The European Commission has taken considerable steps towards the issuing of €250bn of NextGenerationEU green bonds to support green projects.
The European Commission has implemented an independently assessed Green Bond framework, thereby marking a significant move towards issuing up to €250bn green bonds, or 30% of NextGenerationEU’s total issuance.
This framework offers bond investors with certainty that the funds mobilised will be assigned to green projects and that the Commission will report on its environmental impact.
With the adoption of this framework, the Commission is working towards the issuance of the first green bond in October of this year.
Commissioner in charge of Budget and Administration, Johannes Hahn, explained: “The EU’s intention to issue up to €250bn in green bonds between now and the end of 2026 will make us the largest green bond issuer in the world. This is also an expression of our commitment to sustainability and places sustainable finance at the forefront of the EU’s recovery effort.”
The Commission is to offer the EU-bills through auctions and its programme is projected to begin in the middle of September. This auctioning programme will also be utilised for bonds.
Hahn said: “The confirmation of our original funding plan for 2021 is a sign of the excellent planning and preparatory work done so far. The launch of our auctioning platform is another piece of great news, which will further raise the attractiveness of EU borrowing and have a lasting impact on the EU capital markets.”
Adoption of a Green Bond framework
This week’s NextGenerationEU green bond framework has been written to align with the green bond principles of the International Capital Market Association (ICMA), which is a market standard for green bonds. In line with typical practice, the framework has been studied by a second party opinion provider, Vigeo Eiris, part of Moody’s ESG Solutions, and confirms that the framework is in line with the ICMA’s Green Bond Principles, is consistent with the EU’s wider Environmental, Social and Governance (ESG) strategy, and will offer a healthy contribution to sustainability.
Green bonds for green aims
The announcement of the framework for green bonds highlights to the investor community how the funds raised by the NextGenerationEU green bond issuance will be utilised towards green aims.
The NextGenerationEU green bond proceeds will finance the share of climate-relevant expenditure in the RRF. Every Member State has to dedicate at least 37% of their national Recovery and Resilience Plan – the roadmap to spending the funds under the Recovery and Resilience Facility – to climate-relevant investments and reforms, with many Member States planning to do more than required.
NextGenerationEU is a provisional recovery instrument of some €800bn in current prices to assist Europe’s recovery from the coronavirus pandemic and aid the development of a more green, digital, and resilient Europe.
In September 2020, the European Commission declared its intent to increase 30% of the NextGenerationEU funds by issuing green bonds and then utilise the proceeds to finance green investments and reforms, which is a sure indication of its dedication to sustainability.