Ministry of Finance Accountant General Yali Rothenberg has completed Israel’s first offering of green bonds, amounting to $2 billion. The bonds were issued for a term of ten years, bearing annual interest of 4.5%. The offering was aimed at the international market, while talks are underway between the Accountant General Department and the Israel Securities Authority on an issue of shekel-denominated green bonds in the local market.
Money raised through green bond issues is designated for financing projects defined as environmentally friendly. Current EU regulation obliges major investment houses to report on the environmental effect of their investments. Overseas investors are thus motivated to channel their cash to green investments. The need for an offering of this kind arose last year, when major overseas investors approached the Ministry of Finance and asked why Israel was not in the green bond market.
In current market conditions, with interest rates rising and stock markets falling, and the fear of an economic recession, bond yields are rising, and raising sovereign debt is becoming more expensive. The Ministry of Finance sees a green bond issue as a way of raising money more cheaply than through regular bonds, since investors for whom such bonds contribute to meeting their ESG targets will be willing to accept a lower return.
What comes within the definition of a green project? For six months, the Ministry of Finance discussed the matter with the relevant government ministries - Environmental Protection, Science and Technology, Energy, Economy and Industry, and Transport - and a series of projects was designated for inclusion under the guidelines of the taxonomy document prepared by the Ministry of Environmental Protection with the help of an international consultancy. Meanwhile, the debt unit of the Accountant General Department conducted a roadshow for overseas investors at the end of last year.
After the annual debt issue on the global market, debt raising in 2023 will be focused on the Israeli market. Last October, the Accountant General Department ceased to issue designated bonds to pension funds. The Ministry of Finance believes that, in the absence of this instrument, local financial institutions will be sufficiently liquid to absorb most of the state’s debt offerings.
Published by Globes, Israel business news - en.globes.co.il - on January 11, 2023.
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