Green finance momentum builds as nearly £100 billion raised by sovereign green bonds globally

• 16 countries have issued sovereign green bonds so far; the UK’s will be one of the largest to date
• UK’s Green Financing Framework, which will outline projects eligible for funding, to be revealed this week
• Momentum builds to support environmental projects ahead of COP26 climate summit

Following the announcement to issue its first green bond (or green gilt) in November 2020, the UK government is due to publish this week its Green Financing Framework which will outline how it plans to use the proceeds raised to finance environmentally friendly projects.

When the UK issues its inaugural green bond later this summer, it will join a growing list of ‘green bond nations’ that have raised nearly £100 billion (£95 billion) globally, according to analysis* by global law firm Linklaters.

A growing club of ‘green bond nations’

Almost 90% of the global value of green bonds has been from issuances by European nations. A majority of the 16 countries that have launched green bond issuances are on the continent, including France, Germany, Hungary and Belgium.

Those outside of Europe include Hong Kong, Indonesia, Chile, Nigeria and Fiji.

According to reports, the UK will seek to raise £15 billion from its sovereign green bond which would make it one of the largest issued to date. Italy's green bond this year was the largest single issuance at €8.5 billion (£7.3 billion). However, France's first green bond issued in 2017, which raised €7 billion (£6 billion) at its original issuance, has been tapped for a total of €28 billion (£25 billion).

Financing our net-zero future

This week, the UK will publish details about the types of projects eligible for the funding and it may draw inspiration from the most common use of proceeds around the world, including projects that support renewable energy, energy efficiency, transport, and water.

Richard O’Callaghan, capital markets partner at Linklaters, said:

“Momentum is building with COP26 only four months away. Governments across the globe are considering the various ways in which they can raise capital for green projects and the green bond continues to be an attractive option for issuers and investors alike. The UK’s inaugural green bond, and those that follow, will be pivotal in helping to reach its net-zero commitments in the years ahead.”

Amrita Ahluwalia, managing associate at Linklaters, added:

“Green bonds are being issued not just by governments but by companies and financial institutions across industries all over the world. The ESG agenda is accelerating change across capital markets as environmentally conscious investors seek to play their part in responding to climate change.”

A total of more than 680 green bond issuances were launched globally in 2020, raising a total of $227.6 billion (£163 billion), according to a previous analysis by Linklaters.

Linklaters’ green, social and sustainability bond practice and experience spans its European, North American and Asian offices and draws on the support of the firm’s market-leading corporate, environment and climate change, energy and financial regulation practices.

_{*Source: Bloomberg}