The issuance of US$65 billion in Next Generation EU ( NGEU ) green bonds by the European Union on November 20 presents opportunities to Asian issuers of green bonds to advance their own sustainability objectives while fostering stronger financial ties with the EU in 2025, including possible partnerships with European investors looking to reinvest returns into green initiatives.

The issuance comes  more than three years after the first NGEU green bond in October 12 2021, when the inaugural issuance raised €12 billion ( US$12.62 billion ) through a 15-year bond, maturing in 2037.

The NGEU green bonds are part of the broader NGEU programme, which aimed to finance Europe's recovery from the Covid-19 pandemic. The NGEU green bonds contributed to funding initiatives under the €800 billion recovery plan, focusing on green and sustainable investments.

What makes NGEU green bonds unique is the fact that they are part of a wider EU recovery initiative, involving joint borrowing on a large scale, with a strong alignment to both recovery and sustainability goals. Other EU green regional, while significant, operate more narrowly and lack the integrated framework and historical context of NGEU green bonds.

Unlike other EU green bonds that promote sustainability but do not have the same transformative or unified political significance, the NGEU green bonds represent a major political and financial innovation by the EU, demonstrating solidarity and commitment to a green recovery.

In a statement issued by the European Commission during the launch of the new NGEU green bonds last week, it admitted that the new issue is intended to confirm the EU’s leading role in sustainable finance in line with the announcement of EU President von der Leyen in her State of the Union address of 2020, that the European Commission will continue to work towards issuing 30% of the NGEU financing through green bonds.

NGEU green bonds, according to the statement, are expected to enable €264.6 billion of green investments in the nine sectors set out in the NGEU Green Bond Framework, including clean transport, clean energy and energy efficiency, confirming the EU’s leading role in sustainable finance.

The issuance was met with overwhelming demand, attracting over €135 billion in investor orders, underscoring the strong appetite for sustainable investments and the EU’s credibility as a green bond issuer.

The new NGEU green bonds can also act as a catalyst for sustainable finance globally and represent an opportunity for Asia to advance its own sustainability objectives while fostering stronger financial ties with Europe.

Green bond issuance in Asia arguably needs a shot in the arm as issuance patterns in the region haven’t been uniformly strong recently, and factors like rising interest rates earlier in the year, inflation concerns and macroeconomic uncertainties continue to pose challenges in some markets.

When compared with Europe, green bond issuance in Asia showed mixed trends in 2024. And the global green bond market saw a robust start to the year, according to data from the Climate Bond Initiative ( CBI ) and S&P Global, with worldwide issuance rising significantly during the first quarter, driven by favorable economic conditions like falling inflation and expectations of lower interest rates in key regions.

In Asia, however, issuance patterns were not uniformly strong; and, according to data from the CBI and S&P, factors like rising interest rates earlier in the year, inflation concerns and macroeconomic uncertainties continued to pose challenges in some markets.

The issuance of the NGEU green bonds – and other high-quality green bonds – presents opportunities for Asian institutional investors, such as pension funds and sovereign wealth funds, looking to diversify portfolios with sustainability-aligned assets and may lead to deeper integration of Asian investors into global green finance markets.

In addition, Asian issuers involved in renewable energy, sustainable infrastructure and other green projects might indirectly benefit from European investors that are looking for opportunities to reinvest returns into green initiatives, including partnerships with Asian counterparts.

The full implementation in the coming years of all measures that can be funded by NGEU Green Bonds will provide a significant contribution to the EU’s green transition, according to the EU Commission statement, reducing greenhouse gas emissions by an estimated 55 million tonnes per year within the EU.