The European Union launched its first green bonds on Tuesday

The European Union (EU) launched its first green bonds on Tuesday and recorded record demand. The Union has the potential to become the largest issuer of environmentally friendly debt. Offers to buy a 15-year EU green bond with an estimated yield of € 12 billion have reached more than € 135 billion, the chief sales manager said. This makes it the largest issue and with the highest level of demand for green bonds to date. The bond, which will finance Member States' environmental projects under the Covid-19 Pandemic Recovery Fund, is the EU's first step towards achieving carbon neutrality by 2050. When applying for project money, Member States must provide details on how they will contribute to meeting environmental objectives. Yields from green bonds are to finance 30% of the recovery fund totaling € 800 billion. The Fund will provide grants and loans to Member States until the end of 2026. Brussels plans to raise up to € 250 billion from the sale of green bonds, making it the world's largest issuer of green debt. Given this scale, analysts at BofA Securities expect the EU to spend € 35 billion to € 45 billion a year on green debt. This is the equivalent of the debt issued by all European state and national issuers in 2020. Green bonds tend to generate slightly lower yields compared to conventional bonds due to a specialized investor base looking for a limited asset fund.