UK opens order books for first green government bond

Britain aims to issue at least $20bln of green government bonds this year

  
The London Eye, the Big Ben clock tower and the City of London financial district are seen from the Broadway development site in central London, Britain, August 23, 2017.

The London Eye, the Big Ben clock tower and the City of London financial district are seen from the Broadway development site in central London, Britain, August 23, 2017.

REUTERS/Hannah McKay/File Photo

LONDON - Britain opened order books on Tuesday for the sale of its first green government bond, which is expected to raise several billion pounds of proceeds that will be ring-fenced for environmental projects.

The bond will mature in July 2033 and pays a coupon of 0.875%. Price guidance for the gilt has been set at 7.5-8.5 basis points above the yield for the June 2032 conventional gilt, one of the bookrunners on the transaction said.

Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC and JP Morgan are acting as joint leads on the transaction.

Britain aims to issue at least 15 billion pounds ($20 billion) of green government bonds this year, though this is only a small fraction of the 253 billion pounds of gilt issuance planned for the current financial year.

Finance minister Rishi Sunak announced the decision to start a green gilt issuance programme in November last year, not long after Germany issued its first green gilt.

Britain's debt agency had been wary in the past about issuing a new type of debt because of concerns that the low volume compared with conventional gilts would lead to investors demanding an interest-rate premium to hold it.

But other countries have been able to sell green bonds at a very similar or even cheaper cost than conventional debt, capitalising on demand from some investment funds for environmentally-friendly assets.

As well as the new July 2033 bond, Britain also plans to issue another green gilt with a 20- to 30-year maturity next month.

The Bank of England has also said it will buy the bonds as part of its asset purchase programme.

Britain's government has been keen to promote environmental measures in the run-up to hosting the United Nations' COP26 climate summit in Glasgow in November. ($1 = 0.7330 pounds)

(Reporting by David Milliken, editing by Andy Bruce) ((david.milliken@reuters.com; +44 20 7542 5109; Reuters Messaging: david.milliken.thomsonreuters.com@reuters.net))


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