Business Irish

Thursday 19 September 2019

Green bonds key to Irish strategy amid EU boost

Bond bonus: The NTMA raised €3bn from last year’s sale
Bond bonus: The NTMA raised €3bn from last year’s sale

David Chance

Ireland issued its first 'green bond' last year along with Belgium and Lithuania and the market is set to grow further when the Netherlands sells its first issue in May.

Governments are selling more green bonds so as to tackle climate change and to provide finance for sustainable growth and investment.

Although the market for sovereign sales remains small, it is growing rapidly, according to Canadian credit rating agency DBRS.

The National Treasury Management Agency (NTMA) raised €3bn from last year's sale and demand came in at almost four times that level as the agency tapped new sources of demand.

Investors based in France, for example, accounted for 19pc of demand compared with an average of 8pc over the past 10 NTMA sovereign debt sales. Half the investment in that bond came from investors or pools of capital that were new to NTMA issuance,

The NTMA indicated that it would sell into last year's issue and possibly seek to raise another €1bn by doing so early in 2019. "The result of our inaugural syndication of a Sovereign Green Bond last year means that this type of instrument will likely be a key element of our strategy," a spokesman said.

With the issue from the Netherlands, there will be six European states as sellers of green bonds.

Although the surge of interest in Europe last year, which saw Ireland, Belgium and Lithuania sell environmental bonds in 2018, lifted sovereign issuance volumes by 52pc to a total of $16.3bn (€14.5bn), the asset class accounts for just 1pc of European government bond issuance.

France's first sovereign green bond for €7bn in 2017 remains the largest issue and DBRS said it expects the Netherlands to come in at €4bn-€6bn.

"The rising trend in sovereign green bond issuance shows the commitment of several European governments to contribute to the implementation of the goals of the Paris Climate Agreement and the UN 2030 Agenda for Sustainable Development adopted in 2015," DBRS said.

Even though the State looks set to miss its 2020 carbon reduction target, there is €23bn of planned spending on green projects through to 2027. European financial institutions were the leading green bond issuers last year and the euro was the top currency.

There has been a push from legislation in the EU too, around a green bond classification plan, the incorporation of sustainability in requirements for banks and insurance companies, as well as for greater transparency in corporate reporting around the issue.

DBRS said it expected Europe to continue to lead the way as a result.

Irish Independent

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