Member States Sovereign Green Bond Issuance and the Development of Local Green Bond Markets in the EU

In 2016 Poland was the first EU country to issue a Green Bond Principles-aligned bond to finance environmental projects. Since then, sovereign issuance in the EU grew enormously. In just over five years the market grew to over 290 bn euro outstanding sovereign ESG bonds in the EU in 2022. 16 Member States have chosen to issue green and social bonds in that time. In this chapter we analyse the features of these bond issuances and in particular, their conditions, objectives and governance structures. Member States choose to issue green bonds in order to finance specific sustainability transition projects, facilitate the development of local sustainable finance markets and to diversify their investors base. While ICMA Green Bond standards are followed by all EU sovereign issuers, we observe significant heterogeneity in terms of the implemented governance mechanisms as well as early uptake of new EU rules (EU Green Bond Standard, Green Taxonomy). In this context, we specifically discuss the conditions under which sustainable sovereign issuance contributes to the development of local green bond markets, focusing in particular on less developed capital markets in Central and Eastern Europe