In 2019, the Netherlands was the first country with a triple-A rating to issue a green bond. “The Dutch government’s second issue and revised green bond framework reflect its support for the green bond market as a means to promote sustainable development and contribute towards the Paris Agreement goals,” says Senior Portfolio Manager Treasuries, Kim Liu. “The EU Taxonomy also plays a key role in steering capital to meet the objectives of the European Green Deal and in improving transparency to help investors identify investments that make a substantial contribution to the EU’s climate and environmental objectives.”
Pre-launch engagement
This new bond has an initial issue size of €4.98 billion, is a 20-year green Dutch State Loan (DSL) and was over 3.5 times oversubscribed. In the run up to the bond’s launch, the DSTA had meetings with a number of investors, including APG. Topics covered at this meeting included developments in the Dutch economy and an in-depth discussion on the new green bond framework update and its EU taxonomy alignment. Liu: “Over the years, in our annual meetings with the DSTA, we have shared our expectations and input, for example, when the first green bond framework was published. These discussions with the issuer help us to better understand their intentions and allow us to give our views and those of our clients on certain themes with regard to responsible investing.”
Green Bond Framework and EU Taxonomy alignment
In September, the Dutch government published its updated Green Bond Framework.
The use-of-proceeds expenditure covers projects in four eligible green categories: renewable energy, energy efficiency, clean transportation, and climate change adaptation and sustainable water management. Liu: “The framework is aligned with the International Capital Market Association's (ICMA) Green Bond Principles and Moody’s second-party opinion concludes that it demonstrates a high overall contribution to sustainability. More importantly, it also meets our (and our clients) requirements, with a designated use of proceeds that creates a positive impact.”
Blue expenditures
While alignment with the EU Taxonomy is increasingly becoming the market standard for companies, it is still in its infancy when it comes to sovereigns, according to Liu. “In this context, we appreciate the efforts made to align the new framework – eleven out of the twelve economic activities fully adhere to all EU taxonomy criteria. These criteria relate to the extent of the contribution projects make, and to the do-no-significant-harm (DNSH) requirements that mean that activities that meet one objective do not come at the expense of another.” The updated framework also aligns with a new set of Taxonomy criteria, published in June by the European Commission, explains Liu. “This is the first triple-A sovereign green bond to have “blue” activities fully mapped to the EU Taxonomy. These include expenditure to finance plans, updated annually and outlined in the Delta Programme, to protect the country from flooding, mitigate the impact of climate change and ensure supplies of freshwater.” The updated framework further aligns the green bond issuance program with current Dutch policy on climate change to achieve the country’s climate targets.
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