Iberdrola Issues First EuGB Bond With High Demand

Iberdrola, the world's leading energy and electricity company, has made history by raising €750 million from a green bond issue that meets the new European Green Bond (EuGB) standard. This pioneering issuance is not only Iberdrola's first EuGB-aligned bond but also the first Spanish company to issue one under this new regulation. Moreover, it is the first bond to be both EuGB-compliant and aligned with the Green Bond Principles of the International Capital Market Association (ICMA), a precedent in the green finance market.

The issue saw outstanding market appetite, with the issue being five times covered and having an order book over €3.7 billion. It is the company's largest ever order book for a senior issue since 2021, a sign of increased investor confidence and increased appetite for green finance that meets tough European standards. Over 170 institutional investors were involved in the deal, a sign of firm interest and backing in Iberdrola's sustainability-focused strategy.

The release of the European Green Bond standard marks a huge step for the EU's sustainable finance plan. Signed in November 2023, to become applicable as of December 2024, the regulation was established by the European Commission to function as a "gold standard" of green bonds. The central goal is to oppose greenwashing as well as intensify transparency and credibility in the green finance marketplace.

In order to be considered a EuGB issuance, bond proceeds should be directed only towards economic activities that are in line with the EU Taxonomy — a categorization system recognizing economic activities that are environmentally sustainable. The rule does provide for a 15% flexibility margin, allowing investment in activities taxonomically compliant but under sectors that do not yet have final criteria. Issuers that exploit this flexibility have to give clear disclosures as to how and where these funds will be utilized.

In addition to investment allocation, the EuGB standard places strict transparency and accountability standards on issuers. Issuers are required to make explicit the use of proceeds and unveil a plausible green transition plan. Moreover, regular reporting on the way the financed projects feed into the company's environmental objectives is required. Through these provisions, bond issuers are held in check to remain in line with larger climate and sustainability objectives, instilling confidence among investors and stakeholders.

Iberdrola has been a leader in green financing for years. It is also one of the world's biggest corporate green bond issuers, investing these proceeds in a broad range of sustainable initiatives, ranging from renewable energy developments to energy efficiency projects, clean transportation infrastructure, and waste management systems. The new green bond proceeds will go towards renewable energy projects, both operational and under development.

In 2021, Iberdrola revealed its intentions to transform its financing structure profoundly towards sustainable and green instruments. By 2025, it plans to have just shy of two-thirds of its debt in the form of such instruments. The company came a long way in this direction in 2024, when a staggering 94% of all its financing fell under the category of sustainable. At the end of 2024, Iberdrola's sustainable financing portfolio stood at over €60 billion. This comprises €22.9 billion in green bonds, €15.6 billion in sustainable credit lines, and €6 billion in sustainable commercial paper. The portfolio is also diversified with green and sustainable bank loans, structured finance products, and multilateral environmental outcome-targeted loans.

The highest ever demand for Iberdrola's newest green bond highlights the growing maturity of Europe's sustainable finance market. It also reflects the confidence investors have in well-governed, transparent instruments that deliver both financial return and quantifiable environmental benefit. By being the first Spanish issuer to use the EuGB framework, Iberdrola sets a precedent for other regional companies, reinforcing its leadership position in spearheading the green transition.

The successful sale not only reinforces Iberdrola's green finance reputation but also indicates increasing market demand for bonds that meet stringent regulatory requirements. By combining the EuGB criteria with ICMA's Green Bond Principles, the firm has secured a rare convergence that adds to the integrity and attractiveness of its issue.

As the world economy increasingly turns toward sustainability, Iberdrola's action proves that financial innovation, regulatory compliance, and environmental stewardship can come together to provide long-term value for investors, society, and the earth.