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EU to raise €12bn in largest ever green bonds issue

·2-min read

 

Punctured euro banknotes which are used to train sniffer dogs, are presented to the media during a news conference on German custom's annual statistics, in Berlin March 21, 2014. REUTERS/Tobias Schwarz (GERMANY - Tags: POLITICS BUSINESS)
The issue now puts the EU on track to seize the crown as the largest green bond issuer in the coming years. Photo: Tobias Schwarz/Reuters

The European Union (EU) has raised €12bn (£10bn, $13.9bn) in its first ever green bond on Tuesday, in what is its first step to becoming a leader in the fast-growing green debt market.

The 15-year green bond, due 4 February 2037, received more than €135bn of demand, Reuters said, citing a lead manager.

This was the highest level of demand for a green bond on record in the government debt market, beating the £10bn ($13.6bn) the UK raised with a £100bn order book in September.

The issue now puts the EU on track to seize the crown as the largest green bond issuer in the coming years.

It has hired Bank of America Securities, Crédit Agricole, Deutsche Bank, Nomura and TD Securities to jointly lead the sale.

Read more: How Do Green Bonds Work?

"Expectations are running high that the EU will solve the inherent supply-demand imbalance in green bonds," Commerzbank's rates strategists Rainer Guntermann and Michael Leister said.

The bond will finance environmentally beneficial projects in the member states, as the EU aims to be carbon-neutral by 2050. This includes expenditures in energy efficiency, clean energy, and climate change adaptation.

The launch forms part of the funding for the Next Generation EU (NGEU) budget.

Green bonds will fund 30% of the bloc’s €800bn coronavirus recovery scheme, which provides grants and loans to member states until the end of 2026.

Read more: EU raised 7.7bn euros for recovery fund from money markets

Bram Bos, lead portfolio manager for green bonds at NN Investment Partners, told the newswire that the scale of issuance from the EU would increase the liquidity of the green bond market significantly.

"I think the possibility and barriers to start 'greenifying' your government (bond) portfolios is getting easier and easier with these kinds of issuances from the European Union, which in terms of size is massive," he said.

"For the bigger government portfolios, there is now a possibility to do more and more."

It comes as investor demand for so-called grey-bonds has already been strong, with many social-bond deals up to 10 times oversubscribed.

The Bank of America has previously said: “EU green bonds should attract even stronger demand, as most investor groups are on the lookout to grow their green assets.”

Watch: How Important Is Climate Change When It Comes To Bond-Investing?

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