Insights Blog

Record Demand for Germany's Debut Green Bond

September 17, 2020

Research from SCEPA economists studying the economic impacts of climate change and mitigation policies show green bonds have great potential to help countries across the world increase environmental investments and reach emission targets.

Now, record demand for Germany’s debut program offering green bonds in early September shows investors are eager to invest in green debt.

The German 10-year green bond raised $6.5 billion euros ($7.7 billion U.S. dollars), funds that will be used for environmentally friendly projects including sustainable transport systems and renewable energy. The bonds were issued at a low yield (-0.46%), close to that of similar-maturity conventional treasury bonds, which was thought to be difficult to accomplish by critics who did not expect significant demand. But in fact, the demand for those green bonds turned out to be five times higher than the supply. German deputy finance minister Joerg Kukies hailed the program as “an important step towards significantly strengthening Germany as a sustainable finance location.” Indeed, the bond and its reception are significant steps for Europe’s green bond market and provides evidence that green bonds are a viable way to scale up green investments.

German Chancellor Angela Merkel said she would like the economic recovery from the pandemic to rely on green funding and investments. Professor Willi Semmler, Director of SCEPA’s Climate Change Project, has argued this approach is essential. Semmler and his co-authors contend in a recent Intereconomics article that the COVID-19 crisis illustrates the potentially disastrous local effects of climate disasters and that reconstruction programs must capitalize on green investment opportunities. With the issuance of its first green bonds, Germany took steps toward a sustainable recovery and a greener global economy, as other countries will be encouraged to take advantage of this ripe market.