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Germany issues first green bonds

Tuesday, 08 September 2020

On 24 August 2020, the German government reaffirmed plans to raise €11 billion via the issuances of green bonds, to aid the financing of sustainable energy projects.

The new green bonds have attracted €33 billion worth of orders. The first issuances of the bond will have a total minimum value of €4 billion. 

The German green bonds are designed in the form of 'green twin bonds' - with the bonds issued with similar characteristics to conventional securities (maturity and coupon). This is intended to minimise the negative influence on overall liquidity of German government bonds, while at the same time diversifying the bond market for investors.

The proceeds from the green bonds are already earmarked for various projects, including the promotion of clean transport systems and support for renewables research and innovation. 

As bonds affect the funding of renewables projects in Germany, they impact EEG tariffs and potentially the GO-eligibility of renewable installations.

The German Federal Ministry of Finance highlighted four key points in their associated press release:

  1. Strengthening the nations position in the field of sustainable finance
  2. Creating transparency on green federal expenditure
  3. Identifying nearly 13 billion Euros of green spending
  4. Issuing via the twin bond model

The green bond market has surged in recent years; in 2019 green bond and green loan issuances exceeded USD 250 billion, with the European market accounting for almost half (45%)  of this amount. The final 2020 figure is expected to be slightly lower, around USD 200 billion but going forward these values are expected to be dwarfed in future years.

Sweden also saw the inaugural sale of the first Swedish sovereign green bond product which raised SEK 20 billion at the start of September 2020. Sovereign bonds will be the driver for accelerated growth of the global green bond market going forward.

Sources

ESG Clarity

German Federal Ministry of Finance - press release

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