Switzerland launches the first green Confederation bond
The Swiss Confederation's green bond sold like hot cakes. And more are to come. The issue proceeds are intended to promote the development of renewable energy, for example.
The long-awaited issue of the Swiss Confederation's first green bond took place today. Bonds were placed for a total of CHF 766 million with a term of 16 years (2038) and a coupon of 1.5%.
The green Confederation bond with the best credit rating was highly sought after. The bids in the auction amounted to CHF 974 million, of which almost 80% was allocated. This is therefore the second highest amount raised by the Swiss Confederation on the market this year. With this first issue, Switzerland has now also joined the ranks as one of the green bond-issuing countries.
Based on the 2021 state account, the Federal Government has identified green government expenditure of around CHF 4.5 billion. Some of which is now being financed in the form of green bonds. Among other things, the Swiss Confederation intends to raise the local financial centre to an international leading position for sustainable financial investments.
The green bond is a first for the Swiss Confederation. Other local institutions have already taken this path, including banks such as Zürcher Kantonalbank and UBS, the cantonal hospitals of Aarau and Winterthur, companies from the utilities sector such as BKW and Axpo, as well as the Cantons of Geneva and Basel-City. The proportion of green bonds in the most important Swiss bond index, the SBI® ESG AAA-BBB, is currently 2.8%.
No purchase without a second opinion
Zürcher Kantonalbank's Asset Management requires an independent second opinion as part of its own investment process before any investment in green bonds and examines the precise purpose of the funds borrowed in detail.
In the case of the green Confederation bond, the second opinion was obtained from the sustainability agency ISS ESG. It rates the contribution towards the following six Sustainable Development Goals (SDGs) of the United Nations as "significant" (see table below). ISS ESG also confirms that the framework complies with the standards of the International Capital Market Association (ICMA).
The green Confederation bond contributes to the following UN Sustainable Development Goals:
Goal (number) |
Description |
7 |
Affordable and clean energy |
11 |
Sustainable cities and communities |
13 |
Climate action |
14 |
Life below water |
15 |
Life on land |
17 |
Partnerships for the goals |
What is the money raised used for?
In the Sustainable Development 2030 strategy, the Federal Council explains which priorities it intends to set for sustainable development over the next ten years. The 17 SDGs form the reference framework. They aim to facilitate socially, economically and environmentally sustainable development.
the Federal Council describes the use of the issue proceeds in detail in the framework for the issue of green bonds. This includes accelerating the development of renewable energies, for example by constructing and operating the transmission and distribution systems for electricity from renewable energies, or reducing the dependence of transport on fossil fuels by expanding and improving rail infrastructure.
Beware of "greenwashed" bonds
Green bonds are the most well-known instrument for sustainable financing. As with conventional bonds, they are used for borrowing capital. The capital received must be used explicitly to finance environmentally sustainable projects. Guidelines have been developed to ensure that green bonds are effective in terms of sustainability. Avoiding any misappropriation of investors' money is essential for maintaining the credibility of green bonds.
The Green Bond Principles of the ICMA help to identify and prevent greenwashing. Issuers of green bonds are primarily favoured by investors if they have the use of funds examined by independent third-party companies in addition to the ICMA guidelines.
