Having arrived late in the green debt segment, the German government, on the other hand, is a pioneer in instituting a twinning system.
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Germany on Wednesday successfully placed its first issue of “green” debt to finance environmental projects, and could become a benchmark issuer in the field of sustainable bonds, in full boom.
The debt agency collected 6.5 billion euros for the issuance of this bond from the German federal state, according to a press release.
The loan is launched over 10 years and offers a zero nominal “coupon” (the annual interest rate), namely 0%.
In other words, those who have subscribed to the operation agree not to make any gain by lending funds to the State, and even to lose them if the return in the end is negative.
A situation which testifies to the quality of the “signature” of the German State on the financial markets, in a general context of very low interest rates with the current recession linked to the pandemic.
Berlin wants through this loan and others to follow “to make an important contribution to the future development of the sustainable finance market”, underlines Tammo Diemer, leader within the debt agency, quoted in this press release.
More than planned
The country, which initially planned to collect only 4 billion euros, has decided to break this ceiling in the face of investor demand, which has exceeded 33 billion euros.
Germany is following in the footsteps of Belgium, France, Ireland, Lithuania, the Netherlands and Poland which have all already issued sovereign green bonds, instruments designed to finance investments in favor of the energy transition. and ecological.
France had decided in 2017 to play a leading role in this area in the wake of the Paris Agreements, by raising 7 billion euros that year on the market.
Berlin has identified € 12.7 billion in spending that will be largely covered by its first annual green debt issuance program.
These expenditures are part of a vast climate package adopted at the end of 2019 and which will cost the government 54 billion euros by 2023 to accelerate the reduction of polluting emissions, by attacking transport as well as housing and ‘Agriculture.
Another issue of German “green” debt is scheduled for the fourth quarter of the year, with a maturity of 5 years, so that the Federal State should issue up to 11 billion euros on the market on this alone. compartment.
Germany is entering a market segment that is itself booming: global green bond issues increased from $ 9.1 billion in 2014, or 0.2% of total bond issues, to nearly 205 billion dollars in 2019, or 2.85% of total emissions.
In 2020, their issue volume could reach a new record at 225 billion dollars, according to a forecast by Moody’s which has been revised upwards.
Innovative twinning
Having arrived late in the green debt segment, the German government, on the other hand, is a pioneer in instituting a twinning system.
It allows investors to position themselves as they wish on a green bond or on its conventional twin sister, but not offering the same yield over time.
Also, the green debt issued today displays a price slightly higher than its twin sister issued last June and which is traded on the secondary market. This means that investors are prepared to pay a “green premium” to acquire these new securities.
This “should help alleviate investor concerns about the liquidity of green offers,” said Matthew Kuchtyak, analyst at the rating agency Moody’s.
The debt agency wants to build a green yield curve by 2021, offering a green variant for all Bund bond durations ranging from two to 30 years.
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