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Netherlands plans first AAA-rated sovereign green bond


 Tuesday 9th April 2019 10:57

On 21 May 2019, the State of the Netherlands will issue its inaugural Green Bond. The Dutch State Treasury Agency (DSTA) announced this today, together with other details concerning the issuance. The Green Bond will have a maturity of 20 years and has been certified by the Climate Bonds Initiative. In addition, the Netherlands will be the first country with a triple-A rating to issue a Green Bond. By issuing the Green Bond, the Netherlands aims to further enhance and support the establishment of a robust green capital market.

Green Bonds are bonds of which the proceeds will be allocated to green, or climate-related, expenditures and investments undertaken by the government. The Green Bond Framework, which describes the investment and expenditure categories to which the proceeds of the Green Bond will be allocated, has been released today together with other specifications on the Green Bond. These categories include renewable energy (SDE-arrangement), energy efficiency (STEP-arrangement), clean transportation (expenditures and investments in rail infrastructure) and climate change adaptation (Deltafund). Eligible green expenditures include expenditures from the entire budget year preceding the issuance, the budget year of issuance and future budget years. DSTA intends to allocate at least 50% of the proceeds of the issued Green Bond to expenditures in the budget year of issuance or future budget years. The DSTA intends to produce both allocation and impact reporting.

The Minister of Finance, Wopke Hoekstra, has introduced strict requirements with regards to the expenditures that can be financed through the Green Bond. The allocation of expenditures will exclusively be done in accordance with specific climate criteria, such as a substantial contribution to the reduction of CO2 emissions. Minister Hoekstra stated: “Our ambition is to issue a “dark green” bond. The certificate which we, as the State of the Netherlands, have obtained from the Climate Bonds Initiative is tangible evidence of this ambition. Our aim is to give an extra boost to the Dutch green capital market through the issuance of the Green Bond”. As is common practice with a Green Bond, an independent expert, in this case Sustainalytics, has assessed the Dutch Green Bond. Sustainalytics has concluded that the Green Bond Framework, underlying this Green Bond, is credible, meaningful and in line with the core elements of the international Green Bond Principles.

The date of issuance, maturity date and target volume are as follows:

Auction date

Tuesday 21 May 2019, commencing 10:00 CET

Maturity date

15 January 2040 (short first coupon)

Reference bond

DBR 4,75% 4 July 2040

Target volume

€ 4 - € 6 billion

Pricing

Aim to price on the auction day, but no later than 12:00 CET on Wednesday 22 May

Settlement date

Two days after the issuance price is set

Coupon

To be announced on Friday 17 May 2019

Initial spread guidance

To be announced on Monday 20 May 2019

In case of unforeseen conditions, the DSTA reserves the right to change the date of auction.

The auction will take place via a Dutch Direct Auction (DDA). Specific to the DDA is the direct placement of debt with end-investors. During the DDA, investors can place their bids via one or more Primary Dealers of their choice. The Dutch State Treasury Agency aims to reach green investors in this auction. Investors that meet certain criteria can request to be qualified as green investor. Green investors will, to a limited extent, receive a preferential treatment in the allocation of the bonds.

The book opens at 10:00 CET and closes at 17:00 CET at the latest. The allocation will be announced as soon as possible after the closing of the book. The pricing will occur at the earliest 30 minutes after allocation and no later than 12:00 CET on the following day. The DSTA aims to price on the auction day itself.



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