Germany introduces new concept of ‘Green Twin Bonds’

Written by Adam Cadle

03/09/2020

Germany is introducing a new concept of ‘Green Twin Bonds’, where a green bond is issues with the same maturity and coupon as a conventional bond.

The green bond is a separate bond with a smaller issue volume than the conventional bond, and the aim of this structure is to ensure that the issuance of green bonds does not negatively influence the overall liquidity in German government bonds.

Germany is the third AAA-rated country to start issuing green government bonds, after the Netherlands in 2019 and more recently Sweden on 1 September 2020.

NN Investment Partners lead portfolio manager green bonds Bram Bos said: “We think this is an important milestone for the green bond market as the German government bond market is one of the most important reference points in the capital markets.

“Clearly the growth of the green bond market keeps on accelerating and the strong increase in government issuance gives more investors the chance to greenify their full fixed income portfolios.”

Germany is committed to being almost climate neutral by 2050. In November 2016, the German federal government adopted the Climate Action Plan 2050, making the country one of the first to submit its long-term greenhouse gas emission strategy to the UN, as required under the Paris Agreement.

On 2 September, Germany issued €6.5bn worth of bonds with a maturity of 10 years. In contrast to some other countries, like the Netherlands, Belgium and France, the German government plans to build a full yield curve. This gives investors more options to greenify their fixed income portfolio at several different points along the yield curve. After this inaugural green bond, Germany is expected to be a regular issuer, issuing around €10bn per year in green bonds.

Related Articles