EU on track to become world’s largest issuer of green bonds

The European Union has issued more than EUR 65 billion of green bonds so far under the NextGenerationEU (NGEU) instrument.

Under the NextGenerationEU (NGEU) instrument, at least 37% of spending in member states’ recovery and resilience plans must be used for sustainable investments and reforms in areas addressing climate change.

Proceeds from NGEU green bonds finance the investments, which are approved through the EU’s Recovery and Resilience Facility. The European Commission plans to issue 30% of the NextGenerationEU financing through green bonds.

In more than three years after its first issuance, the EU has raised more than EUR 65 billion in total in the segment, setting it on track to becoming the largest issuer of green bonds in the world, according to the European Commission’s NGEU Green Bonds Allocation and Impact report 2024.

The trade bloc’s executive arm said NGEU green bonds remain highly attractive, offering a high return on investment – financially and allowing investors and markets to be part of the solution. The commission launched the Green Bond Dashboard in 2022 to provide full transparency about how the financing raised from these bonds is invested.

The programme has the potential to grow significantly further and steadily in the years ahead

As of August 1, the European Commission had issued EUR 60.2 billion of NGEU green bonds overall, compared to EUR 44.2 billion one year earlier, a rise of 36.2%. The sum had increased to EUR 65.2 billion by the end of October 2024.

The report shows that the program has the potential to grow significantly further and steadily in the years ahead.

“This is even more important as the proceeds generated by NGEU green bonds have an impact across the entire EU: they finance investments in areas such as clean transport, renewable energy, energy efficiency, and biodiversity,” European Commissioner for Budget and Administration Johannes Hahn stated.

Most measures are implemented in the energy efficiency and clean transport sectors

At the report’s cut-off date, August 1, 332 out of 2,096 milestones and targets linked to measures in the NGEU green bond pool were considered fulfilled across 22 member states. The level reached 153 across 14 member states in 2023.

The measures are defined mainly by the NGEU Green Bond Framework, contributing to energy efficiency, for example energy renovation of private or public buildings, and the clean transport and infrastructure item, for example to improve transportation links, the report reads.

NGEU green bonds to enable EUR 264.6 billion in green investments

The mechanism is expected to facilitate EUR 264.6 billion in green investments in the nine sectors set out in the NGEU Green Bond Framework.

The full implementation of all measures that can be funded will provide a significant contribution to the green transition, reducing greenhouse gas emissions by an estimated 55 million tons per year within the EU, the European Commission said.

The pool of expenditure from green bond proceeds has been expanded

According to the report, it is 1.5% of all emissions and equivalent to the combined emissions of 15 million households or to replacing 38 million of 250 million internal combustion cars with electric vehicles in the EU.

The most significant development since the 2023 report is the expansion of the pool of allowed NGEU expenditure from green bond proceeds to EUR 264.6 billion. On August 1 of last year, the sum was EUR 190.6 billion.

The growth in the share of climate-transition-relevant expenditure in NGEU results from the revision of national recovery and resilience plans to integrate the REPowerEU plan, the report adds.