Serbia raises EUR 1 billion in its first green bond auction

Serbia achieved the lowest annual coupon rate in its history in the sale of its first green bonds. CEO of Climate Bonds Initiative Sean Kidney praised the move and said if the authorities use the funds properly, for environmental protection measures, they can expect more good deals in debt sales.

Serbia issued EUR 1 billion in its first sale of green bonds in the international market, after adopting the necessary legal framework, which it started preparing in June.

The seven-year securities have a 1% annual coupon or interest rate, which the National Bank of Serbia (NBS) said was the lowest ever, and the yield rate came in at 1.26%. Offers for the eurobond exceeded EUR 3 billion, according to the announcement. Minister of Finance Siniša Mali said the sum was three times higher than the government expected.

The green bond issue was oversubscribed by more than three times

At the same time, Serbia sold a conventional eurobond of EUR 750 million with a maturity of 15 years to refinance existing debt. The central bank noted it is the longest period so far.

Investors committed more than EUR 2.5 billion or more than EUR 6 billion for both packages combined, the statement adds. The coupon is 2.05% and the yield landed at 2.3%.

Serbia achieved superb result with green bond

“The numbers are superb, which underlines the benefit for sovereigns of doing green bonds,” Chief Executive Officer of the Climate Bonds Initiative (CBI) Sean Kidney told Balkan Green Energy News. He said the result is “pretty exciting” and that it is a very clear, positive message.

The use of proceeds must be proper, transparent and reported

The head of CBI, which issues guidelines for green bonds and certifies them, said financing conditions in the green bond issue are more favorable for Serbia than in the conventional one. Kidney also noted Eurozone inflation is currently much stronger than the final yield. Consumer prices in the 19-member monetary union jumped 3% in August on an annual basis, compared to 2.2% that was registered for July, Eurostat said.

“Next we need to look where exactly the funds are being used. Transparency and reporting are the fundamentals of this market. Serbia now needs to ensure the proceeds are used properly. Otherwise they will lose investor confidence. But if they can deliver what the market wants and expects with the use of proceeds, there will be many more of these,” Kidney underscored.

Interest rates declined during two auctions

More than 200 investors participated in the two auctions, NBS revealed.

Minister Mali claimed the proceeds from the green bond issue would be used to accelerate the country’s green agenda. They will be invested in the rail and subway network, sewerage, water and wastewater processing, flood protection, biodiversity protection, pollution prevention and control, waste management and to provide support for energy efficiency measures and the installation of rooftop solar panels, he said. The government will invest even more in the same segments in the future, Mali stressed.

The framework was produced in accordance with the standards of the International Capital Markets Association (ICMA)

The central bank said Serbia is the only European country outside of the European Union to have issued a green instrument. Governer Jorgovanka Tabaković pointed out the initial interest rate for the green bond was lowered by 35 basis points during the auction, compared to a 30-basis-point decline in the case of the conventional eurobond.

According to the legal framework, proceeds from Serbia’s sovereign green bonds can only be used for financing and refinancing in the areas of renewable energy (with emissions of up to 100 grams of carbon dioxide equivalent per kilowatt-hour), energy efficiency, sustainable water and wastewater management, pollution prevention and control and circular economy, protection of the environment and biodiversity and sustainable agriculture.

The framework was produced in accordance with the standards of the International Capital Markets Association (ICMA), the government said.