£10bn raised by UK’s first ever ‘Green Gilt’

What is a Gilt?

A gilt is a term for a UK Government bond. Gilts are essentially a loan from an investor to the Government. The loan is held until maturity and during this time the Government pays a fixed interest rate to the bondholder. After the gilt matures, the Government returns the initial capital value of the bond back to the investor. 

The Chancellor announced in the March 2021 Budget plans to launch a new ‘green gilt’ which would be a type of bond that is used to finance projects that have a beneficial impact on the environment.

The UK’s first ever Green Gilt

On the 21st September 2021 the Government confirmed that, following the launch of their first green gilt, £10bn had been raised, with the bidding purportedly exceeding £100bn in collective bids from investors. This green gilt is a 12-year bond, due to mature on the 31st July 2033. 

This marks the largest inaugural green issuance out of any country. Chancellor of the Exchequer Rishi Sunak elaborated: “Green finance is vital in helping us to tackle the environmental challenges we face, and the launch of our first green bond is a signal that the UK continues to be a world leader in this area.”

The money made from the green gilt will go towards bolstering and funding environmentally conscious projects such as offshore wind farms and zero-emissions buses.

Funding will also be dedicated to carbon footprint reduction schemes focused around decarbonising homes and businesses. The Green Financing Framework, a document published earlier in the summer, outlines how these funds will be distributed and places special emphasis on renewable energy, climate change adaption and pollution control. 

“This funding will be used to finance vital green government projects across the country,” continued Rishi Sunak, “including things like clean transportation, renewable energy and preserving our natural environment. In helping us to build back better and greener, it will also help to create jobs as we transition to net zero.”

For more information about the shift to green investing in the investment industry, take a look at our article on sustainable investment.

A promising future for Green Gilts in the UK

The success of this first green gilt has meant immediate plans for a second green gilt are being made with the intention of releasing the next issuance later in the year.

Institutions are moving to adjust and accommodate the rising popularity of green gilts. The Bank of England confirmed that it will now be buying green gilts as part of its asset purchase programme and will be treating them the same as conventional bonds.

Chief Investment Officer at The Private Office, Toni Meadows, commented that "The demand for the green gilt was high and bodes well for future issuance. The recent green gilt was more cheaply priced than other green issues when compared with conventional gilts"

If you’re interested in investing, or simply want to learn more about how to be environmentally conscious with your money, checkout our page on ESG.

Green gilts may well be the future of investment, uniting those who want both a stable financial investment and to do their bit for the environment. The investment world is beginning to realise the importance of responsible investment as more of the public demand change and a move towards greener projects.

If you’d like to find out more about how you can invest more of your money for good, why not arrange a free initial consultation.

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Please note: The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.