Tuesday 8 December 2020 9:55 am

Government calls on banks to advise on first green gilt

The UK government has asked banks to bid for contracts to advise on the launch of the country’s first green gilt.

Chancellor Rishi Sunak unveiled plans last month to issue climate-focused securities for the first time. He said the bonds would contribute to a “new chapter for financial services” in the UK.

Green government bonds – also known as green gilts – are a type of borrowing to fund climate-friendly infrastructure projects. Many countries, including Germany, already issue them.

The UK’s Debt Management Office (DMO) today said the government was looking for market participants to advise on the structure that the issuance of the green gilts should take.

Businesses have until 16 December to apply for the contract or contracts. A contract would be worth £200,000 and start on 21 January 2021 and end in 20 July 2022, according to government documents.

Green gilts come amid climate focus

The launch of the green gilts are part of the government’s focus on climate change. It has pledged to “build back better” from coronavirus through low-carbon infrastructure projects across the country. 

Britain will host the COP 26 international climate summit in Glasgow next year, after it was delayed due to coronavirus. It intends to reach net-zero carbon emissions by 2050. 

Investors and commentators met the announcement of green gilts with enthusiasm. Some said the City was late to the party, however, with 16 countries already issuing such bonds.

Simon Bond, a director at Columbia Threadneedle Investments, welcomed the news last month. He said that “proceeds can be directed into projects such as renewable energy provision or better transportation systems”.

“I’m confident a sterling-denominated UK green gilt will be welcomed by investors and thus help the government raise finance from new sources for environmentally beneficial projects.”