Green Bonds Are the Fresh Way to Get Germany to Borrow
The country’s upcoming debt issue could be a turning point as more governments seek to finance climate projects.
Governments are getting set to cash in on a booming market in green bonds—debt that funds projects with environmental benefits. Fueled by the growing awareness that more radical action has to be done to combat climate change, and by the need to fund it, Europe is taking the lead.
The European Union needs as much as €290 billion ($321 billion) per year in extra financing to reach a goal of being a climate-neutral economy by 2050. Germany looks set to issue its inaugural sovereign green bonds next year—potentially more than €10 billion worth. It’s the first country with a AAA credit rating to do so after the Netherlands this year. That’s a big deal for the green bond market. “German government bonds are the benchmark ‘risk-free’ asset in Europe,” says Wolfgang Bauer, a money manager at M&G Plc. “It’s fair to say that there would be demand.”