ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

European Commission readies €250bn green bond roll out

But a bun fight is already brewing about who ‘deserves’ the proceeds


Pete Carvill

The European Commission has moved towards its next issuance of €250bn worth of green bonds through the adoption of its new Green Bond framework.

The framework, said the Commission, ‘[…] provides investors in these bonds with confidence that the funds mobilised will be allocated to green projects and that the Commission will report on its environmental impact’.

Issuance of the green bonds will come through NextGenerationEU, a package put together by the Commission to help the continent recover from the pandemic. The aim of the programme is to ‘build a greener, more digital, and more resilient Europe’, according to the official literature. Issuance is set to take place over five years, beginning in the next few months.

In a statement, the Commission said: “To finance NextGenerationEU, the European Commission – on behalf of the EU – will raise from the capital markets up to around €800bn between now and end-2026. €421.5bn available mainly for grants (under RRF and other EU budget programmes); €385.2bn for loans. This will translate into borrowing volumes of an average of roughly €150bn per year.”

It was last year, in September 2020, that the Commission said it would fund 30% of the NextGenerationEU programme through the issuance of green bonds, which would be used to finance green investments.

Worthy winners?

The move has still been met with some scepticism. Quoted in EU Observer, French NGO Reclaim Finance said that only companies that have committed to decarbonisation should benefit from the green bonds.

As EU Observer wrote, “However, by current market standards, large energy suppliers, or even gas and oil companies, might use green bond financing for wind or solar projects, while at the same time maintaining or even increasing their investments in fossil infrastructure. In this way, green funding might exacerbate reliance on fossil fuels.”

Paul Schreiber, a researcher and economist at Reclaim Finance quoted in the piece, said: “The EU framework for green bonds as it is set up right now doesn’t look at the company level, but country level. And it delegates the compliance work to a private party.”

Green is this season’s colour, it seems. Recently, German reinsurer Munich Re released its second €1bn green bond, following its first in 2020. GAM Investments is also looking to get in the game with its new sustainable climate bond strategy, announced this week, which sees it hook up with the Climate Bond Initiative.

Rounding out this triumvirate is the UK government’s ‘green gilt’, which is expected to make its debut this month.