The sovereign green bond market is at a tipping point after Germany issued its landmark inaugural 10-year green transaction. The new issue was met with strong investor demand, which drove books to build to over $33 billion Euros, enabling Germany to achieve a 1 bp primary market greenium*, and a 1.7 bps secondary greenium later in the trading session. Nineteen countries have issued green, social or sustainability bonds to date, with at least another dozen reported to be developing frameworks, or assessing the market. The sustainability market offers an opportunity for countries to access a broader and deeper pool of capital while aligning funding with sustainability policies. Sovereign issuance will pave the way for continued growth in sustainable credit markets, providing sustainable reference assets and cash equivalents, as well as clarity on the pricing of green assets.
* The ’greenium’ or ’green bond premium’ indicates a yield and credit spread (price) for a green bond is lower (higher) than its non-green equivalent (maturity and coupon). This indicates a lower cost of debt for green issues.
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