The Federal Republic of Germany has published its first framework for Green German Federal Securities, in a major step towards the country’s use of sustainable finance tools such as green bonds. According to the country’s Federal Ministry of Finance, the aim of these securities is to make Germany’s “green” budget spending transparent while also strengthening the country’s position in the area of sustainable finance. The Ministry also stated that as a benchmark issuer for the euro area, the German federal government will add value for the sustainable finance market in Europe, through its establishment of a green yield curve, using an innovative “twin bond” model for upcoming green offerings.
According to the Ministry of Finance, funds raised in green securities offerings will serve multiple purposes, including the acceleration of the transition to an economy that utilizes primarily renewable energy, and towards more efficient energy use, as well as for research that works towards a more sustainable future. Green spending in line with the new framework’s criteria of more than €12.7 billion has already been identified, across five sectors, including transport; international cooperation; research, innovation and awareness raising; energy and industry, and; agriculture, forestry and natural landscapes.
The green budget items were selected utilizing established international standards, such as the UN sustainable Development Goals (SDGs), and the International Capital Market Association’s Green Bond Principles.
Rita Schwarzelühr-Sutter, Parliamentary State Secretary at the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, said:
“With its climate package, the German government has set the course towards huge investment in green and climate-friendly technologies. The finance industry can also contribute to reaching this objective. Green federal bonds create a clear incentive. In this way, we are showing how green and climate-friendly economic activities can be made transparent and predictable.”
In a move intended to add value to the sustainable finance market in Europe, the new green securities will always be issued as twin bonds, along with existing conventional securities with matching characteristics, including maturity and coupon. This is intended to enable the government to offer investors different maturities, and establish a green euro interest rate benchmark.
Dr Jörg Kukies, State Secretary at the Federal Ministry of Finance, said:
“From now on, the German government will issue green federal bonds every year. In this way, we are creating strong momentum towards a more robust sustainable finance market. Our innovative “twin bond” approach is designed to attract new investors and issuers to the green bond market and thus act as a catalyst, channelling more investments into a greener economy.”