In November 2020, my right honourable friend the Chancellor of the Exchequer (Rishi Sunak) announced plans for the UK to issue its inaugural Sovereign Green Bond (or ‘Green Gilt’). Green Financing products like these are a form of Government borrowing to finance projects with clearly defined environmental benefits.
Since then, the Government has set out its intention to issue a series of Green Gilts to meet growing investor demand. Budget 2021 confirmed the following ambitious commitments, including that:
Green Financing will be a multi-year programme, and HM Treasury will announce future years’ Green Financing targets as part of its usual approach to debt management.
NS&I today announced that Green Savings Bonds will go on sale later in the year, with full details available on the NS&I website.
Ahead of this, HM Treasury and the DMO yesterday published the UK Government Green Financing Framework. This document sets out the Government’s ambitious climate and environmental agenda and its vision for enhancing the UK’s leadership as the world’s pre-eminent green financial centre. The Framework also details how the proceeds from the Green Gilt and retail Green Savings Bonds will finance expenditures to help tackle climate change, biodiversity loss, and other environmental challenges, while creating green jobs across the UK.
As part of this, the Framework lists the six types of green expenditures that will be financed across the UK by the Green Gilt and retail Green Savings Bonds:
The Framework also stipulates that funds raised from each offering must be allocated to government expenditures occurring no earlier than 12 months before and no later than two budget years after that offering. At least 50% of funds will be allocated to current and future expenditure rather than refinancing past expenditures, matching the strongest commitments of other major sovereigns.
Finally, this document commits the Government to annual allocation reporting and at least biennial reporting of metrics on environmental impacts and social co-benefits, ensuring transparency for retail and institutional investors and other interested parties.
Two independent reports assessing the Framework and the eligible government expenditure were published alongside the framework on 30 June 2021:
Copies of the Framework, Second Party Opinion, and Pre-Issuance Impact Assessment have been placed in the Libraries of the House and are published on www.gov.uk/government/publications/uk-government-green-financing. Further information can also be found on the DMO and NS&I websites.