Uzbekistan debuts green sovereign bonds on LSE

Uzbekistan has issued Uzbekistani som (UZS) 4.25 trillion ($349.1mn) of green sovereign international bonds on the London Stock Exchange (LSE). In tandem, Central Asia’s second largest economy also placed international bonds valued at $660mn. 

The country’s green som tranche broke new ground as it made Uzbekistan the first EM sovereign to sell a local currency green bond overseas.

Raised funds are to be used to implement goals of the country’s 2030 Development Strategy, including the transition to a green economy and energy sector reforms.

Funds have been raised for a period of three years. Due to high demand from buyers, the coupon rate was reduced from 18% to 16.25% per annum.

This is noticeably lower than the current bond rates on the domestic market, the Uzbek finance and economy ministry noted.

At the auction on September 26, two-year government bonds were placed by local investors at 17.57%.

Georgy Paresishvili, chairman of the board of Tashkent stock exchange, praised the issuance of green bonds as a triumph. He said: “Given the current interest rates for bond issuance, I consider this placement of green bonds as highly successful.”

Uzbek economist, Otabek Bakirov, said that the return of Uzbekistan to international debt market was an unexpected, but important event.

“Green bonds are a new experience for Uzbekistan. I hope that reports on the use of the funds raised following bond placement will be drawn up and published according to international standards,” he added.

Bakirov also stressed that most of the public’s attention is concentrated within makhallas, in particular, in projects funded by the budget. “Therefore, it would also be appropriate to consider the issuance of ‘makhalla bonds’. I am sure that these bonds would be of interest for investors,” he said.

Across the globe, green and sustainable bonds have been increasingly adopted as a means of financing sustainable development and combatting climate change. The trend has gained momentum since the adoption of the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change in 2015. From Chile to Uzbekistan, numerous emerging market governments have issued green, social and sustainability bonds to fund climate action, transition away from fossil fuels and align with their SDGs.