UK's second green gilt raises another £6bn

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ZAOZHUANG, CHINA - SEPTEMBER 7, 2021 - The sun shines on solar photovoltaic panels in Zaozhuang, Shandong Province, China, On September 7, 2021. Photovoltaic power turns barren mountains into Golden Mountains. (Photo by Song Haicun / Costfoto/Sipa USA)
Green bonds have become a popular way for governments to support climate-friendly projects as the clock ticks down. Photo: Song Haicun / Costfoto/Sipa USA

The UK has raised £6bn for climate-friendly projects in its second green gilt sale, as the drive towards net zero continues ahead of COP26. 

Together with the first sale last month – which was the largest green issuance by any country – a total of £16bn has been raised from the UK’s Green Gilt for projects like zero-emissions buses, offshore wind and schemes to decarbonise homes and buildings.

The order book was 12 times oversubscribed. The combined size of the two transactions now means the UK is one of the top three biggest national issuers of green bonds in the world.

“Our Green Gilt shows that the UK continues to be world leaders in green finance, helping to fund vital projects across the country and creating jobs as we drive progress to net zero," said chancellor Rishi Sunak. 

He added: “The demand for our Green Gilt in the run up to COP26 shows that investors are keen to help in the collective fight against climate change, and the important role that private finance plays in that endeavour."

Government bonds, or gilts, are sold to institutional investors and provide a fixed rate of return until their expiry. The UK’s second Green Gilt is a 32-year bond, maturing on 31 July 2053, making it the sovereign green bond with the longest maturity in the world and reflecting the UK’s long-term commitment to reach net zero emissions by 2050.

The Treasury said that by issuing green gilts at several maturity points, the UK has set a baseline for green sterling debt, making it easier for companies to price their own green bonds. 

The UK recently followed many other European nations into the green bonds market. In September, Spain launched a €5bn ($5.86bn, £4.3bn) bond sale. Austria was also due to raise €1.61bn from bonds due 2031 and 2037, and Germany re-opened inflation-linked bonds due 2030 and 2046 to raise €700m.

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Earlier in the week the government also published its Greening Finance Roadmap that set out plans for requiring companies, pension schemes, financial services firms and their investment products to report on the impact they are having on the climate and environment — as well as the risks and opportunities facing their business. 

Some criticised the plans as not going far enough. 

Watch: Sunak Wants UK to Be a Leader in Green Finance

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