UK’s second green gilt raises a further £6bn for low-carbon projects

The second green gilt is a 32-year bond

The UK launched its first green gilt in September. Reuters first reported £90bn in orders – a figure which surpasses all previous records for debt sales by the UK Government or any of the devolved administrations.

The UK Government has since confirmed that £10bn has been raised through the sale. 

The gilt package was first confirmed by Chancellor Rishi Sunak last November and subsequently confirmed at the 2021 Budget speech in March. Then, in July, the price of the UK’s green gilts was set at £15bn by the Treasury.

Throughout this process, Sunak has promised that the UK’s first green gilts will not be its last.

On Thursday (21 October) the second green gilt sale was confirmed. It has raised a further £6bn to fund green projects and, together with last month’s sale, a total of £16bn has been raised for projects such as zero-emissions buses, offshore wind and schemes to decarbonise homes and buildings.

The Government has also confirmed that the order book for this gilt was 12 times oversubscribed.

The Chancellor of the Exchequer, Rishi Sunak said: “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.

“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.”

The 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. In comparison, the first green gilt will mature in June 2032 and July 2033. At least a further £5bn has been promised by the end of 2021.

Busy times

The Treasury has confirmed that a standalone retail Green Savings Bonds, issued by NS&I, will soon follow.

It comes following a busy week for the Treasury. First, it released details on a package of new sustainability-related disclosure requirements, designed to tackle greenwashing in the financial space and encourage corporates to front-load their transitions to net-zero.

The package, entitled ‘Greening Finance: A Roadmap to Sustainable Investing’, aims to make the UK a world leader in sustainability-related reporting standards.

The Treasury has also published an updated spending review on the net-zero strategy. The Net-Zero Strategy claims that decarbonisation could leverage up to £90bn of private investment by 2030. However, the Treasury has warned that the cost of net-zero remains largely undefined but that the cost of inaction “significantly outweighs the costs of action”.

The UK is one of 16 countries to have issued sovereign green bonds and, according to LinkLaters, global issuance of sovereign green bonds to date has raised some £95bn.

Other issuers include France, which, according to the Climate Bonds Initiative, raised more than £9.4bn through issuance in the first half of 2021, and Germany, which raised more than £5.3bn in the same six-month period. France is aiming to raise £25bn in green gilt issuance in total, having launched its first package in 2017.

Matt Mace