Scotland is reviewing its own green bonds

Scotland is also known for its skirts, the “kilts”. However, bonds could possibly soon be issued under the same name.

Scotland might not be stingy with interest.

Dhe Scottish government is considering raising money on the capital market for the first time, according to a report by the Bloomberg news agency. Since 2015, the Scottish regional government has had the legal right to independently issue bonds, which are referred to as “kilts” in reference to the British government bonds “gilts”. Until now she had not made use of it.

But the ruling Scottish National Party, which is seeking another referendum on leaving the UK if it can win a majority in the general election in May, is apparently looking to explore the terrain. The agency quotes a spokeswoman as saying that the company wants to work closely with investors on options, such as green bonds with a state guarantee, in order to achieve the net zero emissions target.

Since these bonds would be issued by a government with the stated aim of secession, the theoretical solvency of an independent Scotland would be decisive for the pricing, said Ross Hutchison of investor Aberdeen Standard. The green element is interesting and could attract a lot of investor interest. Scotland will host the next major United Nations climate change summit in November.

The UK last year expanded the opportunities for regional and local governments to take on debt. The UK Municipal Bonds Agency was set up specifically for this purpose, with the aim of making it easier for municipalities to access bond investors. In the case of Scotland, a new tax deal between Edinburgh and London could also change attitudes towards borrowing, Bloomberg said. However, decisions will probably only be made after the elections in May.

The borrowing could be done through the regional government-backed Scottish National Investment Bank, which was also established in late 2020. Scotland has more tax sovereignty than municipalities, and Edinburgh has a wealth management industry with companies like Standard Life Aberdeen and Baillie Gifford.

The sensitive question is what would happen to the debt if Scotland actually broke away from the UK. This could significantly increase the price of Scottish debt, especially given that an independent Scotland intends to re-join the EU. Therefore, investors estimate, “kilts” would tend to trade with a premium of one percentage point on the “gilts”.