New Zealand To Issue Sovereign Green Bonds To Support Climate Transition

New Zealand government announced it’d be issuing a ‘green bond’ to fund low-emission or environmental projects such as renewable energy or reforestation, have increasingly become part of climate financing around the world including the UK, Germany and France.

NZ PM Arden Election
NZ PM Arden

The ‘green bonds’ are issued at lower interest rates (relative to conventional govt bonds) to money managed by sustainable funds & those with ESG (environment, social and sustainability) mandates.

In 2020 the global green bond market reached a cumulative issuance milestone of US$1 trillion since its inception in 2007. The World Bank began issuing them in 2008.

NZ Finance Minister Grant Robertson said. “Green bonds will enhance the development of New Zealand’s sustainable finance market,” “Projects financed by the bonds will be subject to additional scrutiny and, over time, the project selection, evaluation, and reporting requirements will help to ensure high-quality projects with robust environmental outcomes are delivered.” “This is particularly important given the significant amount of investment that will be required by the Government to support the climate transition.”

The step follows recent NZ Government moves to launch a new investment framework so all investments by Crown financial institutions are carbon neutral by 2050, to require KiwiSaver default funds to divest from fossil fuels, and to launch a green investment fund. This year, New Zealand also became the first country in the world to pass legislation to require all listed companies and large financial institutions to report on their climate-related risks.

“The creation of a green bond programme will add a new financing tool we can use to deliver the low-carbon projects we need to meet our climate targets,” Climate Change Minister James Shaw said. “Right now, at the global climate change negotiations in Glasgow, countries all over the world are making significant commitments to cut emissions. “Something in the order of 80 per cent of the global economy is now covered by some form of net-zero target. “To meet these targets and cut emissions in line with what the science requires, capital needs to be directed towards activity that will accelerate the transition to a low-carbon economy. Green bonds will be a crucial part of that.”

New Zealand Debt Management at the Treasury will release final details of the green bond programme mid next year, followed by an inaugural issuance in late 2022.

New Zealand Emissions Targets

At the UN summit in Scotland, New Zealand tabled a pledge to cut net emissions to 50 per cent below gross 2005 levels by 2030. That 2015 target was to reduce emissions by an average of 30 per cent from 2005 levels over the 2021-2030 period.

It is the latest in a raft of measures the Government has introduced to make sure New Zealand’s financial system is helping address the climate emergency, including:

  • Launching a new investment framework so all investments by Crown Financial Institutions are carbon neutral by 2050
  • Becoming the first country in the world to pass legislation to require all listed companies and large financial institutions to report on their climate related risks
  • Requiring KiwiSaver Default Funds to divest from fossil fuels
  • Launching NZ Green Investment Finance and quadrupling the capital it has available to invest in low carbon technologies of the future

Source: NZ Treasury  Beehive

From The TradersCommunity News Desk

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