UK’s first green gilt raises £10bn after record investor interest
Inaugural UK sovereign green bond attracts huge investor demand, with second retail savings bond set to launch in October
The UK’s first ever ‘Green Gilt’ is on track to beat all previous records for British government debt sales thanks to huge demand from investors, helping to raise £10bn towards net zero projects such as electric vehicle, renewable energy, and green building infrastructure since its launch this morning.
Investors are estimated to have this morning placed more than £90bn in orders for the 0.875 per cent green gilt, the sale of which saw Barclays, BNP Paribas, Citi utsche Bank, HSBC, and JPMorgan act as bookrunners, according to Reuters.
The Treasury said the green gilt was both the largest inaugural green issuance by any sovereign, while also attracting the largest ever order book for a sovereign green transaction.
Government bonds, or gilts, are sold to institutional investors and provide a fixed rate of return until their expiry. The UK’s inaugural green gilt is a 12-year bond, which is set to mature at the end of July 2033.
The Treasury said proceeds from the green gilt would be used to finance expenditures on clean transportation, energy efficiency, renewable energy, pollution prevention and control, living and natural resources, and climate change adaptation projects, as set out in the government’s Green Financing Framework.
Chancellor of the Exchequer Rishi Sunak said the fast-expanding green finance sector was “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”.
“This funding will be used to finance vital green government projects across the country, including things like clean transportation, renewable energy and preserving our natural environment,” he explained. “In helping us to build back better and greener, it will also help to create jobs as we transition to net zero.”
The move marks the first of two green gilt issuances expected from the Treasury this year, with the second set to launch next month ahead of the COP26 Climate Summit with a view to raising a minimum of £15bn for green projects, it said.
HMT said the second green gilt, which is to be issued by National Savings & Investments, would be the world’s first standalone retail green savings bond, offering the British public the opportunity to invest in the green economy.
The government said it had also committed to reporting on both the environmental impact and social co-benefits of green expenditures financed by green gilts, through metrics covering job creation, access to affordable infrastructure, and socioeconomic advancement.
Earlier this year the Treasury said the debut green bond was a “core part” of the Chancellor’s vision to establish the UK as a leader in sustainable finance.
It comes ahead of a busy autumn for the Treasury’s green agenda, with the department under pressure to publish its long-awaited Net Zero Review ahead of the crucial COP26 Climate Summit in Glasgow in six weeks’ time.
The government is also expected to shortly publish a host of major green policy plans in the coming weeks – including the Heat and Buildings Strategy and an overarching Net Zero Strategy – and businesses have been increasingly vocal in calling for ambitious policy commitments to be matched with requisite funding from the Treasury.
In launching its inaugural green gilt today, the UK joins Germany, France, Italy, Ireland, Sweden, Poland, Lithuania, and Hungary as European nations that have issued large scale sovereign green bonds, as governments seek to take advantage of the booming green bonds market.
Anne Marie Verstraeten, BNP Paribas UK country head, welcomed the UK’s green gilt launch. “It is essential for finance to mobilise capital in the transition towards a net zero economy in the UK, and this inaugural green gilt demonstrates the momentum in finance to address critical climate and biodiversity challenges on the road to COP26,” she said.
