EU’s first Green Bond issuance

The European Union (EU) attracted huge demand from investors for its first green bond on October 12, 2021.

Highlights

• Huge demand was there as Brussels kicked off its efforts for becoming world’s biggest issuer of sustainable debt.
• Euro 12bn sale of 15-year debt attracted about Euro 135bn of orders.
• This was the largest green bond deal, eclipsing the UK’s £10bn debut in the month of September.
• The sale happened as Europe continues to battle an energy crunch, which also illustrate that there is a growing need for diverse and renewable sources of power.

First Issue by EU

This issue of recent bond is the first of an expected €250bn of “European Commission green bonds”. It makes about a third of the EU’s €800bn Covid-19 recovery fund.

How EU will use the amount?

Proceeds through the green bond will be given to the member states who can spend it on areas such as transport, energy efficiency and nature protection. This bond will help in strengthening the role of EU and euro in sustainable finance market.

Partnering Member States

Brussels has joined several member states such as France, Italy, Germany, Spain and Poland in issuing green debt. Demand for green securities is intense because of focus of fund management industry on environmental, social and governance factors.

Greenium

The EU has joined other recent issuers with respect to attracting a price premium called as greenium. Yield of 0.45 per cent represented a borrowing cost of around 0.025 of percentage point.

Green Bond

Green bond is a debt instrument through which capital is raised to fund ‘green projects’. Green projects usually include projects related to renewable energy, sustainable water management and clean transportation etc.

Month: Current Affairs - October, 2021