UK Publishes Green Financing Framework as it Prepares for Inaugural Green Bond Issue
HM Treasury, the UK government’s economic and finance ministry, and the UK Debt Management Office (DMO) announced the release of the UK Government Green Financing Framework, marking the next step towards the government’s inaugural Green Gilt issue.
The UK government included plans to issue at least £15 billion of green gilt in its current 2021-2022 fiscal year budget, released earlier this year. The announcement followed a commitment made last year by Chancellor of the Exchequer Rishi Sunak that the UK will issue its first green bond, with proceeds used to help enable the UK meet its 2050 net zero target and other environmental objectives.
The government also announced that its savings organization National Savings and Investment (NS&I) will issue a Green Savings Bond this year, marking first standalone retail product tied to a sovereign green bond.
The Framework details 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. According to the Framework, 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.
The Green Financing Framework has received a Second Party Opinion from V.E, part of Moody’s ESG Solutions, assessing the framework’s alignment with the core components of the International Capital Market Association’s Green Bond Principles 2021, including its level of contribution to sustainability, alignment with international standards, coherence with government’s strategic sustainability priorities, and the government’s ESG performance.
Patrick Mispagel, Managing Director – Sustainable Finance at Moody’s ESG Solutions, said:
“Proceeds from the green financing instruments issued under the UK’s framework will provide a ‘robust’ contribution to sustainability, the second-highest level on our four-point scale. The UK is vulnerable to the impact of climate change, particularly flooding and coastal change that may cause risks to communities, businesses and infrastructure. We expect the UK’s financing of climate adaptation projects to increase its resilience and capacity to adapt to climate change, with a positive impact on all relevant stakeholders.”
Click here to view the UK Government Green Financing Framework.