Green bonds of Moscow sold out in 5 weeks
Residents of the capital and other regions bought 100% of the issued green bonds of Moscow for the population. The securities were sold out in five weeks. The city will buy about 50 domestically produced electric buses with the funds raised, said Vladimir Yefimov, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations.
«The placement of the securities began on May 30 on the "Finuslugi" platform of the Moscow Exchange. The issue was fully redeemed in less than a month and a half instead of the planned placement period of six months. The high demand of the population demonstrated the demand for green bonds and people's interest in participating in the city's development. Almost 70% of the bonds were purchased by residents of Moscow and the Moscow Region», — added the Deputy Mayor.
Green bonds are protected against market risks because they are not traded on the stock exchange. Only individuals who are tax residents of the Russian Federation could buy them. The proceeds will be used to finance the city's environmental programs. For example, replacement of one bus by a modern electric bus leads to reduction of polluting emissions by 172-233 kilograms a year and greenhouse gas emissions by 49.4 tons.
The issue volume amounted to two billion rubles at par value. The annual coupon rate on the bonds is 8.5% and is paid on a quarterly basis. Investors will receive their first yield on August 29, 2023. The circulation term of the securities is two years and the maturity date is May 27, 2025.
The compliance of the bonds with the requirements for green financial instruments in the Russian Federation was confirmed by Expert RA credit rating agency. The issue was included in the list of financial instruments for sustainable development of Russia which is maintained by the state corporation VEB.RF by order of the Government of the Russian Federation.
Geography of demand
A new financial instrument for the capital was in demand by residents of different regions. Elena Ziabbarova, Minister of the Moscow City Government and Head of the City Finance Department, noted that green bonds were purchased by residents of 73 territorial entities of the Russian Federation. The greatest demand for the bonds was seen in Moscow (57% of total sales), the Moscow Region (9.8%) and St. Petersburg (5.6%). Investors from the Tyumen, Tver, Sverdlovsk, Tula and Nizhny Novgorod Regions also became bond holders.
«The high rate of bond sales confirmed confidence in Moscow as a reliable issuer. We have managed to create a simple and profitable financial instrument that can interest anyone, including people with no investment experience. It is the source of additional guaranteed income for the citizens, and for the capital - an impetus for the further development of green economy and improve the quality of the urban environment», — said the head of the department.
Among the objectives of the issue – improving financial literacy of the population and the development of skills for responsible investing. Sales statistics showed that many non-professional investors are interested in green bonds, and such securities are indeed seen as an effective means of safekeeping and augmenting savings.
Demand for green bonds was consistently high throughout the entire offering period. The highest sales volumes were recorded in the first week.