Daily Management Review

Germany To Move Towards Sustainable Finance By "Green Bonds" Issuance In 2020


Germany to use "green twin bonds" to "roll over maturing debt".

In the second half of 2020, Germany promises to come out with its first "green bond" while in the following half, the country will introduce "a multi-billion euro" issue. The said step, informs the finance agency of Germany, is in line with the "booming market for sustainable finance".
According to the finance agency:
“The German Federal Government intends to support the development of sustainable financial markets and in particular the green market segment by issuing Green German Government securities”.
In fact, the Managing Director of the agency, Tammo Diemer informs that the euro issue would be a "multi-billion" one somewhere "between a high-single digit to low double-digit" billion. Further details will be revealed soon, added Diemer.
The above mentioned green bond is an attempt to "roll over maturing debt" and will come in a "green twin bonds" form. As a result, the green bonds will be issued with the "same maturity and coupon as conventional securities". The twin bonds will replace the "twin bond’s auction volume" in part.
Furthermore, the agency added:
“In accordance with the established Green Bond Principles, the proceeds from Green German Government securities will completely be allocated to already existing expenditures with a positive ecological-sustainable effect”.
Earlier in December 2019, the member states of the EU sought to create "new set of rules" under which the financial products can be termed as "sustainable" and "green". Further, Reuters reported:
"Under the agreement, all financial products that claim to be green or sustainable will have to disclose exactly what proportion of their investments are environmentally friendly".
In 2020, Germany plans to exceed the amount of money borrowed in 2019. However without taking into account the "inflation-linked debt", the agency could issue “210 billion euros" of debt in 2020, while comparitively it issued only "196 billion" last year.
In fact, the agency will need to take "on more debt" even though a "budget surplus" is expected for it has to "repay old debt" as the government lacks sufficient funds to do so. Therefore, one can see the "black zero" fiscal goal included in budget policy of Chancellor Angela Merkel in line with the "auction calender".