1. Developments in sovereign green
bond markets
18 April 2023
Committee of Senior Budget Officials
9th Meeting of the OECD Paris Collaborative on Green
Budgeting
Fatos Koc
Head of Financial Markets Unit
Capital Markets and Financial Institutions
Division / DAF

2. 2
Outline
Approaches to incorporating ESG factors into public debt management
Growth and characteristics of green bond issuance
Benefits and challenges from a public debt management perspective
Common features of leading practices
Concluding remarks

3. 3
Benefits of issuing sovereign green bonds
25%
38%
43%
65%
68%
68%
Impact on sovereign creditworthiness
Accountability and transparency
Positive market story
Diversification of investor base
Aligning with government’s ESG policy
Supporting the market for sustainable
finance instruments
Source: Findings from OECD member and accession countries’ responses to the 2022 OECD Survey on Primary Markets Developments

4. • Being more proactive and transparent in
providing information to investors, rating
agencies and broader public on
government initiatives and actions to
promote green agenda
• Issuing green bonds
• Adding climate-related risk scenarios into
debt analysis, and medium- and long-term
debt sustainability analyses
4
Incorporation of green-considerations in
public debt management

5. 5
Sovereign green bond market grew significantly both in AEs and
EMEs
Issuance amount of AEs and EMEs
Note: Issuers refers to Sovereign green bond issuers
Sources: OECD calculation based on data from Refinitiv
Share of green bonds in gross borrowings
0
10
20
30
40
50
60
70
80
90
100
2016 2017 2018 2019 2020 2021 2022
Advanced economies Emerging economies
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2016 2017 2018 2019 2020 2021 2022
Green bonds Issuance (%Gross Borrowings of Issuers)
Green bonds Issuance (%Gross Borrowings of AEs Issuers)
Green bonds Issuance (%Gross Borrowings of EMEs Issuers)

6. 6
Green bonds constitute the largest share in the
labelled bond markets
0
20
40
60
80
100
120
140
2016 2017 2018 2019 2020 2021 2022
Green Social and Sustainable
Sources: 2022 OECD and accession countries Survey on Primary Market Developments. OECD calculations based on data from Refinitiv.
Only Green Bonds Only Social and Sustainability Bonds Both
BEL BLR COL CHE AND BEN BGR PER TGO KOR POL
DNK FJI FRA SWE BFA CIV GTM PHL URY SRB HUN
DEU HKG IRL ITA GNB IDN IMN SEN UZB AUT CHL
LTU NLD NZL GBR LVA LUX MYS SYC CAN EGY
NGA SGP ESP MLI MEX NER THA
Countries with amount Issued > USD 10
bn since 2016
Countries with amount Issued < USD 10 bn
since 2016
Sovereign ESG Issuance amount by type of ESG instrument Sovereign Issuers by type of ESG instrument they issue

7. 7
Sovereign green bonds are mostly denominated in Euro
Currency composition of issuance Domestic vs Foreign Issuance
Note: The “Other currencies” category includes Canadian Dollar, Chilean Peso, Chinese Yuan, Colombian Peso, Danish Krone, Fijian Dollar, Hungarian Forint, Indonesian
Rupiah, Japanese Yen, Nigerian Naira, Swedish Krona, Thai Baht, and Uzbekistani Sum. Panel C: No foreign currency issuance in 2017.
Sources: OECD calculation based on data from Refinitiv
0
10
20
30
40
50
60
70
80
90
100
2016 2017 2018 2019 2020 2021 2022
EUR USD GBP Other
0
10
20
30
40
50
60
70
80
90
100
2016 2017 2018 2019 2020 2021 2022
Domestic currency Foreign currency
USD billion USD billion

8. 8
In terms of funding allocation, clean transportation is
a major element in many countries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Clean Transportation Energy efficiency and Renewable Energy SWWM* Other**
Sources: Countries Green-labelled bonds frameworks
Notes: ‘SWWM’ stands for ‘Sustainable Water and Wastewater Management’. ‘Other’ item includes the following expenditures: Pollution prevention
and control, Environmentally sustainable management of living natural resources and land use, Terrestrial and aquatic biodiversity, Climate Change
Adaptation, Circular Economy, Green Building, International Cooperation, Research, Innovation and raising awareness, Multi-sector.
Allocation amount by type of expenditure

9. Sovereign ESG-labelled bond process - Main
operational aspects
The issuer creates a
comprehensive
ESG bond
framework outlining
the eligible projects
and criteria in line
with ESG
principles.
An external review
provider is engaged
to evaluate the ESG
bond framework
and ensure its
alignment with
relevant ESG
guidelines.
With a positive
assessment from
the third-party
vérifier, the issuer
proceeds to issue
the ESG-labelled
bond, raising funds
from investors.
Post-issuance, the
issuer prepares a
transparent report
detailing the
allocation of funds
to the eligible
projects.
The issuer
periodically
publishes an impact
report, illustrating
the qualitative and
quantitative
outcomes of the
financed projects
and their
contribution to ESG
objectives.
ESG
Framework
Development
Third Party
verification
Bond
issuance
Allocation
Reporting
Impact
reporting

10. 10
Major challenges associated to green bond
issuance for debt managers
9
9
12
16
17
18
19
23
23
27
0 5 10 15 20 25 30
Timing consideration (e.g., issuance)
Potential impact on existing instruments
Complexity of issuance process
Additional operational costs
Changes in regulation
Allocation reporting (ex-ante)
Interaction with other governmental entities
Lack of eligible expenditures
Changes in taxonomy
Impact reporting (ex-post)
Source: Findings from OECD member and accession countries’ responses to the 2022 OECD Survey on Primary Markets Developments

11. • Identification of relevant information for investors
and credit rating agencies
• Co-ordination among the relevant public
institutions, difficulty in accessing existing data
• Lack of relevant data and analysis
• Insufficient staff resources
• Insufficient technical capacity
11
Major challenges draw on issuers’ climate-
related communication practices
Source: 2022 Edition of OECD Sovereign Borrowing Outlook publication, Chapter 2 on ESG practices and challenges: Perspectives
from public debt management

12. • Strong interaction and collaboration with
stakeholders throughout the life of the
bond
• Commitment to transparency and
reporting disclosures
• Commitment to sustain liquidity through
issuance volume and instrument design
12
Common features of leading practices

13. • Lack of – or limited – eligible government expenditures
• Fragmentation in sovereign issuance structures
• Standardisation of green products
– minimum reporting requirements;
– a clear and consistent definition of what constitutes ‘green
spending’; and
– an agreed mechanism to deal with issuers that do not allocate
funds raised in accordance with these standards.
• Compliance with regulatory landscape which is
developing
• Supply and demand dynamics for green and other ESG-
labelled bonds
• Currency risk attached to FX-den. labelled bonds
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Concluding remarks

14. Find us online
Publications, events and other projects:
OECD Sovereign Borrowing Outlook, www.oecd.org/finance/oecdsovereignborrowingoutlook.htm
OECD Working Papers on Sovereign Borrowing and Public Debt Management,
http://www.oecd.org/daf/fin/public-
debt/oecdworkingpapersonsovereignborrowingandpublicdebtmanagement.htm
OECD Global Forum on Public Debt Management, https://www.oecd.org/daf/fin/public-
debt/global-forum-public-debt-management.htm
PDM Network: Public Debt Management Conference, https://www.oecd.org/daf/fin/public-debt/
OECD Debt Transparency Initiative, https://www.oecd.org/finance/oecd-debt-transparency-
initiative.htm
Contact:
PublicDebt@oecd.org
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