Next Generation EU green bonds will finance sustainable investments aligned with the objectives of the Recovery and Resilience Mechanism
The European Commission has adopted a green bond framework subject to independent evaluation, which will result in the issuance of a series of green bonds worth up to 250.000 M€, 30% of Next Generation EU’s total issuance.
The first issue of green bonds is scheduled for the month of October, and UE intention is to issue those 250,000 million euros, progressively, until 2026, becoming the largest issuer of green bonds in the world.
In addition, the Commission has revised its financing plan for recovery in 2021 and confirmed its intention to issue long-term bonds totaling almost 80.000 million euros this year, to which will be added tens of billions of euros of short-term EU debt securities.
The Commission will offer these European Union debt securities only through an auction programme scheduled to start on 15 September.
There will be two monthly auctions for short-term debt securities, the first and third Wednesdays of the month. The auction program will also be used for bonds, in addition to syndications. According to the timetable published yesterday, the Commission will generally hold an auction and a monthly syndication for its bonds.
Green bonds as a vanguard exercise
The Next Generation EU green bond framework has been developed by the International Capital Market Association (ICMA) green bond principles, which sets the Guidelines for the market for these bonds.
The green bond framework has been adapted to the European standard. The proposal was already presented by the Commission in July 2021 and submitted to its corresponding decision process in the European Parliament and the Council. After this, an implementation period will take place before to the entry into force.
Guarantee of ecological purposes
The framework that has been approved and adopted demonstrates to the investor community how the funds raised by the NextGenerationEU green bond issue will be used for green purposes.
Revenue from NextGenerationEU green bonds will fund the climate-related portion of expenditures in the MRR.
Each Member State will need to devote at least 37% of its National Recovery and Resilience Plan to climate-related investments and reforms, and many Member States plans to do more than necessary.
In compliance with the rules of the MRR, Member States shall notify the Commission of the ecological expenditure they carry out.
This information will serve the commission to show investors how green bonds are being used, in line with the nine categories established under such bonds.
Following the publication of the framework, the launch of the NextGenerationEU green bonds is planned, the first issue is scheduled for October 2021.
The European Commission has also launched a document with all the details of green bonds.