24 Jan 2022

Green bonds in Serbia

Environmental awareness has been a pressing topic for decades. In the past, international treaties were signed to put words into action.

One of these key treaties was the 1997 Kyoto Protocol.   The reasoning behind this protocol was evident; countries needed to reduce greenhouse gas emissions (“GHG”). Back in 2008, Serbia had ratified this agreement and prescribed mandatory targets for the reduction of harmful emissions in the period between 2008-2012.  The Amendment from Doha confirmed the second binding period of the Kyoto Protocol, between 2013-2020, including new obligations in GHG emissions reduction.  However, perhaps the most crucial treaty was the Paris Agreement.  This agreement defined new obligations for all participating countries for the period after 2020 and was based on the  Intended nationally determined contribution (INDC), which was determined by the participating states. In June 2015, the Republic of Serbia set out an agenda to reduce GHG emissions by 9.8% by 2030 compared to 1990.

While there has been much discussion on various initiatives, it is only in the past few years that the public has witnessed significant changes in terms of any environmental action.

In 2021, Serbia passed the Climate Changes Act (“Act”).   The Act’s goal is for Serbia to abide by its obligations. It includes limiting GHG emissions and adapting to new climate initiatives while paying significant attention to monitoring and reporting on the low-carbon development strategy and its necessary improvement.  The legislators thus evidently recognized that only constant supervision can deliver significant changes.

Another vital moment worth highlighting was Serbia’s emission of green bonds.  This was a massive step Serbia took in raising funds to meet its international obligations. The Eurobond was issued in the amount of EUR 1 billion, has a maturity of 7 years and was released at the lowest coupon rate ever, -1.00%.  Funds raised will be used for a number of green agenda projects that include achieving sustainable growth in Serbia’s economy through investments in renewable energy, energy efficiency, transport, sustainable water management and pollution prevention and control.  Thus, Serbia has become the first non-EU country in Europe to issue the green financial instrument. The emission of the green bond is entirely within the Green Bonds Principles prescribed by the International Capital Market Association (ICMA).

While the road to any sort of environmental victory is lengthy, Serbia has recently made crucial steps in filling up its share of obligations.