The Federal Republic of Germany has issued its first green bond with a €6.5 billion offering. The highly anticipated issue met very strong demand, and was more than 5x oversubscribed with an order book exceeding €33 billion.
Tammo Diemer, member of the Finance Agency’s executive board, said:
“The order book reached more than 33 billion euro from investors worldwide. As hoped, we were able to allocate the Green Bund in a balanced and diversified manner.”
The green bond offering comes a week after Germany published its first framework for Green German Federal Securities. 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.
Germany’s green bond offerings employ an innovative “twin bond” model, intended to add value to the sustainable finance market in Europe, by issuing the securities alongside existing conventional securities with matching characteristics, including maturity and coupon. By doing so, it will establish a ‘green yield curve,’ highlighting the value of the sustainable characteristics of the bond.
Germany’s offering was a 10-year, 0% coupon Green Federal bond, with the same characteristics as its conventional twin bond issued on June 17. The ministry reported that at 104.717%, the price of the new Green Bund was slightly above the secondary market price of the conventional twin.
Diemer said, “This transparency is made possible by our innovative twin bond concept.”
According to the recently published framework, the proceeds from Germany’s green bond 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.
The ministry’s announcement indicated that Germany intends to become a permanent issuer on the green bond market, and anticipates another green securities offering in the fourth quarter of this year, probably a Green Federal note with a 5-year maturity.