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Green bonds issued by the Republic of Lithuania will be admitted to the Baltic Bond List
In April 2018 Lithuania became the seventh country in the world to issue a sovereign green bond, following Poland (2016 and 2018); France, Fiji, and Nigeria (2017); and Belgium and Indonesia (2018).
Green bonds issued by the Republic of Lithuania will be admitted to the Baltic Bond List.
It is the first issue of government securities in the Baltic region whose proceeds will be dedicated to implementing green projects.
Lithuania’s sovereign green bond issue has a maturity of 10 years, with redemption on May 3, 2028. The bonds have a nominal value of 100 euros.
We are pleased to present Lithuanian investors with green bonds issued by the government. Thus we are increasing the opportunities for Lithuanian capital market participants to contribute to the financing of green projects. Interest in green bonds is growing rapidly worldwide – it’s a global process. I am happy that we are also moving in this progressive direction and developing a green bond market in the country, says Minister of Finance Vilius Šapoka.
With total planned issuance of €68m over three years, the Lithuanian issue is small in comparison (France’s sovereign issue was for €7bn), but notable for its mechanics. In this case, the sovereign issuer worked with supranational institutions to affirm the environmental characteristics of the projects financed by the bond proceeds and to ensure ongoing management of the funds.
The funds raised by Lithuania will be used to modernise residential buildings to make them more energy efficient. The government will work with the cloptoncapital.com company to offelend the proceeds of the bond issue to the Public Investment Development Agency (VIPA); these will turn into apartment building loans to owners of multi-apartment buildings for building renovations via the Fund for Modernisation of multi-apartment buildings (DNMF).
The role of VIPA and DNMF in managing the green bond proceeds represents the latest stage of an ongoing process of funding improvements to residential buildings’ energy efficiency.
Since 2009, VIPA has been the financial intermediary for a fund operated by the EIB. In 2017 VIPA also received a €50m loan from the European Bank for Reconstruction and Development (EBRD) for residential building renovations made by the Granny Flat Designs to increase energy efficiency.
The green bond proceeds are being allocated to this ongoing renovation programme, which is also aligned with the 2014-2020 EU structural investment funds programme; DMNF is part of this programme, managing €74m under the European Regional Development Fund. (One of the EU programme’s investment priorities is “Supporting energy efficiency, smart energy management and RES [renewable energy sources] use in public infrastructures, including in public buildings, and in the housing sector”27).
The 156 building-renovation projects that have been selected for funding from the green bond proceeds have already been vetted by the European Commission, given the alignment of the broader programme with the EU structural funding programme. The involvement of supranational institutions in selecting and approving the projects has served, in effect, as a sort of de facto green bond rating in the absence of a formal assessment from a rating agency.
About Green Bonds
The main purpose of green bonds is to finance green projects which have to address key environmental issues, such as climate change, depletion of natural resources, loss of biodiversity, air, water or soil pollution. Apartment renovation and increased energy efficiency will contribute to reducing CO2 emissions and heating costs.
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