The German government spent 12.3 billion euros on climate protection and environmental programmes in 2019 that were later offset by 11.5 billion euros raised via green bonds, according to its newly published “Green Bond Allocation Report”. The report on green federal securities issued in 2020 provides investors with transparent information on expenditures from the government’s environmental and climate action programs, the German environment ministry (BMU) said in a press release.
In order to strengthen the idea of sustainability in the financial market, the government’s Climate Action Programme 2030 called for the issuance of green federal securities. Green bonds are allocated budget expenditures that contribute to climate and environmental protection. Like conventional federal bonds, the green federal securities are an instrument for borrowing by the federal government and have the same characteristics, and are therefore referred to as “green twins”. Investors can swap green bonds purchased under the programme with conventional German government bonds that are launched in parallel with a similar volume. Germany’s Finance Agency launched the first ten-year green bond in September with an issue volume of 6.5 billion euros and the first five-year green bond in November with an issue volume of 5 billion euros. “The federal government’s market presence with green federal securities was spot on,” said German finance ministry (BMF) state secretary Jörg Kukies. “Thanks to the innovative twin concept, we have succeeded in clearly showing the price advantage for green emissions.” According to Kukies, the government has made an “enormous contribution” to the growth of the sustainable bond market and has brought Germany far ahead as a sustainable finance location.
The BMF and BMU announced the twin bond concept last year with the intention to make the still marginalised green bond market more attractive by allowing especially larger institutional investors to switch to the conventional market if deemed necessary for liquidity purposes.
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