How can these be structured? M&A-aligned green financing frameworks allow firms to meet their environmental “pledge”, inherent in a green bond, through acquiring intrinsically green companies, alongside the more traditional capital and operating expenditure  options. It ties neatly into the ideal of the green debt market being open for financing any environmentally friendly expenditure, which has arguably been the direction of travel of International Capital Market Association (ICMA) and EU guidelines. A good example of this is ENGIE’s green bond framework.

What’s the corporate appeal? As with any strategic objective, this offers the company more flexibility in execution – to either develop their own more environmentally impactful product mix or to buy that of (smaller) competitors. The latter option can lead to a quicker and hence more ambitious transition.

Including Green M&A can also make it easier for a company in capex-light business areas to get to a critical mass of eligible green projects and, through that, become a more frequent issuer in this asset class - particularly as both the target’s asset value and acquisition goodwill can be included.

Of course, there’s no such thing as a free green lunch... providing transparency and consistent reporting on environmental in-house projects and assets is more straightforward than doing the same on a newly acquired company. Therefore seeking to issue a Green M&A bond requires careful pre-acquisition due diligence as well as a rapid post-deal level setting of environmental policies and reporting between the target and the acquirer.

Yet this should not be a hurdle for most companies. As the M&A landscape normalises post-coronavirus, expect more inorganic produce amongst green financing frameworks.