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Germany launches first ‘green’ bonds to finance climate-related projects

Germany on Monday announced details of its first "green" bond placing, tapping financial markets to fund environmental projects for the first time.

Germany launches first 'green' bonds to finance climate-related projects
Fridays for Future demonstrators in Hamburg on August 21st holding up a sign reading: "Endless resources, unendless ignorance." Photo: DPA

The finance ministry said it would raise up to €11 billion in 2020 to support climate-related projects.

The first issue in September of a 10-year bond, or Bund, will have a minimum of €4 billion in volume.

The German government announced late last year that it would launch the bonds in the second half of 2020 as part of its efforts to combat climate change.

The country earmarked €54 billion in spending to 2023 as part of a climate package that includes introducing a carbon tax to cut greenhouse gases by 55 percent by 2030 compared with 1990 levels.

READ ALSO: 10 German words you need to know to engage in the climate debate

Rita Schwarzeluehr-Sutter, parliamentary state secretary for environment, said the bonds will contribute to the government's efforts.

“Green federal bonds create a clear incentive. In this way, we are showing how green and climate-friendly economic activities can be made transparent and predictable,” she said.

The green bonds will be “twin bonds”, issued alongside conventional federal bonds with the same maturity and coupon, the finance ministry said.

It means investors will be able to swap their bonds from one variant to the other, with the aim of making them more attractive to investors, according to Jörg Kukies, parliamentary secretary to the finance ministry.

Germany joins the green bond trend relatively late. Poland launched the world's first sovereign green bonds in 2016 and France, currently the world leading issuer of the instrument, in 2017.

Yet environmental issues are high on the German political agenda: Greta Thunberg and representatives of the environmental activist group Fridays For Future had an audience with Chancellor Angela Merkel last week.

READ ALSO: Greta Thunberg calls on Merkel to be 'brave' in climate change fight

Green bonds accounted for 2.85 percent of global bond issuance in 2019, or around $205 billion, according to the European Central Bank.

Almost half of green bonds issued worldwide last year were in euros, the ECB added.

ECB chief Christine Lagarde said in July that climate protection was a top priority for the bank, after it unveiled a plan worth €1.35 trillion to help the European economy recover from the coronavirus pandemic.

Lagarde started at the ECB late last year with a pledge to pursue a “greener” monetary policy, raising the prospect that the bank could increase the share of climate-friendly investments in its portfolio.

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ENVIRONMENT

Young activists take German states to court over climate inaction

Campaigners began a legal challenge against five German regions on Monday to force them to take stronger action on climate change, emboldened by a landmark recent court ruling in favour of environmental protection.

Young activists take German states to court over climate inaction
Demonstrators from the Fridays for Future movement protest in Gießen, Hesse, with a sign saying "No wishy-washy, no climate lashing". Photo: picture alliance/dpa | Frank Rumpenhorst

The plaintiffs are basing their case on a sensational verdict by Germany’s constitutional court in April which found that Germany’s plans to curb CO2 emissions were insufficient to meet the targets of the Paris climate agreement and placed an unfair burden on future generations.

In a major win for activists, Chancellor Angela Merkel’s federal government then brought forward its date for carbon neutrality by five years to 2045, and raised its 2030 target for greenhouse gas reductions.

READ ALSO: 

On Monday, 16 children and young adults began proceedings against the regions of Hesse, Saxony, Saxony-Anhalt, Mecklenburg-Western Pomerania and Saarland, with support of environmental NGO Environmental Action Germany (DUH).

They are charging that none of the states targeted by the legal action have passed sufficiently strong climate legislation at the local level, according to DUH.

“The federal government can’t succeed on its own,” lead lawyer Remo Klinger said in a press conference, highlighting state competence in the area of transport.

DUH worked closely together with the youth climate movement Fridays For Future to find activists willing to front the challenges, the group said.

Seventeen-year-old plaintiff Alena Hochstadt said the western state of Hesse, known for its Frankfurt banking hub, had always been her home but she feared having “no future here”.

Concern about the risk of “floods, storms and droughts” led her and other campaigners to seek “a legal basis for binding climate protection”.

READ ALSO: Climate change made German floods ‘more likely and more intense’

Hesse’s ministers for climate and the economy said they were “surprised” by the announcement.

“DUH clearly has not yet understood that we in Hesse are well ahead,” Priska Hinz and Tarek Al-Wazir said in a joint statement, drawing attention to an energy future law from 2012, before the Paris climate agreement.

In July, DUH-supported activists took the states of Bavaria, North Rhine-Westphalia and Brandenburg to court on similar grounds.

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