Budget 2021: Government to issue 'world's first' green retail bonds

Chancellor Rishi Sunak has confirmed the government will launch a green retail savings bond to help fund the UK’s transition to a net-zero carbon economy.

In today’s Budget speech, Sunak described the planned sovereign bond launch as a ‘world’s first’, saying it will form part of a £15bn slew of green bonds the Treasury will issue.

The retail bonds will be offered through National Savings & Investments (NS&I), in a move trailed earlier in the week. All eyes will be on the interest rates on offer after NS&I slashed them last September, citing extremely high demand.

‘This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change, benefiting from the innovative reporting standards planned for the green gilt programme,’ the Treasury said in a briefing note following the Budget statement.

The new bonds will fund a range of projects designed to reduce the country’s reliance on fossil fuels, including the building of wind farms and other renewable energy initiatives.

Sunak said: ‘The UK will issue at least £15bn in green bonds to help finance the transition to net-zero, and the government will launch the world’s first sovereign green savings bond for retail investors.’

In reality, they are a drop in the ocean compared with the government’s overall net borrowing, which has hit a record £355bn in the current tax year.

The chancellor also announced plans to establish a UK infrastructure bank, which will receive £12bn in initial funding to support a ‘green industrial revolution’.

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Headquartered in Leeds, it will work with both the private sector and local government to develop projects, with one of its first investments being new port infrastructure in Humberside to support offshore wind energy.

Stephen Payne, global equity fund manager at Janus Henderson, said the government’s green agenda is not ‘as dramatic as suggested by some’.

‘The chancellor has shied away from a carbon tax but there is a new National Investment Bank with £12bn of backing. The issue of “green” gilts will help fund projects to tackle climate change and potentially attract ever more ESG-focused investors, whilst there is also a new National Savings green product,’ he said.



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