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A thread about "Green gilts"…
So the Chancellor announced today that the government will launch its “first ever Sovereign Green Bond next year”…1/ https://www.gov.uk/government/speeches/chancellor-statement-to-the-house-financial-services
So the Chancellor announced today that the government will launch its “first ever Sovereign Green Bond next year”…1/ https://www.gov.uk/government/speeches/chancellor-statement-to-the-house-financial-services
…First what IS a Green Bond?
Well, it’s a bond raised to “fund projects to tackle climate change, finance much-needed infrastructure investment, and create green jobs across this country,” says the Treasury…2/
Well, it’s a bond raised to “fund projects to tackle climate change, finance much-needed infrastructure investment, and create green jobs across this country,” says the Treasury…2/
….But hang on, aren’t those the things this government has said it plans to borrow lots of money to spend on anyway? Yes.
So what makes a “green” sovereign bond different from any other regular sovereign bond?...3/
So what makes a “green” sovereign bond different from any other regular sovereign bond?...3/
...Well, in other countries that have issued them the money has been ringfenced or "hypothecated" for green investments, meaning the money raised can ONLY be spent on that project, which is the selling point for environmentally-conscientious investors....4/
....In Sweden an amount corresponding to the amount issued in the Green bond is allocated to eligible green expenses which have been selected and approved in advance....5/
...And, crucially, proceeds from Green Bonds are monitored and documented by the country's national debt office according to clear procedures (see more below) …6/ https://insights.nordea.com/en/sustainability/sovereign-green-bonds/
…So that surely, you might assume, is what the UK Government is also planning: formal hypothecation.
Otherwise why would a Green UK sovereign bond be any different from any other UK sovereign bond?
If the money just goes into the general pot, what's the point of them?...7/
Otherwise why would a Green UK sovereign bond be any different from any other UK sovereign bond?
If the money just goes into the general pot, what's the point of them?...7/
....Well I checked with the Treasury about the hypothecation question and, apparently, there’s no commitment to it yet.
Officials are working on the “practicalities” and “finer details” of issuing such bonds I’m told...8/
Officials are working on the “practicalities” and “finer details” of issuing such bonds I’m told...8/
....Bear in mind some context here, namely that the UK Treasury has a long record of resisting hypothecation of tax revenues for specific forms of spending.
See here for a flavour... http://researchbriefings.files.parliament.uk/documents/SN01480/SN01480.pdf 9/
See here for a flavour... http://researchbriefings.files.parliament.uk/documents/SN01480/SN01480.pdf 9/
....Perhaps that institutional resistance will be overcome in this case.
Let's hope so - because otherwise this would surely otherwise be a high-profile example of “greenwashing” – a green gimmick rather than a substantive change.
So: watch out for the details.
/ENDS
Let's hope so - because otherwise this would surely otherwise be a high-profile example of “greenwashing” – a green gimmick rather than a substantive change.
So: watch out for the details.
/ENDS
