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10 May 2022

Green federal securities

Climate action is a priority. To boost sustainability in financial markets too, the German government is issuing Green German Federal Securities. This will inject momentum into the sustainable bond market as a whole.

With its economic stimulus package and its Climate Action Programme 2030, the German government is already strongly committed to climate action. As part of the Climate Action Programme 2030, the German government has started to issue green bonds. The aim here is to promote the idea of sustainability in financial markets too. Germany’s green bonds are also referred to as “green twins”, because they have the same characteristics as conventional federal securities. The difference is that they have eco- and climate-friendly budget expenditures assigned to them.

The German government issued Green German Federal Securities for the first time in 2020. Germany’s Finance Agency launched the sale of 10-year Green Federal Bonds in September 2020, which were followed by the introduction of 5-year Green Federal Notes in November 2020. The issue volume was €6.5bn for the Green Federal Bonds, and €5bn for the Green Federal Notes.

Green fed­er­al se­cu­ri­ties enlarge image
Source:  Federal Ministry of Finance

Green Bond Framework

The use of proceeds from Green German Federal Securities always corresponds to federal expenditure from the previous year. Spending from the previous year’s budget that qualifies as “green” is assigned to the securities. The Green Bond Framework lists five main green expenditure categories that can be assigned to Green German Federal Securities. These are:

  1. Transport
  2. International cooperation
  3. Research, innovation and awareness raising
  4. Energy and industry
  5. Agriculture, forestry natural landscapes and biodiversity

By specifying these categories, the framework creates transparency regarding green expenditures and their impact. The Green Bond Framework is available for download at https://www.deutsche-finanzagentur.de/fileadmin/user_upload/institutionelle-investoren/pdf/GreenBondFramework.pdf.

German government publishes “Green bond allocation report 2021”

On 10 May 2022, the German government published the allocation report for Green German Federal Securities that were issued in 2021. The “Green bond allocation report 2021” provides investors with transparent and reliable information about federal budget expenditures incurred in 2020 in the areas of climate action, environmental protection and nature conservation that qualify as green and were allocated to the proceeds of Green German Federal Securities issued in 2021.

The German government issued Green German Federal Securities worth €12.5bn in 2021. In the 2021 allocation report, €13.4bn in eligible green expenditures from budget year 2020 were allocated to the proceeds from these securities.

The allocation of proceeds to green expenditures underwent third party verification.