Green Investors Get More Green
The inaugural Dutch Sovereign Green Bond went to a successful direct auction today with reports marking strong investor interest in the Climate Bonds Certified, AAA rated offering maturing in 2040.
For the first-time, investors with ESG considerations were given preference in the auction with a priority allocation worth up to 10% of their bids.
In a statement, the Dutch State Treasury Agency (DSTA) advised bid volume reached a whopping EUR 21.2bn in just over 90 minutes with a final allocation of just under EUR 6bn.
The Dutch Sovereign sets several precedents for the market, with both direct auction model and preference to green investors worth noting. A detailed breakdown of investor types and locations is available here.
Initially foreshadowed in a letter to the Parliament by Finance Minister Wopke Hoekstra in October 2018, today’s auction is part of a wider green bond program planned to reached EUR 10bn. At the time Hoekstra said:
“I have decided to issue a green bond because I think sustainable investments and a further boost to the green capital market in the Netherlands are important goals. The green bond will represent a solid asset for any green portfolio. This will allow investors to diversify their green portfolios and help to further develop the domestic green capital market.''
Certification and Use of Proceeds
Netherlands is the first EU nation to issue a Certified Sovereign Green Bond with Certification ranging across the major Criteria under the Climate Bonds Standard. Future sovereign green issuance will also be Certified according to the Green Bond Framework.
Sharp eyed observers will note the preponderance of water infrastructure (the latest on flood risk is here) within a comprehensive use of proceeds array we think is worth listing in full:
- Solar energy
- Onshore solar electricity generation facilities
- Marine renewable energy
- Offshore wind energy
- Water infrastructure
- Engineered water infrastructure
- Flood defence
- Water distribution
- Nature-based water infrastructure including flood defence
- Engineered water infrastructure
- Low carbon buildings
- Residential property energy efficiency upgrades
- Low carbon land transportation
- Public passenger transport infrastructure
Who’s in, who’s next?
With this bond Netherlands joins the league of green sovereign issuers that include Poland France, the Nigerian Climate Bonds Certified issuance (a first from Africa), Fiji, Belgium, Indonesia, Lithuania, Republic of Seychelles and Ireland.
Chile’s Finance Minister has foreshadowed an issuance, and there have been several reports mooting a ‘green bund’ from Germany in 2020. Egypt and Kenya are also mentioned as contenders.
That still leaves plenty of room amongst the G20, EU & MEA nations.
The Last Word- from Manuel Adamini, Head of Investor Engagement, Climate Bonds
“Today’s auction reflects a national government seeking to boost market liquidity, stimulate domestic corporate issuance and encourage institutional investors with existing green and ESG portfolios. Congratulations!"
"This is green finance leadership writ large. In the face of the coming climate crisis we need more of it.”
'Till next time,
Climate Bonds
