Sustainable development has been a major concern for the City of Paris for more than 10 years. When, in 2015, the City of Paris hosted the COP21, the City Hall wanted to send out a strong signal to the international community and to other local and regional authorities and show the diversity of municipal ecological actions and commitments. To emphasize this, the City of Paris erected the climate bond to finance climate and energy projects. The total size of the bond is € 300 million, with a running time until May 2031. The bond aims at private investors who consider it as a secondary advantage to invest in the sustainability of the city of Paris. They will receive a profit rate of 1.75% per year. 20% of the climate bond funds have been assigned to adaptation projects. Currently, two projects with a climate adaptation objective have been included in the bond and are being implemented: planting 20,000 trees in the city and creating 30 hectares of new parks by 2020.

Due to climate change Paris expects an increase in average daily temperatures as well as in the number of hot, very hot and extremely hot days and in the occurrence of heatwaves. The heatwave of 2003 had a devastating impact on the country, leading to almost 15,000 heat related deaths in France. Projections are that the summer of 2003 could become a normal summer in 2050 and the Paris Heatwave Plan was drawn up in response to this. Heat stress is, therefore, an important focal point for the city of Paris and measures to prevent it, like green gardens, parks and roofs and use of water for cooling, are being implemented. A trend for more frequent droughts has also been documented by Météo-France, with less summer rainfall, a decreased flow rate of the river Seine and an increased risk of agricultural drought in Île-de-France. This may impact the supply of drinking water from surface waters. The climate projections for Paris also indicate an increase of the frequency of heavy rains in the coming century.

Floods, however, are not expected to be more or less frequent due to climate change. But since the consequences of a flood by the Seine overflowing its banks or by rainfall runoff after heavy rains can be in any case significant, there is a need for flood protection.


The aim of Paris climate bond is to finance energy-climate projects, covering the 4 main goals of the Paris Climate & Energy Action Plan: reduction of GHG emissions, improvement of energy efficiency, production of renewable and/or recovered energy, and adaptation to climate change. The purpose of the Adaptation Strategy, one of the operational documents of the Paris Climate & Energy Action Plan, is to prepare the city for both future climate changes as well as for future scarcity of certain resources such as water, energy, food and biodiversity. This is translated into four main objectives:

  • protect Parisians from extreme climate events;
  • ensure the supply of water, food and energy;
  • live with climate change: more sustainable city planning;
  • foster new lifestyles and boost solidarity.

The objective of both adaptation projects under implementation within the climate bond is to reduce the urban heat island effect and increase thermal comfort within the city, which mainly relates to objectives 1 and 3 of the Adaptation Strategy.

Climate bond

A climate bond is perceived as an interesting and profitable mechanism by the city to finance public projects, because it consists of a wide variety of investor profiles (few investors are interested in bonds which are only climate-related) and requires transparency. Transparency is ensured by annual reporting, where the issuer has to justify the allocation of money to projects complying with the set criteria. The process and report is reviewed by the non-financial rating agency Vigeo, thereby providing investors reassurance on the use of their funds. In addition, the transparency is an opportunity for the city to question internal practices and improve them if needed. Also, the climate bond highlights political priorities by ranking investments.

The selection of projects to be included in the bond is managed by the Finance Management Support Service (SGF) of the city in full collaboration with the Urban Ecology Agency of Paris (AEU) and overseen by Vigeo. The list of projects to choose from is defined at the start of each election term. After each election, the new Mayor presents his/her political direction to the Council of Paris for approval. This direction is financially translated in an investment programme (defining political priorities and pushes) and corresponding projects. The selection process among these projects was based on several criteria that are a combination of criteria brought forward by SGF and criteria which are usually used for Socially Responsible Investments (SRI).

1. Municipal internal criteria

The first criterion is that a project should contribute to (one of) the four goals of the Climate and Energy Action Plan. Secondly, only projects of the investment programme that have not already been initiated are financed (‘new’ projects), as they are more attractive to investors, easier for annual reporting and show the prospective approach of the City of Paris.

2. ‘Green Bond Principles’ and operational criteria

The climate bond is a kind of green bond and is subject to the ‘Green Bond Principles’. In addition, after the pre-selection according to criteria described above, the SGF and the AEU make a further selection of projects and organize meetings with project managers, representatives of the AEU and Vigeo to refine this selection. The aims of this step in the process are:

  • Get precise information on each project (e.g. what will be done Case studies 5 exactly, refined budgetary allocation, planning of the project, monitoring methods) and check that each aspect (environmental, social, governance) of the project matches with the ‘use of proceeds’ defining eligible categories of projects (according to the ‘Green Bond Principles (GBP))’ and are compatible with rules of liquidity and project management.
  • Check that each selected project contains real and mainly measurable environmental benefits and that measuring procedures and instruments are or can be implemented by various departments and/or the AEU (accredited for Carbon Evaluation). For the adaptation projects the results are simply expressed in surface area of green spaces created (target: +30ha by 2020) and/or number of trees planted (target: +20,000 by 2020);
  • Build the framework reflecting indicators and climate benefits to which City of Paris is committed.

Note that a project under the climate bond should not necessarily be implemented within Paris, as long as City of Paris is a direct paying agent and the prime contractor.

Climate bond

The Paris climate bond was initiated by the City of Paris, created both by the Finance and Procurement Department (DFA) and the Parks and Environment Department of Paris. Due to the fact that the 2015 Paris climate bond was the first socially responsible public offering made by the City of Paris, the DFA has asked, in the context of public procurement, a non-financial rating agency (Vigeo) to assist the City at the preparatory stage of this public offering. This way, the Finance Management Support Service (SGF) could benefit from the sectoral expertise of this agency, its guidance and its methodology.

Credit Agricole CIB, HSBC and Societé Generale CIB acted as joint lead managers on the issue. These banks have been selected through competitive tendering to accompany the City of Paris in the process and to be partners. This way, the City of Paris can benefit from their expertise on investor expectations (e.g. to validate the use of proceeds, the framework and the selection of the projects of this bond), their network and marketing services (media relations, help in the organisation of the roadshow, etc.). The Paris climate bond is a real success: it was funded by a lot of investors, more than expected, and at the beginning there were applications of investors worth €475 million to fund the bond. At the moment, more than 30 investors are involved. The bond is mainly supported by domestic investors (83%), but the City of Paris managed to diversify its investor base to international institutional accounts, in particular to Benelux (9%), Switzerland (3%) and Nordics (3%). Insurers and pension funds bought the lion’s share of the trade (51%), followed by asset managers (49%).

Teams have been formed within the city administration to execute the projects under the bond, with the greenery department of the City being responsible for the realization of the adaptation measures. This department is divided in four working units for different parts of Paris, ensuring a more or less equal spreading of the trees and parks over the Paris area. Some projects will be newly designed.