04 Aug 2021

The UK's first Government Green Bond to be issued

Rishi Sunak announced that in 2021 the UK Government will be issuing a ‘Green Bond’.

Government bonds are a means for the Government to raise cash, they pay you back the money you have invested in the bond plus interest after a fixed period of time.

Unlike other government bonds (often known as gilts) the capital they raise from selling these bonds is to be exclusively used towards projects and initiatives which will help us move towards a cleaner, lower carbon environment.

The timing of issuing these bonds is crucial, firstly to get us moving towards the targets we need to reach, but also as interest rates are so low, the cost of repaying the debt of these bonds will be low for the Government.

The Debt Management Office is likely to issue the first green bonds in September 2021, with NS&I expecting to issue some direct to consumers later in the year.

Recent EU legislation has meant that Investment Fund managers have an increased requirement to incorporate ‘ESG’ factors (Ethical, Social and Governance) into their funds, and as a result the Green Bonds could firstly trade at a premium to their net worth, as the demand from fund managers could far outstrip the supply.