Green OLO

The Kingdom of Belgium intends to issue in the near future and subject to market conditions its inaugural Green OLO benchmark with a maturity in the 15y to 20y part of the curve (OLO 86).

The framework for such issuance has been jointly prepared by the Prime Minister, the FPS Finance, the FPS Environment and the Belgian Debt Agency.

The Green OLO Framework follows the Green Bond Principles and is in full alignment with the current best practices in the Green Bond Markets. The size and other characteristics of the inaugural Green OLO are comparable with all other OLOs but the proceeds will only be allocated to assets with the purpose of the transition to a sustainable economy.

 

To be completed after the transaction

To be completed after the transaction

The Kingdom of Belgium is committed to provide to investors two types of reporting:

  1. For all issuance under this Framework, the FPS Finance and the Belgian Debt Agency will coordinate and publish a report on the management/allocation of the proceeds of the preceding year to Eligible Green Expenditures or their estimates that will be further refined throughout the year. The latter is particularly the case for tax credits that can only be known once household and corporate tax returns are processed. These Expenditures represent a limited part of total Eligible Green Expenditures.

    The first allocation reporting will be published in the year following the first issuance and then annually until full allocation.

    The allocated proceeds will be broken down by Green Sector (e.g. energy efficiency, clean transportation, renewable energy, circular economy, living resources and land use) and by type of expenditure (e.g. investment expenditure, tax expenditure, operational expenditure…)

    The allocation of the proceeds will be reviewed annually by an independent audit firm.
     

  2. The Minister of the Environment will coordinate and publish a report assessing the environmental impact of Eligible Green Expenditures.

    For the purpose of this reporting, a task force – consisting of the DG Environment, FPS Finances, FPS Mobilité, FPS Economie / DG Energie, Régie des Bâtiments, Politique scientifiques and Coopération au développement, and any other relevant body – will provide input.

    The first impact report will be published in the year following the issuance, and as necessary thereafter following additional issuance/tap or subject to other relevant information becoming available.

  1. What is a Green OLO? How does it work?

A Green OLO has the same characteristics as any other OLO, - with regard to initial size, reopening of the bond and secondary market liquidity - but for which the Kingdom of Belgium will take additional commitments on the use of proceeds and reporting. A framework has been created comprising different eligible green sectors for which the Federal Government is competent. This framework is in line with the Green Bond Principles, 2017, and The Kingdom of Belgium will use its best efforts to follow best practices as they evolve.

 

  1. Do you plan to issue the Green OLO right after the roadshow? What kind of size are you targeting? And which maturity?

We are targeting a benchmark green OLO (hence EUR 3bn+) in the tenor of 15 years or above. The transaction will be launched, subject to market conditions.

 

  1. Which redemption month are you targeting?

The redemption month will be different from that of other OLO’s in order to mark the difference between a Green OLO and the other OLO’s. The redemption date for this bond will be April 22nd.

 

  1. Is the Green OLO strippable?

The Green OLO will be strippable just like all other OLO’s.

 

  1. Are you going to be a repeat issuer?

The Kingdom of Belgium will ensure the liquidity of this Green OLO through regular taps based on investors’ demand. No communication can be done as of today on the issuance of other Green OLOs.

 

The Green OLO and its Framework

 

  1. What is the rationale for The Kingdom of Belgium to issue such a Green Bond?

Green Bonds markets are widely thought to have the long term potential to attract more investments for environmental challenges, and to mitigate and adapt to climate change in particular. With this transaction, the Kingdom of Belgium has the ambition to:

  • Foster and secure public investments and the financing of public policies required at the federal level to address the low carbon transition, biodiversity and other environmental challenges, in order to fulfil our objectives and comply with our commitments in these domains;
  • Foster economic activity and jobs through investments in strategic, green sectors
  • Further the development of this market, so that it reaches the critical size that will be necessary to start influencing green investments globally;
  • Contribute to the adoption of best practices;
  • Additionally, the Kingdom of Belgium is constantly seeking to diversify its funding sources and investor base.

 

  1. What are the intended types of expenditures to finance with the Green OLO?

All Green Eligible Expenditures will be related to the Federal State environmental objectives and competences.

Green Eligible Expenditures are Federal State expenditures that can qualify under the Green OLO Framework, including tax incentives, investment expenditures and operating expenditures, as any of such expenditures can be used to deploy Belgium’s climate and environmental policies.

Expenditures can be directed at state agencies, regions and communities, companies and households. Nevertheless, Green Eligible Expenditures will exclude any Federal State expenditure to a Belgian agency or to a local authority that such entity plans to use itself for its own Green Bonds, as the Federal State wants to protect the Green Bond issuance capacity of other Belgian public players.

Green Eligible Expenditures include recent and current expenditures within the Federal State’s budget and expenditures towards Green Holdings within the Federal State Portfolio (“FPIM/SFPI” plans) that fall within the following Green Sectors:

 

Green Sector

Scope for the Green Eligible Expenditures and examples

Energy Efficiency

  • Invest in green buildings and improve buildings energy efficiency (i.e. roof / wall / floor insulation, new boiler, new heat pump, solar heater)
  • Improve energy efficiency of private sector production facilities
  • Promote demand-side management (DSM) measures

Examples of Green Eligible Expenditures:

  • Tax credit for corporates investing in energy efficiency
  • Investments in Sustainable Real Estate Funds with Green certification

Clean Transportation

  • Promote transport services and modal shift towards public transportation and soft mobility; support multimodal transport solutions
  • Support the development of electric vehicles and related infrastructures

Examples of Green Eligible Expenditures:

  • Federal State’s support for investment and operating expenditures related to the extension, improvement and maintenance of public transports and rail-related infrastructures
  • Tax credits in favor of electric vehicles

Renewable Energy

  • Develop and support/deploy renewable energies technologies and related investments (e.g. wind off-shore, solar, hydropower (< 25MW), including supply and storage infrastructures)

Examples of Green Eligible Expenditures:

  • Federal State’s support to renewable energy infrastructures

Circular Economy

  • Promote sustainable consumption and production modes (including waste reduction and recycling)

Examples of Green Eligible Expenditures:

  • Tax expenditures for reusable packaging

Living Resources and Land Use

  • Improve the resilience of territories to climate change and other natural disasters, including in developing countries
  • Preserve the biodiversity and enhance environment protection (including pollution prevention and control)
  • Develop pollution monitoring and control systems
  • Mitigate non-CO2 emissions in agriculture

Examples of Green Eligible Expenditures:  

  • Operating expenditures of academic research programs in biodiversity, climate change and other global environmental challenges
  • Investment expenditures for soil rehabilitation
  • Investment in Sustainable programs for climate change mitigation and adaptation in developing countries

The Inter-Ministerial Working Group aims at excluding all nuclear activities, all armament and any expenditure mainly related to fossil fuel.

 

  1. What type of information will the reporting include?

The Kingdom of Belgium is committed to provide to investors two types of reporting:

  • For all issuance under this framework, the Ministry of Finance and the Belgian Debt Agency will coordinate and publish a reporting on the management/allocation of the proceeds of the preceding year to Eligible Green Expenditures or their estimates that will be further refined throughout the year. The latter is particularly the case for tax credits that can only be known once household and corporate tax returns are processed. These Expenditures represent a limited part of total Eligible Expenditures.
    The first allocation reporting will be published in the year following the first issuance and then annually until full allocation.
    The allocated proceeds will be broken down by Green Sector (e.g. energy efficiency, clean transportation, renewable energy, circular economy, living resources and land use) and by type of expenditure (e.g. investment expenditure, tax expenditure, operational expenditure…)
    The allocation of the proceeds will be reviewed annually by an independent audit firm.
  • The Minister of the Environment will coordinate and publish a reporting on an assessment of environmental impact of Eligible Green Expenditures.
    For the purpose of this reporting, a task force – consisting of the DG Environment, FPS Finances, FPS Mobility, FPS Economy / DG Energy, Belgian Buildings Agency, Science Policy and Development Cooperation, and any other relevant body – will provide input.
    The first impact reporting will be published in the year following the issuance, and as necessary thereafter, at an appropriate frequency, depending on Green Sectors, until the maturity of the Green OLO.

 

  1. Has this Framework been reviewed by a Second Opinion Provider?

It is The Kingdom of Belgium’s strong intention to follow best market practice, so as recommended by the Green Bond Principles, an external reviewer (Sustainalytics) has confirmed the alignment of the Green OLO Framework with the four pillars of the Green Bond Principles.