Netherlands’ Green Bond Debut

    Stockholm (NordSIP) – “On 21 May 2019, the State of the Netherlands will issue its inaugural Green Bond,” according to the Dutch State Treasury Agency (DSTA). The green bond will be issued via a Dutch Direct Auction (DDA), a process that prices bonds against a reference German government bond, according to DSTA.

    The bond will be benchmarked against the 4.75% German bund maturing in 2040, with initial spread guidance to be announced on Monday, May 20th. The bond will mature in 2040 and the Dutch sovereign is aiming for a volume of € 4 – 6 billion. The bond will be the first Green bond from an issuer rated a AAA/Aaa/AAA by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, respectively. Previous sovereign green bonds have been issued by Poland (Baa1/A2/A3) in December 2016, France (AA/Aa2/AAA) in January 2017, Nigeria (B/B2/B+) in December 2017, Belgium (AA/AA3/AA-) in February 2018 and Ireland (A+/A2/A+) in October 2018.

    “The Dutch State Treasury Agency aims to reach green investors in this auction,” states the DSTA press release. “Investors that meet certain criteria can request to be qualified as a green investor. Green investors will, to a limited extent, receive preferential treatment in the allocation of the bonds.”

    The intention to issue this green bond was originally announced at the end of October 2018. “Investors increasingly want to invest their capital into sustainable projects. Up till now, Dutch pension funds, insurance companies and banks looking for green investments in safe sovereign bonds had to look abroad,” explained the Dutch Finance Minister, Wopke Hoekstra (pictured), on that occasion. “I have decided to issue a green bond because I think sustainable investments and a further boost to the green capital market in the Netherlands are important goals. The green bond will represent a solid asset for any green portfolio. This will allow investors to diversify their green portfolios and help to further develop the domestic green capital market.”

    More recently, the minister reportedly told the Climate Bond Initiative he hoped that the bond would be rated dark green. “The certificate which we, as the State of the Netherlands, have obtained from the Climate Bonds Initiative (CBI) is tangible evidence of this ambition. Our aim is to give an extra boost to the Dutch green capital market through the issuance of the Green Bond.”

    The proceeds from this bond will be directed towards renewable energy, energy efficiency, clean transportation, and climate change adaptation projects. “Eligible green expenditures include expenditures from the entire budget year preceding the issuance, the budget year of issuance and future budget years,” the Dutch treasury clarifies. “DSTA intends to allocate at least 50% of the proceeds of the issued Green Bond to expenditures in the budget year of issuance or future budget years. The DSTA intends to produce both allocation and impact reporting.”

    Picture courtesy of Dutch Ministry of Finance

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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