The UK government wants to sell green bonds
The U.K. is one of the countries that managed to reduce the damage from the pandemic fairly quickly and support the economy. However, the measures introduced by Parliament were not enough, and the authorities continue to look for options to strengthen the market. One of them was the creation of a long-term investment fund, whose funds will go to support the economy. In addition, the government plans to issue the first green bonds.
The capital of the investment fund will be formed from the pension funds. For this purpose, a number of measures will be created to encourage them to invest their money. According to statistics, the accounts of pension funds contain about 500 billion pounds sterling.
The Ministry of Finance intends to issue green government bonds this year. The placement of bonds of this type is a first for the country. Over time, the government wants to use the yield from the securities to develop projects related to environmental protection and reducing the negative impact of carbon emissions. In addition, green bonds will help increase the number of alternative energy facilities and create new jobs.
Such securities were first issued by the European Investment Bank in 2007. They were called Climate Awareness Bonds and were intended to improve energy efficiency and development of renewable energy projects. Over time, green bonds have become a sought-after tool on the market, and in recent years they have been issued for a total of about $500 billion.These bonds are sold in more than 50 countries of the world, and the issuers are both large international organizations and small companies.
Since this type of securities is a relatively new instrument for the market, the criteria for what exactly can be classified in this group are not yet fully defined. Most often, issuers are guided by the rules of green bonds, which were introduced in 2014 by the International Capital Market Association. Moreover, these principles are voluntary and explain how to evaluate financed projects and manage funds from investments.
Various companies are evaluating such bonds, including Moody’s Investors Service, Bloomberg LP, Cicero and others.
The European Union is now actively working to create a standard for green bonds, which will be used around the world. However, like the existing rules, the new guidelines are also planned to be voluntary. At the legislative level, a number of requirements in this area have been adopted only in France. First and foremost, they concern the accounting of funds that are allocated for environmental projects. In many countries there are tax incentives for this kind of bonds, and governments are fully encouraging the development of the green securities market.