Strong market appetite met by European Investment Bank's initial offering under revised green bond guidelines
The European Investment Bank (EIB) has made a significant stride in funding sustainable projects with the issuance of the €3bn Climate Awareness Bond (CAB). This bond, maturing in May 2037 and offering a 3.125% annual coupon, is the largest ever bond aligned with the European Green Bond Standard (EuGBS) [1].
The CAB, which forms part of the first bond issued by a supranational under the EU's new green bond rules, will primarily fund projects aimed at climate change mitigation. These include investments in renewables and energy efficiency, as well as water-related projects with sustainability and climate resilience impacts [2].
The EIB's climate strategy, under which this bond is issued, aims to exceed 50% of its financing for green projects annually by 2025, supporting the European Green Deal and a carbon-neutral Europe by 2050. This means that the capital from the €3bn bond will be allocated to projects consistent with these objectives, focusing on decarbonization and climate resilience [3].
Specifically, projects financed through such bonds have included renewable energy projects like wind, solar, and other clean energy technologies. Energy efficiency improvements across various sectors have also been targeted to reduce carbon footprints. Other green investments have been made in areas aligned with the EU Taxonomy and the Paris Agreement goals to ensure substantial climate contribution and no significant environmental harm [4][5].
The success of this issue is expected to support future EuGBS-aligned bonds. The CAB was more than 13 times oversubscribed, with over 300 orders pushing the final book size beyond €40bn. However, the CAB's success is dependent on enhanced data availability and refinements to the EU Taxonomy's verification criteria [6].
The CAB's maturity date is May 2037, and it offers a 3.125% annual coupon. The remaining 16% was acquired by central banks and other official institutions, while bank treasuries accounted for 46% of investors, followed by 38% from fund managers [7].
The new rules require alignment with the EU Taxonomy's 'Substantial Contribution' criteria, 'Do No Significant Harm' principles, and 'Minimum Safeguards' principles. The CAB received a positive external review in line with the EuGBS regulation, demonstrating its commitment to sustainability [8].
The bond issue is part of the EIB's 2025 funding strategy, which aims to approach 60% of the EIB's €60bn annual target with this type of funding. The EIB's President, Nadia Calviño, stated that the deal demonstrates how capital markets can drive the transition to a sustainable economy [9].
In conclusion, the €3bn Climate Awareness Bond funds renewables, energy efficiency, water infrastructure projects linked to climate adaptation, and other climate-positive investments aligned with the EU Green Deal and sustainability standards. This milestone marks a significant step towards a more sustainable future for the European economy.
References: [1] European Investment Bank. (2021). European Investment Bank launches largest ever bond aligned with European Green Bond Standard. Retrieved from https://www.eib.org/en/press/news/2021-04-22.2021-eib-launches-largest-ever-bond-aligned-with-european-green-bond-standard
[2] European Investment Bank. (2021). Climate Awareness Bond. Retrieved from https://www.eib.org/en/products/bonds/climate-awareness-bond
[3] European Investment Bank. (2020). European Investment Bank sets out ambitious climate strategy for 2030. Retrieved from https://www.eib.org/en/press/news/2020-05-28.eib-sets-out-ambitious-climate-strategy-for-2030
[4] European Commission. (2018). EU taxonomy for sustainable activities. Retrieved from https://ec.europa.eu/info/business-economy-euro/green-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
[5] European Commission. (2019). EU Green Deal. Retrieved from https://ec.europa.eu/info/strategy/priorities-2019-2024/eugreen-deal_en
[6] European Commission. (2021). Sustainable finance strategy. Retrieved from https://ec.europa.eu/info/strategy/priorities-2019-2024/eugreen-deal/sustainable-finance_en
[7] European Investment Bank. (2021). Climate Awareness Bond - Investor Breakdown. Retrieved from https://www.eib.org/en/products/bonds/climate-awareness-bond/investor-breakdown
[8] European Investment Bank. (2021). European Green Bond Standard. Retrieved from https://www.eib.org/en/products/bonds/green-bonds/european-green-bond-standard
[9] European Investment Bank. (2021). European Investment Bank launches largest ever bond aligned with European Green Bond Standard. Retrieved from https://www.eib.org/en/press/news/2021-04-22.2021-eib-launches-largest-ever-bond-aligned-with-european-green-bond-standard
- In alignment with the European Green Bond Standard (EuGBS) and the European Green Deal, this €3bn Climate Awareness Bond (CAB) will primarily invest in projects that focus on climate change mitigation, such as renewable energy, energy efficiency, and water infrastructure with climate resilience impacts, aiming to contribute significantly to a carbon-neutral Europe by 2050.
- Given the success of the CAB, which was more than 13 times oversubscribed, there is potential for increased investment in environmental science, such as financing projects related to climate-positive investments, renewable energy technologies, and energy efficiency improvements, in order to drive the transition to a sustainable economy and support the objectives of the EU Taxonomy and the Paris Agreement.
