Serbia preparing framework to issue sovereign green bonds

A government task force is working on a document that would open the way for Serbia to issue sovereign green bonds in the international market. CEO of Climate Bonds Initiative Sean Kidney said green bonds are more attractive to investors than ordinary debt securities.

Minister of Finance Siniša Mali is leading the new interministerial group formed by the Government of Serbia to produce and implement a framework document that would make it possible for Serbia to issue its green bonds in the international market, together with a system of reporting on how the money is used.

Green or climate bonds are a tool for raising funds for projects that mitigate climate change and its impact and introduce the principles of circular economy. For instance, issuers can invest in resource efficiency, waste management, preservation of biodiversity and water resources and pollution control.

IFIs can help Serbia in process

Chief Executive Officer of Climate Bonds Initiative Sean Kidney told Balkan Green Energy News that Serbia could get support from the European Bank for Reconstruction and Development and other international financial institutions or IFIs in the process. The challenge is in “doing something that the market is comfortable with” alongside the issues of reporting and accountability, he said.

More and more investors have environmental targets to meet and are obliged to invest in sustainable projects

Serbia could get a better deal with a green bond than an ordinary bond, with an interest rate that is anywhere between five and 25 basis points lower, Kidney pointed out. The head of the international organization that certifies climate bonds said the demand for them is “way higher” than for conventional ones as an increasing number of investors have their own environmental targets to meet and are obliged to invest in sustainable projects.

The task force is responsible for establishing cooperation with advisors in the process of the production of the framework document, selecting and assessing the projects that would be financed with green bonds, managing the funds and reporting annually to the Government of Serbia and investors on the use of funds.

Market for green bonds growing in Balkans

Some companies in Southeastern Europe including banks have already raised money through green bonds. Reiffeisen Bank was the first in Romania. Last month it sold a package in local currency for RON 400.6 million (EUR 81.4 million).

EBRD and the International Finance Corp. (IFC) from the World Bank Group were among the buyers. Lenders issue green bonds to finance climate and environmental projects.

On the other hand, no state in the region covered by Balkan Green Energy News has sold such debt securities yet. According to a recent report, Turkey is working to fulfill legal requirements that will enable it to raise money by selling debt that would be priced according to results of its social and sustainability projects.

Sustainability bonds are a wider category, for debt that has both the characteristics of green bonds and social bonds – those intended for improving the life of vulnerable groups, like with social housing.