EU to start auctioning green bonds next month


The European Commission has announced the first auction of a planned €250 billion green bond program will be held next month.

The EU executive said on Tuesday it had drawn up a green bond framework verified by a third-party to reassure investors their cash would go to climate change-related projects, and added the first of a planned €80 billion worth of green bonds would be offered to investors in October.

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The bloc has budgeted for an €800 billion ‘NextGenerationEU' Covid recovery package to the end of 2026, including a €724 billion ‘recovery and resilience facility‘ (RRF) which will disburse grants and loans to member states, and of which at least 37% must be devoted to green spending.

The EU has committed to having 30% of the bonds it issues to finance its recovery plans fall under the ‘green' definition and, having raised €35 billion in June by launching four oversubscribed instruments, it has signaled the sustainability-linked packages will begin to be auctioned next month.

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With the bloc intending to raise around €150 billion per year from next year onwards, this year's finance will be generated by €80 billion worth of bonds, topped up by “tens of billions of euros of short-term EU-bills,” with auctions for the latter to begin on Wednesday, and then to ‘typically' be held on the first and third Wednesdays of the month. The plan is to auction bonds monthly “in general,” the commission said on Tuesday, and to offer syndications with the same regularity. Syndications will offer groups of lenders unable to sign up individually to provide the large sums of credit required, to do so collectively.

The commission has already approved the RRF plans submitted by numerous member states and has distributed several ‘pre-financing' sums to provide nations with 13% of their total grant and loan packages.

The latest member state to benefit was Cyprus, with the commission today announcing the release of its 13% – €157 million – of a total 2021-27 package of €1 billion in EU grants plus €200 million worth of loans. Cyprus has earmarked €89 million of its full RRF package for renewable energy and energy efficiency projects.

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