Bumper Week of Green Bond Sales Finds Strong Demand in Europe

(Bloomberg) -- A stellar week of green bond sales in Europe looks set to turn into a bumper month for the region’s sovereign issuers.

Spain sold 5 billion euros ($5.9 billion) in its debut green bond deal on Tuesday, attracting an order book that covered the deal by 12 times. Meanwhile, the Isle of Man -- a British crown dependency that last came to the market two decades ago -- raised 400 million pounds ($550 million).

Coming up, the U.K. will make its inaugural green sale later this month in what has been promised to be the biggest sovereign issue in history, while the European Union will start its 240-billion-euro green issuance program in October. 

The boom in green debt is continuing apace despite concern that incoming rules from the EU on what constitutes an environmentally friendly security could fragment the market between issuers that adhere to these standards and those that don’t. For investors who are wary of potential greenwashing, that’s muddying the outlook.

Yet despite the headwinds, demand remains robust, with a boom in ESG investing mandates pushing up the “greenium” investors are willing to pay for ethical debt, according to Deutsche Bank AG. 

“The problem is not too much debt, but not enough,” Chris Iggo, chief investment officer of core investments at AXA Investment Managers, wrote in a note. “Institutional asset owners and their asset managers need to de-carbonise portfolios by increasing the share of “green” assets.”

Next Week

• Europe’s pandemic recovery bond sales will take the spotlight next week, with the European Union expected to sell NGEU debt via banks. Societe Generale expects either a three- or seven-year bond to be sold.
• Sovereign issuance from Germany, Netherlands, France, Spain and Italy should amount to about 30 billion euros ($35.5 billion), according to Commerzbank strategists. Still, net supply is likely to remain in negative territory, with 35 billion euros of backflows due from Austria and Italy, they said.
• Unemployment, inflation and retail sales data for the U.K. will be published on Tuesday, Wednesday and Friday, respectively
• European Central Bank chief economist Philip Lane will speak in a webinar on Wednesday

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