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What is a green bond and how is the Dutch sovereign green bond different from the others?

What is a green bond and how is the Dutch sovereign green bond different from the others?
Asked by
Grace A categorie-icon time-icon4 weeks ago
1 Answer Answer Question

Ignatius Bose
Answered time-icon4 weeks ago

Green bonds are similar to any other regular bonds issued by Governments and corporates correspondingly with the core difference being the purpose of issuance. While regular bonds are issued to raise capital, the idea behind green bonds is to fund projects that contribute to positive environmental change.
These bonds were first issued in 2007 by the European Investment Bank and the World Bank, and the buoyant response from investors led to more such bonds being allotted by Governments and corporations alike, and in 2018, the size of the green bond market touched a record $170 billion.
The Dutch Government’s AAA-rated 20-year euro-denominated sovereign bond is the first of its kind since it is distinct from the other offerings-
1) The bonds give preference to environmentally friendly funds in the form of additional allocation.
2) They are offered at an auction with no role for primary dealers, unlike other sovereign green bonds that are generally issued through a syndication process.
The spread of the Dutch sovereign offering is set at 18 basis points over a benchmark German bond, and although the Government is looking to raise about €6 billion from the issue, bankers predict the bond to be oversubscribed.

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