Selling Green Bonds Has Never Been So Easy or Cheap in Europe

This content was published on September 10, 2021 - 11:00

(Bloomberg) -- There has never been a better time to sell green bonds in Europe. 

A boom in ESG investing has pushed up the “greenium” investors are willing to pay for debt that complies with a set of environmental, social, and governance criteria, according to Deutsche Bank AG. That’s flushed out debut green deals from issuers as diverse as Spain and Oreo-cookie maker Mondelez International Inc.

“We are now able to go to issuers and tell them ‘if you issue your debt in green format, you will actually save money,’ meaning that the hurdles we had to overcome for our clients to issue green bonds are now gone,” said Henrik Johnsson, co-head of investment banking EMEA at Deutsche Bank in London. “We are in a Goldilocks moment.”

Mondelez’s borrowing costs for its inaugural green bond were lower than they would have been for conventional bonds, according to data analyzed by Bloomberg. Germany’s EnBW Energie Baden-Wuerttemberg AG also cut costs with a green-bond sale.

“Everything else equal, investors are willing to pay more for a green bond than for a conventional bond,” Pablo de Ramon-Laca, director general of Spain’s Treasury said in an interview with Bloomberg TV Wednesday. The government cited an estimate by lead managers on the deal that it achieved a greenium “of around 2 basis points.”

It’s all part of a surge in green financing that’s seen investors funnel a record 310 billion euros ($367 billion) into ESG funds in Europe during the first half of this year, according to Morningstar Direct. That’s almost three times the amount during the same period last year and is close to matching the 343 billion euros raised in all of 2020.

Read: Why Bonds Good for the Earth Now Carry a ‘Greenium’: QuickTake

As more issuers join the ESG bandwagon, pricing differences are being thrown into sharp relief. That’s especially true for those that routinely pay higher borrowing costs on standard debt than their peers.  

“The greenium tends to be higher, because the starting point is higher,” said Arthur Krebbers, head of sustainable finance, corporates at NatWest Markets Plc. Price differences tend to be less stark for those that have been in the market longer.

According to Deutsche Bank research, borrowers of green bonds got a reduced rate vis-a-vis their outstanding debt on 61% of deals sold in the second half of 2020, an increase over the first half.

Yet there are a number of reasons why the greenium may be set to fade. For one, investors are becoming more discerning, extending the pricing benefits to the “more credible issuers,” according to Krebbers. 

There’s also the pressure of supply as global sales hurtle toward a record $1 trillion in 2021, funds get full on their ESG allocations and the label gets applied more widely. The greenium first came into play because so many investors were rushing to meet ESG mandates and deal flow hadn’t caught up.

“At some point, this will stop because if over time 100% of bonds are issued in the green/ESG format, the premium for green will go away and that will become the new cost of financing, Deutsche Bank’s Johnsson said. “In the meantime, it is a really extraordinary time.”


Two issuers are adding 2 billion euros to the 43.28 billion euros already sold since Monday, making this the busiest week for sales since June, according to data compiled by Bloomberg.

  • Dutch lender ABN AMRO Bank NV is offering 1.5 billion euros of covered bonds maturing in 20-years, while public sector issuer European Investment Bank is increasing its climate awareness bond due in 2030 by 500 million euros
  • Spain’s debut green bond was the most-subscribed offering in Europe’s primary market this week, according to data analyzed by Bloomberg
    • The nation attracted an order book that covered the deal by 12 times
  • Investors have a responsibility to direct the ethical bond market as new issuers join, structures develop and sales break records, said Salima Lamdouar, portfolio manager for sustainable strategies at AllianceBernstein in London
  • UniCredit SpA likely won’t buy the Banca Monte dei Paschi di Siena SpA brand as part of its deal for the bailed-out bank, daily la Repubblica reports on Friday
  • NOTE: European Issuers Rush to the Market in Busiest Week Since June
  • NOTE: Czech Green Bond Deals Herald More Supply From Europe’s East


New dollar bond sales in Asia excluding Japan reached its highest in seven weeks, with deal pace increasing amid intensifying signals that central banks across the globe are moving toward tapering monetary support. 

  • Issuance rose to $6.3 billion from $6.2 billion the previous week, according to Bloomberg-compiled data
  • China Evergrande Group’s wild local bond swings show just how risky it can be to trade stressed assets in the nation’s domestic market
    • A plunge in the price of the developer’s yuan bond due 2023 triggered trading halts on Thursday before it closed down a record 32%. The note fell a further 5.2% Friday
  • Japan Airlines Co. plans to raise about 300 billion yen ($2.7 billion) via subordinated bonds and loans to shore up its capital in case the coronavirus pandemic hurts travel demand longer than it expects
    • The Tokyo-based carrier said it secured around 200 billion yen in loans from four Japanese banks and plans to sell 100 billion yen of bonds. The financing is partly a “preventive measure” to counter the long-term business impact of Covid-19, general manager of finance Yuichiro Kito told reporters


Corporate America’s unprecedented issuance spree showed no signs of slowing Thursday amid what bankers and borrowers say are ideal conditions for high-grade companies to tap the bond market for financing.

  • While the week after Labor Day is normally one of the busiest of the year in debt capital markets, the past three sessions have been among the most active ever. Another 14 blue chip companies sold $15.65 billion of bonds Thursday, after 38 firms priced more than $60 billion over the previous two sessions

(Updates with Deutsche Bank ‘greenium’ estimate in 9th paragraph)

©2021 Bloomberg L.P.

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