On 23 September 2021, the UK Government’s GBP10 billion inaugural green gilt (bond) was listed on the Sustainable Bond Market of the London Stock Exchange (LSE). In addition to being the largest sovereign green bond to list on the LSE, it is also the largest inaugural sovereign issuance to date.
Inaugural UK Green Gilt
This 12-year bond, maturing on 31 July 2033, was the first issuance of the UK Government’s Green Financing Programme and is part of a commitment to issue two green gilts in 2021. The UK will issue a second green gilt this October with the aim of raising at least GBP15 billion in the 2021-22 financial year.
Proceeds from the green gilts will be allocated to projects that meet the environmental eligibility criteria set out in the Green Financing Framework. Specifically, they will be used to fund the UK Government’s spending in 6 key categories:
- renewable energy;
- clean transportation;
- energy efficiency;
- living and natural resources;
- climate change adaptation; and
- pollution prevention and control.
Her Majesty’s Treasury will publish reports on the allocation of the proceeds to each category and on the environmental impacts and social benefits of eligible green expenditures.
Retail Green Savings Bonds
The UK is also planning to issue retail Green Savings Bonds later this year through the state-owned National Savings & Investments Bank. These bonds will be the first standalone retail product to be tied to a sovereign green bond.
Green finance is expected to play a critical role in combating climate change and other environmental challenges by raising capital for the effort to build a sustainable net zero UK economy as well as funding innovation and job creation in green industries.
The UK Government’s Green Financing Framework sets the standard for corporate and sub-sovereign sterling ESG bonds.
The listing of these green gilts reaffirms London as the world’s leading hub for green finance.