First green EU bond to spur investor demand


The bonds will be seen as one of the safest assets, a future rival for US Treasuries, and come at a time of surging fund demand for anything with an environmental label.

LONDON: Europe’s first green bonds are finally arriving, and investors are gearing up for massive interest.

The European Union (EU) sale, expected in the coming week, will be the starting salvo for as much as €250bil (US$289bil or RM1.21 trillion) of such assets that will make it the world’s biggest green borrower. In terms of potential demand, the bloc only has itself to beat: a debut social bond last year smashed all-time records with €233bil (RM1.12 trillion) of orders.

The bonds will be seen as one of the safest assets, a future rival for US Treasuries, and come at a time of surging fund demand for anything with an environmental label. The offering follows the biggest-ever month for sovereign green sales in September, as more countries enter the market for the first time.

“It will validate the start of a greener Europe,” said Ronald van Steenweghen, a portfolio manager at Degroof Petercam Asset Management. “It adds another big pocket of risk-free green paper to the market so certain types of investors are eagerly awaiting this.”

The EU is expected to make its debut via a 15-year bond, syndicated by banks, to raise as much as €10bil (RM48.31bil), according to analysts at ING Groep NV and Danske Bank A/S. Banco Santander SA is also expecting 30-year bonds, for a total of up to €15bil (RM72.46bil).

The proceeds will be funnelled to member states for green projects such as renewable energy.

The debt is part of a pandemic recovery fund agreed last year, to help meet a goal to cut emissions at least 55% by 2030 from 1990 levels. ― Bloomberg

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