EU’s Green Bond Debut Comes Out Swinging

The European Union’s green bond debut was a great hit, drawing record demand, according to Bloomberg.

The EU received orders worth 135 billion euros on Tuesday, ultimately selling $13.9 billion in securities that will mature in 2037.

It outshone the U.K.’s green bond debut from September.

The green bond was just the first batch of 250-billion-euros in green bond sales set to take place in the next couple of years. But the next batch may not go on sale until sometime next year.

Green bonds are poised to play an increasingly important role in financing assets needed for the low-carbon transition.

Green bonds have already grown in popularity, with green bond issuance hitting a record last year, with total sustainable debt hitting a record high of $732.1 billion. Not even the pandemic could stop the surge in investor appetite.

This latest issuance once again highlights the growing demand for green bonds that appears to be outstripping supply, and commanding a premium vs. conventional bonds. For this sale, prices were set eight basis points below midswaps, according to Bloomberg, adjusted from the initial guidance of five basis points below swaps.

The funds obtained through this green bond sale will be used to improve energy efficiency, to develop clean energy, and to assist with climate change adaptation.

But challenges remain.

The regulations and oversight regarding green bonds has not yet caught up with demand. The EU Green Bond Standard will set the global standard for how companies and public authorities can use the green bonds to raise funds while meeting sustainability requirements and preventing greenwashing. 

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