Green Gilt raises £10 billion for green projects

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£10 billion was raised from the sale of the the UK’s first Gilt this morning. According to the government, this will be followed by a second issuance later in the year.

In November 2020, the Chancellor of the Exchequer announced plans for the UK to issue its inaugural Sovereign Green Bond (or ‘Green Gilt’) in 2021. Government bonds, or gilts, are sold to institutional investors and provide a fixed rate of return until their expiry.

The UK’s inaugural Green Gilt is a 12-year bond, maturing on 31st July 2033.

Green Financing products like these are a form of Government borrowing to finance projects with clearly defined environmental benefits.

The Chancellor of the Exchequer, Rishi Sunak commented on the announcement: “Green finance is vital in helping us to tackle the environmental challenges we face, and the launch of our first green bond is a signal that the UK continues to be a world leader in this area.

“This funding will be used to finance vital green government projects across the country, including things like clean transportation, renewable energy and preserving our natural environment.

“In helping us to build back better and greener, it will also help to create jobs as we transition to net zero.”

As set out in the government’s Green Financing Framework, published in the summer, the money raised by the Green Gilt will be used to finance expenditures in clean transportation, energy efficiency, renewable energy, pollution prevention and control, living and natural resources, and climate change adaption.

In this financial year, Green Gilts are set to raise a minimum of £15 billion for green government projects like zero-emissions buses, offshore wind and schemes to decarbonise homes and buildings.

The 2021 Budget confirmed that the UK will conduct at least two Green Gilt issuances in 2021.

According to the government, Green Gilt will be followed later in the year by the world’s first standalone retail Green Savings Bonds, issued by NS&I.

More information about the Green Financing Framework is available on the UK Government website.