Whatever the assessment of the Europeans' struggle against climate change, whether as ambitious or not, the countries are now moving at quite a pace when it comes to indebtedness for the benefit of the environment. After Poland issued the first green government bond in 2016, afterwards France became the largest issuer of this type and Germany launched its first green ten-year-old in September 2020, things are now happening in rapid succession. The United Kingdom has just celebrated its premiere with an eco-bond over twelve years, almost on par with the Spanish Kingdom and its green bond with a term of just over 20 years. But as strong as the recent initial issues were - the real sensation followed today, Tuesday:The European Union made its debut, much anticipated by many investors.

Thomas Klemm

Editor in the "Money & More" section of the Frankfurter Allgemeine Sonntagszeitung.

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The fact that the EU is jointly borrowing may be astonishing in view of years of resistance, not least from Germany, but it is not entirely new.

The international community started issuing sustainable bonds back in October of last year.

These were initially social bonds.

The money raised in this way has since been passed on to the EU countries to support their labor market, which has been battered by the Corona crisis.

With the green bonds that are now being added, however, the EU intends to finance a third of its “Next Generation EU” reconstruction fund.

Specifically, this means: by 2026, it wants to issue green bonds worth around 250 billion euros and do the environment good.

The first green EU bond is sensational in several ways. Firstly, there is a bond issued by a supranational association that is competing with the green bonds of individual member states. Second, the EU will be the foreseeable largest issuer of green bonds. As a result, it will give the currently one trillion euros, and still growing, market even greater importance. And thirdly, the EU is issuing an eco-bond, although it has not yet made a final decision on what should be considered sustainable. Sounds strange and upside down, doesn't it?

When issuing the EU, it is based on its specially developed green bond standards, which also comply with the (voluntary) guidelines of the International Capital Markets Association. But the standards are only available as a draft, as is the so-called taxonomy with which the EU wants to decide what is to be regarded as sustainable in the future. The EU countries quickly agreed that protecting the climate, water bodies, ecosystems and biodiversity are just as much a part of this as preventing waste. The decision to accept gas as a transition technology became more difficult, but not nuclear energy. That means: Not everything is green as the most convinced eco-investors would like. "The green bonds are unlikely to meet all the criteria of the future EU Green Bond Standard",This is the assessment of the bond expert Christian Kopf, who is a member of the management committee of the Union Investment fund company.

Purpose of use uncertain at first

For investors, there is still another uncertainty when buying the green EU bond.

You can be pretty sure that your money will be spent primarily on clean energy, energy efficiency and clean transportation.

However, investors will only find out later which specific projects the member states are actually launching with their proceeds.

"Afterwards, a report on the impact of the investment will be prepared," says Marcio da Costa, portfolio manager at asset manager Bantleon: "The regulation usually only reacts with a delay."