E.U. 'green bonds' off to a record start

Published : October 14, 2021 12:39 IST

The European Commission has managed to sell a record amount of "green bonds" which will fund climate or environmental-related initiatives. Photo: picture-alliance/NurPhoto/N. Economou

There was a great deal of interest among investors as the E.U.'s first "green bonds" went on sale.

There was a scramble among investors for the European Commission's inaugural issuance of so-called "green bonds" on October 12. The first sale managed to raise €12 billion ($14 billion) from the sale of sustainable debt.

Johannes Hahn, who is the E.U. budget commissioner, said the sale was unprecedented. "This marks the largest green bond order book ever in global capital markets, and the largest green bond ever issued, not just in Europe but in the world," Hahn told reporters.

What are 'green bonds'?

"Green bonds" are sustainable investments. They are fixed-income financial instruments used in the funding of climate or environmental-related initiatives. The money that has been raised by the sale of the bonds will be distributed among member states which will then be used on cleaner energy, and other projects that are aimed at helping the bloc reach carbon neutrality by 2050.

The inaugural sale of the 15-year bonds are part of the E.U.'s goal to raise €250 billion in sustainable debt by 2026, which accounts for 30 per cent of the €800 billion the E.U. seeks to "repair the immediate economic and social damage brought about by the coronavirus pandemic."

E.U.'s high hopes for green investment

The E.U. aims to become the market leader for sustainable investment, and Brussels believes the issuance of "green bonds" is the key to unlocking that goal. "It will allow investors to diversify their portfolio of green investments with a highly rated liquid asset, thereby potentially accelerating a virtuous circle of sustainable investments," Hahn said.

E.U. member states are expected to commit to a budget of at least 37 per cent on climate investments in order to receive aid recovery. There must also be a minimum of 20 per cent expenditure allocated towards digital transition.

kb/jsi (AP, AFP)