Green bonds are characterised by the fact that their issue proceeds are allocated to expenditures in the Federal budget that have an environmental impact. This distinguishes them from classic (conventional) German Federal securities.

For holders of green Federal securities, the Federal government reports on green expenditures made in the amount of the issuance volume:

• The green activities that were financed can be found in the Allocation Report which is published in the year following the new issue of the underlying Federal government securities.
• What these measures are intended to achieve is set out in the Impact Report which is published some time after the allocation report.

The issuance of green Federal securities is part of the German government's sustainable finance strategy. With them, Germany is positioning itself internationally as a sustainable finance location.

With its green securities, the Federal government is pursuing specific financial market policy goals:

• Making climate change an issue on the capital market
• Increase transparency on the impact of its sustainable budget spending
• Support the development of sustainable financial markets
• Further development of the green market segment in particular
• Act as a role model for other issuers, such as banks and companies
• Increase transparency in the pricing of green products
• Establish a readily tradable green interest rate reference for the euro area

Every green Federal security has a twin bond - a classic (conventional) Federal security with very similar characteristics. Both twins must have the same coupon and the same interest and maturity dates. This means that both must also come from the same maturity segment - for example, both twins must be Federal bonds with a 5-year maturity. All these similarities make them highly comparable: twin bonds - from a purely financial point of view, both for investors and for the Federal government as issuer.

Green Federal securities with maturities of 5, 10 or 30 years are suitable for many investment horizons. If they are held to maturity, they can be used to earn precisely calculable, regular income.

Like conventional Federal securities, green Federal securities are traded on the stock exchange after they are issued. They are therefore also subject to price risk and may gain or lose value during their term. In most cases, changes in the level of yields on the bond market generally influence the price of Federal securities. Since green Federal securities are very similar to conventional twins due to the twin concept, their price reacts very similarly to that of their twin.

Like their conventional twins, the classic Federal securities with the same maturity, green Federal securities are subject to price risks. They can be used to generate price gains, but also losses. In a positive interest rate environment, they generally offer a fixed annual interest payment - the coupon.

Even after purchase, changes in the yield on the market generally ensure that their market price fluctuates daily during the term. This is particularly relevant if the Bunds are to be sold before they mature. Investors who correctly assess the future development of yields on the bond market thus have opportunities for price gains, but on the other hand, price losses can also occur.

The following rule generally applies:

If the market yield rises, the share price falls - if the market yield falls, the share price rises.

The extent of the price reaction depends on the bond's features: The longer the remaining term to maturity and the lower the coupon of the green Federal security, the more strongly its stock price usually reacts to changes in bond market yields. Thus, a 30-year green Federal bond is likely to fluctuate in price more than a 5-year green Federal bond, and a security with a 1 % coupon more than one with a 2 % annual interest payment.

Regardless of price movements, green Federal securities generally offer regular interest income to all investors.

The capital market has developed a comparatively higher price for green Federal securities compared to their conventional (without green coverage) twins. Their yield is lower. Buyers of green Federal securities thus forgo a small portion of their return in favor of allocating their investment funds to investments in environmental and climate protection.

This difference in return is called "Greenium". It can be seen as the value of a green investment compared to an ordinary investment. Thanks to the twin concept, it can be transparently read off directly for the first time as the difference in yield between the two twin bonds.

Issuer Risks
The Federal Republic of Germany is liable for the repayment of green Federal securities with its assets and tax revenues. Its ability to meet payment obligations arising from green Federal securities determines the issuer risk. This risk is considered to be extremely low. Like all Federal securities, green Federal securities are gilt-edged.

Price Risk
The prices of green Federal securities move in the opposite direction to yields on the bond market. In the event of a rise in yields, investors may suffer capital losses if they sell their green Federal securities before maturity. This risk is much higher for 30-year securities than for 5-year securities, but can be eliminated by holding them until maturity.

Liquidity Risk
The risk of not being able to sell green Federal securities at any time before maturity is considered low, as Federal securities are among the most heavily traded government bonds in the euro area. In addition, the Finance Agency and the Bundesbank maintain markets at the most important trading venues. Nevertheless, due to their lower volume, they are not quite as tradable as, for example, their conventional twins.

Green Federal securities are issued on dates published in advance. These issue dates and usually also the issue volumes are published in the form of an issuance calendar at the end of the previous year for the entire following calendar year.

Banks and Saving Banks
All green Federal securities can be purchased on each trading day via any bank or savings bank, held in a securities account there and also sold again if required. In principle, there is neither a minimum investment amount nor a maximum investment amount. Banks generally charge fees for the purchase, sale and safekeeping of securities.

Finance Agency
No purchase, sale, or custody of green Federal securities is possible at the Finance Agency.