings, and whether or not virtual general meetings will be a part of the “next normal”

While the pandemic has compelled the majority of companies to embrace some form of virtual AGM solution, Gustav Lantz, Product Owner, Investor Services at VP Securities, points out that signs of the digitisation of the AGM had been on the horizon for quite some time. “Already prior to the pandemic, there were several trends pushing AGMs in the direction of digitisation.”

Trend #1: Investors are becoming more engaged

According to Gustav Lantz, changes in investor demographics and mindset were prompting companies to look for more accessible AGM formats. “There was this trend of active ownership, where investors were getting more involved in the governance of the companies they invest in. This was also fuelled by a global trend of a boom in individual investors, where we see a larger number of smaller investors being quite active in the investment space. These investors are typically quite curious about how the companies they invest in are managed, and they look to have a more active role in those companies by attending shareholder meetings.”

Trend #2: Focus on sustainable solutions

Gustav Lantz also highlights the focus on sustainability and corporate social responsibility as trends driving AGM-digitisation. “Physical AGMs can involve a great deal of travel, which, depending on the method of transportation, can increase pollution. Then you have the use of paper at these meetings. So, already before the pandemic, many were focusing on a more sustainable method of holding AGMs.”

Trend #3: The pervasiveness of technology

Finally, the fact that digitisation has impacted virtually every aspect of our lives meant that it was only a matter of time before digital technology transformed the AGM. “Smartphone ownership is practically more prominent than toothbrush ownership,” Gustav Lantz says. “This would indicate that the public is used to using digital technology and is ready for a more digital approach to AGMs.”

Virtual AGMs slow to take off

Despite the prevailing trends pushing AGMs in the direction of a virtual solution, there was still widespread hesitancy over whether to adopt a full virtual AGM solution prior to the pandemic. For example, VP hosted only one virtual AGM in the whole of 2019. When the pandemic arrived in 2020, many companies weren’t in a position to go with a fully virtual solution. “The pandemic came to Europe in the early part of 2020,” explains Gustav Lantz. “The emergency legislation was being drafted and put into place as the companies were holding their meetings, so they didn’t have time to react. Many chose to use different physical formats – and many Danish companies simply asked their investors not to come.”



Then came 2021. Contrary to what many had hoped, most countries were still under pandemic-related restrictions that made physical meetings impossible. And experiences from 2020 had laid the groundwork for a fully virtual approach to the 2021 AGM season. “In 2021, we’ve had a massive spike. A lot of that has to do with expectations from issuers, but also from investors. Investors saw some of these meetings taking place in 2020, and it created an expectation that that should be the way going forward, at least during the pandemic,” Gustav Lantz says.



Many of these companies were trying a virtual AGM solution for the first time. And many of the pre-pandemic concerns about a digital approach still lingered.

Concern #1: How to manage participation in a virtual setting

“We had questions about how we should handle questions and voting,” relates Stine Felten, Executive Assistant to the CFO at Royal Unibrew. “We usually have between 300 and 650 shareholders attend our AGM. A handful make presentations and many have spent a great deal of time on them. So, we wondered how we would balance speaking time between the shareholders in a virtual environment.”

Concern #2: Tackling the transmission delay

For Jonas Guldborg Hansen, Head of Investor Relations and Communication at Royal Unibrew, the concerns primarily related to the technical aspects of running a virtual AGM. “I spoke a lot with VP about what they could offer to reduce any delay in the transmission. It was really important that we have as minimal a delay as possible.”

Concern #3: What if the technology fails?

With a physical AGM, you always have the opportunity to intervene if the technology doesn’t work as it should. Virtual AGMs are a different matter, as Karin Sønderbæk, Legal Director at Sydbank, pointed out. “I think our main concern was that you feel like the proceedings are a bit out of your hands. You can’t personally collect votes if something goes wrong. You’re dependent on the technology.”

A successful ‘VGM’ experience

Fortunately, everyone’s concerns proved to be unfounded. “The whole event exceeded my expectations,” Jonas Guldborg Hansen says. “We had no technical issues and the transmission delay wasn’t more than 20 seconds.” At Sydbank, Karin Sønderbæk had a similar experience. “It was fantastic. Everything was under control, the streaming service worked and there was a good atmosphere when we had input from the shareholders.”

Virtual format has its advantages

There were also definite advantages to a virtual approach. “You save a lot of the planning time and it’s also a more efficient approach to an AGM,” comments Jonas Guldborg Hansen. Karin Sønderbæk points out the virtual format is more inclusive. “We can have participants located across the country, and they don’t have to travel all the way to southern Jutland. So, all investors have the opportunity to attend and actively participate.”

Still lacking the personal touch

While all agree that there are advantages to the digital format, they also agree on the main disadvantage. “A lot of our shareholders look forward to the social aspect of our AGM,” Stine Felten says. “You don’t have the same contact and dialogue with them when you run the meeting virtually.” That’s not to say that those who did attend the virtual AGM were dissatisfied with the format. “We received really positive feedback,” Karin Sønderbæk says. “Several of the participants sent text messages where they thanked us for the opportunity to attend. So, they were quite satisfied.”

Technology may enable a more ‘sociable’ VGM

Gustav Lantz observed similar reactions across VP’s broader customer base, where the virtual format made it easier for institutional and international investors to attend. “One of the major advantages that we’ve noticed is that there has been a massive increase in accessibility. This format also made attendance easier for those with physical limitations and disabilities to still be active shareholders.”



As regards the main disadvantage, Gustav Lantz believes the perceived lack of intimacy might be addressed by future advances in technology. “In the Danish market, there’s a tradition of branding the AGM as a meet-and-greet event, and you lose some of that with a virtual format. However, we have seen that the companies that had experience with virtual meetings from 2020, were in a better position to handle the technology in 2021, so this disadvantage could even out with time and experience.”

Is the virtual AGM the way forward?

Looking ahead to 2022, as many countries are lifting pandemic restrictions, will there still be a place for the virtual AGM in a post-pandemic world? “It’s always difficult to look into the crystal ball,” Gustav Lantz says. “However, we do see some clear trends. Technology is constantly improving, and we believe that new technologies will come that will change how we run AGMs. While we’re not at a point where the fully virtual AGM will become the market standard, we do believe that the virtual format will appeal to certain types of organisational structures, such as those who don’t have any attending shareholders. But I think the market is really heading for a hybrid solution, which offers the best of both worlds.”



Karin Sønderbæk agrees. “We are therefore seriously considering making it possible in our articles of association to hold a digital AGM, so we have that option. I think we’re more open now to a hybrid format. We simply have to realise that this is the future. And now we’ve had the opportunity to have a trial run.”

Contact

Søren Milbregt

Senior Relationship Manager

Phone: +45 4358 8824

Email:  SMilbregt@euronext.com

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Gustav Lantz

Product Owner, Investor Services

Phone: +45 2844 4216

Email:  GTLantz@euronext.com

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On 7 May 2021, Euronext, the leading pan-European market infrastructure, issued its largest ever corporate bond to support its acquisition of the Borsa Italiana Group.

Euronext chose to issue through VP Securities, providing what Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext described as “the proof of concept of the Euronext federal model.” In this article, the parties involved in this ground-breaking transaction talk about their experience working with a cross-border issuance model, and whether or not we will see a permanent shift in market practice.

Setting minds at ease

Issuing a bond of €1.8 billion in 3 tranches required the collaboration of a number of banks, lead managers and lawyers. And while there was a general willingness to try a different approach, there were quite a few concerns as well. “Eurobond market participants have a standardised way of doing things,” explains Raffaele De Vitis, Managing Director at Crédit Agricole CIB, one of the joint global coordinators for the bond offering. “They rely on proven methods of issuing, and are rather conservative when it comes to standard procedures. Consequently, making every parties comfortable with the new process is an important prerequisite. This was particularly relevant in this case because of the strategic importance of the bond.”



Even from Euronext’s perspective, the decision was not taken lightly, as Giorgio Modica, CFO of Euronext, explains. “We are not a recurring issuer. It is not business as usual for us to raise this type of capital and this transaction is by far the largest we have ever done. So, the first thing I said was, ‘Yes, but we need to make sure that it flies.’ I will need to be in a position where I could tell others why I believe.”

Ensuring European Central Bank eligibility

Giorgio Modica’s first concern was ensuring European Central Bank (ECB) eligibility. “We wanted to make sure that issuing our bond through VP Securities would not prevent the ECB from participating via its CSPP,” he says. Fortunately, this concern was quickly put to rest. “One of the first things we focused on was making sure that the bonds were eligible for the ECB,” relates Cenzi Gargaro, Partner of Counsel at White & Case LLP. “For the bond to be eligible, Euronext needed to issue it through a recognised CSD. Fortunately, VP Securities had the necessary recognition, and the right links with Clearstream and Euroclear. So, we could tick that box.” In fact, all three tranches were ECB eligible.

The question of dematerialisation

Then, from the legal perspective, there was the issue of dematerialisation. “Initially, I was a bit concerned, because as far as I knew, a dematerialised structure had never been used for a bond of this size,” Dan Lauder, Counsel at Allen & Overy, states. “English law, traditionally, has to have a physical document of title. The market is used to this structure over the years. We wouldn’t consider anything else because this is the norm. So, my first thought was that this would require a lot of thought and work. We would need to be sensitive to how investors will see it.”



Cenzi Gargaro was very familiar with dematerialisation from French law, yet there was still some hesitancy. “Bonds have been dematerialized in France since the 80s. So, it is a fairly tried and tested approach. However, one of the most dangerous things you can do as a lawyer is to make assumptions. Different jurisdictions have different rules regarding dematerialization vs global notes. This is why you don’t just say, ‘Dematerialized – no problem.’”



What helped put their minds at ease regarding this issue? Dan Lauder highlights two key factors. “We could visualise the parallel with the French structure. Once you can do that in one legal system, then it becomes a possibility in another legal system, because the clearing systems are not that different. Second, I knew that it had happened under English law, where banks had used a dematerialised structure for debt programmes for small level transactions.”



Once they had laid the legal groundwork, the team found that the documentation process was easier with the dematerialised bond. “The issuing and paying agency process and the relationships were much lighter than the actual heavy English documents, which are stuffed with references to physical bonds,” Dan Lauder says. From Giorgio Modica’s perspective, going with a dematerialised bond had an added benefit of complying with Central Securities Depositories Regulation (CSDR), which states that all issuances have to be dematerialised from 2023. “Not having a global note is future-proof,” he says. “And using Danish law means a cheaper execution for us.”

Will investors be wary of the Danish ISIN?

Another major concern involved investor reach. “The main concern around this way of issuing and settling, centred around the possibility of reaching all the international investors we wanted to reach,” Raffaele De Vitis says. “We were concerned about whether investors would raise questions or objections during the book building process about issuing under a Danish ISIN. It is not very common and no central European entity had done this before.” This concern too proved to be unfounded. During the book building process, the lead managers did not receive a single question about or objection to the Danish ISIN. And the bond’s performance met, and in many cases, exceeded expectations.

Bond performance exceeds expectations

The final order book reached an amount of c. €5 billion and was more than 2.7 times oversubscribed. The issuance attracted a wide range of international investors from France, Germany, Austria, the UK, Ireland and the Benelux, as well as a healthy representation of Nordic investors in the shorter (5-year) tranche. “We were able to price the 20-year tranche, which is the most challenging, with the tightest spread ever,” says Giorgio Modica. “We were able to get the best pricing ever. The spreads at issuance were very aligned with the ones in the secondary market, which means we were able to price at fair value, both on the 10-year and 20-year bond.”



Raffaele De Vitis was also pleased with the bond’s performance, “It’s a very solid result. When we were assessing the value of the bond, all tranches priced at or inside their fair value, which is a strong statement to the healthy demand that underpinned the bond.”

VP infrastructure ensures a smooth process

Looking back on the entire process, Raffaele De Vitis highlights VP’s infrastructure as one of the key factors to success. “Once everyone was comfortable with the process and had made the necessary changes to the documentation, the process itself was at least as easy as issuing through the normal route. The plan worked in much the same way as the classic ICSD issuance, and the bridge that VP has to the ICSDs made it easier. The fact that VP has a solid infrastructure and a tested way of working with its partners also made it easier. In fact, the [entire] process was quite pleasant.”



Dan Lauder also looks back at a successful process, where the banks, their legal counsel and the issuer all worked together to challenge the status quo. “I found it on the whole to be a very fascinating experience from a legal point of view. And, in some ways, very enjoyable. When you’re involved in something quite innovative like this, it does add something to the experience. And in the end, all of my concerns proved to be unfounded.”

Will we see a shift in market practice?

Cenzi Gargaro is not entirely convinced. “I don’t think it is going to be an automatic gamechanger. Not because issuers are unwilling to change, but simply because they won’t think about it or there will be no pressing need for it.” However, he also points out that such shifts in market practice have occurred before. “For example, France moved from issuing covered bonds under UK and US law to French law at the start of the 2000s under a new statutory regime. This move necessarily meant switching to dematerialised notes using the French clearing system. This served as a catalyst and, since that time, virtually every French corporate issues its ordinary bonds under French law in dematerialised form. So, history teaches us that change can happen; it just requires the necessary impetus. However, the question is whether a domestic development can attract a more international following, which may depend on other factors.”



One such impetus could be the widespread adoption of dematerialisation. “I’ve always liked the idea of dematerialisation,” says Dan Lauder. “And I do think that the days of the physical bond are limited. You can still use English law, in theory, without the physical bond. This approach is doable and it’s a good structure – so it does present a good alternative.”



Raffaele De Vitis believes it is a matter of helping market participants get used to a new way of doing things. “I think as investors, underwriters, issuers and lawyers become more accustomed to these tools, you’ll see more issuances in this way. Market participants are creatures of habits. You need people to be comfortable with the way things work, and after they are, then they might be willing to change. If you can really show that it is cheaper and it works, then you can make a case for it.”

The proof is in the issuance

When Giorgio Modica needed to convince himself, he started by building a document with a list of concerns, and for each point, he counterbalanced it with facts. “The facts told us that it could be done, and now we can say that it is a success, so our assessment was correct.” In an industry where market participants hesitate to be first movers, Giorgio Modica believes Euronext’s experience can help other issuers see that there are alternatives to the established market practice. “The fact that this issuance was successful is proof that it can be done. I hope that the Euronext’s example can be replicated by other institutions and that other CFOs can make the same decision that I did.”

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Supporting issuance in the regional market

Thanks to an efficient network of connected CSDs, issuers can reach the same number of investor and depth of order book via Euronext CSDs as they could with the traditional global approach.

Supporting issuance in the regional market (PDF)

Contact

Bjørn Stendorph Crepaz

Head of Issuance & Issuer Services at Euronext Securities

Phone: +45 2969 2815

Email:  BSCrepaz@euronext.com

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Henrik Høj

Senior Relationship Manager

Phone: +45 4358 8794

Email:  HHoj@euronext.com

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“It’s time for a change in issuance.” With these words, Bjørn Crepaz, Head of Issuer Products at VP Securities, captured the attention of attendees at the recent PostTrade 360 conference in Stockholm. He explained how we are entering the era of ‘glocal’ issuance, where issuers can have a single approach for global and local issuances by issuing global bonds locally.

The issuance journey begins

17 July 1963 was a landmark day for the European financial markets. Autostrade, an Italian company, needed financing outside of their local market, and they issued the very first euro bond. Since they were first movers in this field, they needed to create a new market practice. They worked with a UK-based law firm and issued on the Luxembourg stock exchange. In time, this new market practice became established.

Two issuance paths emerge

In the decades that followed, issuance basically followed one of two approaches: local or global. If an issuer wants to address the local market and investors, they issue in the local currency, under local law and through the local CSD. In the Nordics, with our history of dematerialisation, this means issuing in a dematerialised book entry form and using central bank money.



On the other hand, if that issuer wants to address an international market, they use the global note scheme. They issue under UK law, list the bond on the Luxembourg or Dublin stock exchange, and go through the ICSDs with cash settlement in commercial bank money.



Thus, it has essentially been an either-or proposition; you either issue globally or locally. However, market developments show that there is a change on the horizon.

The road turns towards harmonisation

Over the past 20 years, as we have moved towards a Capital Market Union, authorities have passed several regulations in the effort to create a level playing field, and ensure competition and harmonisation. We now have frameworks in place to facilitate cross-border activities. And the European Central Bank has become an infrastructure provider, building the target platform for payments and securities and paving the way for process unification. These developments have led to a blurring of lines between global and local. Once again, the market has changed, and now it is time for a corresponding change in behaviour.

The future is "glocal"

The move towards harmonisation has created a more international mindset amongst investors. For example, 47%* of the debt instruments issued in Denmark are owned by international investors; the same is true for 64%* of Danish-issued equity instruments. Recent issuances have also demonstrated that the traditional objections to obtaining global financing through local CSDs are no longer valid. Thanks to an efficient network of connected CSDs, issuers can reach the same number of investors as they could with the global approach. Investors are not deterred by the local set-up and the liquidity levels are the same. And what about dematerialisation? Indications are that global note and certificate-based issuance is soon to be a relic of the past. According to the new SRD regulations, all new issuances should be dematerialised from 2023.



Yes, all signs indicate that we’re entering the era of ‘glocal’ issuance, where issuers can have one approach for global and local issuances by issuing global bonds locally. In upcoming articles, we will talk more about why traditional objections to the ‘glocal’ approach are no longer valid. In the meantime, read more about how financial institutions and companies have benefitted from issuing global bonds through their local CSD in our latest cases.

See a recording of Bjørn Crepaz’s full presentation here

* Source - VP Securities Data analytics

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Contact

Bjørn Stendorph Crepaz

Head of Issuance & Issuer Services at Euronext Securities

Phone: +45 2969 2815

Email:  BSCrepaz@euronext.com

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Henrik Høj

Senior Relationship Manager

Phone: +45 4358 8794

Email:  HHoj@euronext.com

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