The sustainable finance market passed another record today, with the European Commission launching the largest ever green bond offering in a €12 billion 15-year bond offering, eclipsing the record-setting £10 billion inaugural Green Gilt issuance by the UK last month.
The EU deal is the first green bond offering under its landmark €250 billion NextGenerationEU (NGEU) green bond program. NextGenerationEU is the EU’s €800 billion recovery program, established in response to the COVID-19 crisis, aimed at supporting the economic recovery through investments geared towards making the EU greener, more digital and more resilient. European Commission President Ursula von der Leyen announced last year that a full 30% of the NextGenerationEU budget will be raised through green bonds.
The offering indicated that demand for green bonds remains extremely strong, with the deal drawing a book of over €135 billion, more than 11x oversubscribed. According to EU budget commissioner Johannes Hahn, the bond was priced at a “greenium” of 2.5 basis points, indicating favorable pricing relative to similar issues, driven by demand for the green features of the securities.
Proceeds from the issuance will be allocated according to the recently published European Commission Green Bond Framework, with a particular focus being made on financing climate-relevant expenditures under the NGEU’s Recovery and Resilience Facility loans and grants program for member states. Specific eligible categories for investments under the framework include research and innovation activities and digital technologies supporting the green transition, energy efficiency, clean energy and network, climate change adaptation, waste and wastewater management, clean transport and infrastructure, and nature protection, rehabilitation and biodiversity.
”Today’s issuance is a strong start for the NextGenerationEU green bond programme. Set to turn the EU into the world’s biggest green bond issuer, it is a powerful signal of the EU’s commitment to sustainability. Our future is green and it is extremely important that we seize the opportunity to clearly show to investors that their funds will be used to finance a sustainable European recovery.”