Calls on UK to issue first green sovereign bond with 10 to 12yr maturity date

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A majority of investors and banks are calling on the UK government to issue its maiden sovereign green bond with a 10–12-year maturity next month with 2033 as the preferred maturity year, according to the Debt Management Office.

A planned second sale in October was recommended to have a maturity of around 30 years with 2053 the favoured option, the DMO said.

Britain’s government plans to issue at least £15 bn pounds of new debt this financial year. It is part of a trio of measures introduced last year, in an attempt to make Britain a world leader in the use of green finance.

The UK has announced ambitious commitments to reduce all carbon emissions by 68% by 2030 and achieve a net-zero carbon economy by 2050.

A green gilt would help finance projects that tackle climate change, finance much-needed infrastructure investment and create green jobs nationally.

There has been a spate of green issuance in Europe with countries such as Italy, Netherlands, Sweden and Germany coming to the market.

Global green bond issuance in the first half of this year has passed 2020’s full-year volume of $247.5bn to set a new annual record, according to Refinitiv data, as China and the US compete for the title of most active market.

Volume of $255bn for 2021 was more than three times higher than $83.2bn at the same point last year when social bond issuance was the standout as the world responded to the Covid-19 pandemic.

Climate Bonds Initiative forecasts that 2021 will produce a tenth consecutive green finance record with a figure ranging from a low of $400bn and a high of $450bn in global green bonds, loans and sukuk.

The DMO also said it planned to hold 20 gilt auctions in the October-to-December period, three of them of index-linked bonds.

Investors and brokers were split over the merits of selling an ultra-long index-linked bond with a maturity of around 50 years, it said.

The DMO is due to announce details of its bond sales between October and December at 0630 GMT on 31 August.

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