The planned launch of Germany’s sovereign green bonds marks a significant step in the development of the global sustainable bond market, says Moody’s Investors Service.
The German government has pledged to start issuing green bonds annually that are paired with its conventional bonds, at the same maturity dates and coupons.
In a paper outlining its plans, the government said that the aim of its approach is to establish a “green yield curve” with the key maturities of the conventional curve: two, five, 10 and 30 years — while also meeting its sustainable finance needs.
“Germany’s proposed debut sovereign green bond represents another important milestone in the development of the global sustainable bond market,” said Matthew Kuchtyak, Moody’s analyst and assistant vice president, in a statement.
“The government’s intention to pair its green bonds with conventional bonds with the same maturity and coupon is an innovative approach that should help alleviate investor concerns around the liquidity of the green offerings,” Kuchtyak added.
After taking a hit this year due to the Covid-19 outbreak, green bond issuance is expected to “rebound gradually in the second half”, Moody’s said, noting that issuance rose 26% in the second quarter to US$47.8 billion.
Moody’s is forecasting issuance for the year to reach somewhere between US$175 billion and US$225 billion.
Looking ahead further, Moody’s said the pandemic will increase both investor and company focus on ESG risks, as a way to support growth in sustainable bonds.