Eurex Repo introduces a new standardised Green Bond GC Basket
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Eurex Repo introduces a new standardised Green Bond GC Basket 03 November 2020Frankfurt Reporter: Drew Nicol
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Eurex Repo has added a new basket of green bonds for use as general collateral (GC) within its repo marketplace, as of 2 November, as part of Deutsche Boerse’s contribution to the environmental, social and governance (ESG) initiatives within the EU.
The Green Bond GC Basket encompasses euro-denominated debt securities that are issued in adherence with guidelines for sustainable bonds that include renewable energies, sustainable waste management, the preservation of biodiversity and sustainable land utilisation, as well as social bonds that raise funds for new and existing projects with positive social outcomes.
Included in the basket is the first Green Federal security. The 10-year Green Federal bond was first issued by the German Finance Agency in September and a second issuance is due on 4 November. A total amount of €11.5 billion is expected to be issued through green instruments this year.
Eurex says that by allowing for these debt instruments in a new specific GC basket it enables clients to incorporate ESG factors into their funding and financing activities, a key secondary market activity for trading, clearing and collateral management.
“We see the launch of the new Eurex Repo Green Bond GC Basket as a major step forward in the development of a sustainable repo market,” says Claus Breternitz, a director on the repo desk at Commerzbank AG. “This first Green Bond GC basket shows the repo market is reacting to the increasing number of green bond issuances and the growing importance of the ESG segment.”
Frank Gast, managing director at Eurex Repo, adds: “The new Eurex Repo Green Bond Basket is bridging the gap between the well-established Green Bond cash bond market and the newly-emerging ESG securities financing industry.
“By incorporating green and social bonds into its trading, clearing and collateral management ecosystem, Eurex is contributing to the further development of this market and facilitating the attractiveness of newly issued ESG bonds.”
Elsewhere, the basket's go-live follows Eurex’s inclusion of the new EU Sure bonds as eligible margin collateral and for repo trading and clearing.
The European Commission released the Sure bonds last month to raise funds to support businesses impacted by the COVID-19 pandemic. The issuing consisted of two bonds, with €10 billion due for repayment in October 2030 and €7 billion in 2040.
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