(Bloomberg) -- Europe’s biggest carbon polluters are paying increasingly higher interest rates on their bonds, according to a report by the Dutch central bank.
Since 2020, when the European Union started rolling out plans to green its economy, the spread between the borrowing costs of big and small emitters has widened to more than 40 basis points, said De Nederlandsche Bank, or DNB.
What’s more, polluters investing in technologies to cut emissions get a break in the bond market, compared with peers that aren’t, according to the central bank. It set the nominal value of debt outstanding at €1.6 trillion ($1.7 trillion).
“Investors are asking for an interest rate premium to compensate for the risks that emission-intensive companies are exposed to,” DNB said in the analysis published Thursday. “This ‘risk premium’ is somewhat lower for European carbon-intensive companies that invest more in sustainable innovations.”
The EU’s Green Deal, a sweeping strategy to reach net zero emissions by 2050, was approved in 2020. It calls for retooling every industry, particularly carbon-intensive ones such as steel and cement, as well as protecting biodiversity, natural habitats and the oceans.
The Green Deal boosted the risk premiums for short- and long-term bonds alike, according to DNB. While the pandemic and other factors may have contributed to pricing developments, the evidence “implies that companies with lower emissions can finance their operations at lower costs.”
(Updates third paragraph to add value of market.)
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