Russia issues its first sub-sovereign green bond, targeting carbon emissions
Posted on 01 July 2021
Moscow’s new green bond will raise funds to reduce emissions from public transport in the Russian capital. It’s an exciting step towards a low-carbon future, writes WWF-Russia’s Green Economy Programme Director, Mikhail Babenko.Moscow has joined the club of global cities developing green transport infrastructure, with the first issuance of a sub-sovereign green bond in Russia. This signifies the commitment of local government to reduce its carbon footprint, which ensures cleaner air for urban residents and contributes to the global fight against climate change and the destruction of ecosystems.
There have been other successful efforts to help mitigate CO2 emissions using this financial tool too. For instance, in the previous year, a green bond to the value of 300 million roubles (US$4.2 million) with an estimated environmental impact of 6,480 tonnes of reduction in CO2 emissions was issued by Center-Invest Bank on the Moscow Stock Exchange.
Speaking on the history of green bonds in Russia, I must say it’s quite a fresh and foremost tool. The first green bonds were issued in our country in December 2018 on the Moscow Stock Exchange, adhering to verification and compliance aligned with the Green Bond Principles of the International Capital Market Association. That green bond, initiated by a private waste recycling firm, raised funds for the solid waste recycling, disposal and management of regional landfill sites in the cities of Nefteyugansk and Pyt-Yakh.
So far there have been 13 subsequent green bond and four social bond issuances in Russia, demonstrating an appetite from financiers to embrace sustainable investment solutions in line with environment, social and governance principles.
The recent issuance is a fully compliant green bond to raise 70 billion roubles (US$9.8 billion) for the reduction of emissions contaminants and greenhouse gases from Moscow’s public transport system. The bond has a maturity period of seven years.
It is the first environment bond in Russia to be issued by a regional government, as opposed to a private business entity or financial institution, and has been recognized as a green financial instrument by Russia’s national economic development institution, VEB.RF.
Use of proceeds from the bonds, centred on major infrastructure development and environmentally sustainable electric transport, will be reported in Moscow Government’s annual reports.
We are optimistic that changes to legislative processes and increasing familiarity with green bond issuing mechanisms will encourage more sub-sovereign green bond interest within other regional governments and municipalities.
Green bonds have become a global investment sector with enormous momentum, which started in 2007 when the first green bond was issued by the European Investment Bank. The Climate Awareness Bond was a structured instrument with proceeds dedicated to renewable energy and energy efficiency projects.
According to the Climate Bonds Initiative, US$269 billion was raised in 2020 through the issuance of green bonds worldwide, and 2021 is expected to see upward of US$400 billion raised in the sector. The initiative puts the current global green bond asset-class at a value of US$1.07 trillion.