The UK government announced this week the completion of its first “Green Gilt” offering, raising £10 billion for projects aimed at helping the country meet its net zero and other environmental goals, in the largest ever inaugural sovereign green bond issuance.
The deal was met with very strong demand, with investor orders exceeding £100 billion. According to HM Treasury, the UK government’s economic and finance ministry, the order book was largest ever for a sovereign green transaction.
The Chancellor of the Exchequer, Rishi Sunak said:
“Green finance is vital in helping us to tackle the environmental challenges we face, and the launch of our first green bond is a signal that the UK continues to be a world leader in this area.”
Sunak initially announced plans for a green bond issue last year, followed by the release of the government’s2021-2022 fiscal budget this year, including at least £15 billion of green gilt financing. HM Treasury stated that the inaugural offering will be followed by another later this year, to reach at least the targeted £15 billion, along with the world’s first standalone retail product tied to a sovereign green bond.
In its recently released Green Financing Framework, HM Treasury outlined how the proceeds from the Green Gilt and retail Green Savings Bonds will finance expenditures to help tackle climate change, biodiversity loss, and other environmental challenges, while creating green jobs across the UK. Proceeds from the green finance instruments will finance investments and expenditures in the key areas of Clean Transportation, Renewable Energy, Energy Efficiency, Pollution Prevention and Control, Living and Natural Resources, and Climate Change Adaptation.
With its inaugural green finance issuance, the UK takes is place in the rapidly growing sustainable sovereign debt market. Earlier this month, Spain issued its first €5 billion green bond, while Canada recently announced plans for a $5 billion green bond issue, and other countries including Italy and Germany also recently issued their first green bonds. The European Union in particular is set to become a central region for sovereign sustainable finance, following the release this month of its green bond framework, as it sets to kick off a massive €250 billion green bond program with an initial issuance anticipated in October.
Lead banks on the deal included Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC and JP Morgan.