Tuesday 11 December 2018

First Irish green bond in demand despite Italy woes

The money can be invested in green energy projects such as wind farms. Stock image
The money can be invested in green energy projects such as wind farms. Stock image

David Chance

Ireland has become only the fourth country to issue a 'green' bond aimed at funding environmental investments.

The National Treasury Management Agency (NTMA) said it had tapped into a new pool of investors, pricing the bond in line with what would have been expected from a straight sovereign bond despite renewed concerns over Italy's budget situation that have roiled financial markets.

The NTMA sold €3bn of the bonds in a deal where demand hit €11.25bn, and said it would likely sell another €1bn into the issue early next year. While the proceeds of the bond sale will go into the general treasury account, they will be earmarked for green investments,

The deal was led by banks with a strong track record in green bonds, plus Danske Bank, which opened up a Nordic client base and which has a long-standing relationship with the Treasury. No Irish banks or brokers were included in the syndicate managing the sale - meaning the fees involved went to entities based outside the country - as the NTMA was trying to tap into a new client base.

NTMA debt management director Frank O'Connor said the proceeds from the sale cannot be used unless there is an eligible green project.

The bond sale came a day after Finance Minister Paschal Donohoe delivered a budget that was criticised for not including more measures to address climate change, such as raising duties on diesel and other carbon taxes. It also came just a day after the United Nations warned that without rapid action, there would be catastrophic climate damage by 2030.

Sales of green bonds have surged due to a rising pool of dedicated environmental investment funds. Poland, France and Belgium have already issued environmentally-related debt. The cash can be invested in water and waste management, transport, energy, the environment and projects to mitigate climate change.

The proceeds will help fund €23bn of planned spending on green projects through to 2027, which aims to help Ireland reach its goal of cutting carbon emissions of 80pc versus 1990 levels by 2050 across the electricity, built environment and transport.

In 2018 alone, green projects worth almost €1.8bn have been identified.

After the success of the green bond, the NTMA's Mr O'Connor said it would look to return to dollar funding markets as well as looking at shorter-term bond issues as interest rates rose.

From 2027 onwards, Ireland has to start repaying loans made by the EU under its post-crisis rescue package

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