Austria Lets ESG Investors Dodge Bank Fees With Direct Offering

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(Bloomberg) — Austrian debt pioneers say they’ve forged novel new instruments designed to appeal to environmentally-conscious retail investors who want to avoid complicated financial products and commissions.

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The Austrian Treasury is offering two retail debt products with a green label as part of an initiative to channel household saving directly into the federal budget. Funds will help finance renewable energy generation, electric-vehicle charging points and Austria’s power grid. 

Households can buy so-called Bundesschaetze notes from Monday, choosing among maturities ranging from one month to a decade. The government doesn’t charge fees and offers a full guarantee in excess of the European Union’s traditional €100,000 ($107,000) cap on deposits.

“Government notes have a decisive advantage for private investors: there’s no price risk whatsoever,” said Markus Stix, the Austrian Treasury’s managing director who’s spearheaded the creation of novel environmental, social and governance products.

In 2018, the nation offered the first euro-area century bond in a benchmark size to benefit from record low rates. In 2022, it was the first to offer short-term green Treasury bills, targeting increased appetite for sustainable debt instruments by money market funds and central banks.

Austria is the latest government to offer their citizens a way to invest directly toward their nation’s climate plans. The UK started selling retail green bonds in 2021 with Hong Kong following in 2022.

Mutual funds charged an average annual management fee of 1.12% in Austria last year on top of possible initial investment and transaction costs, according to the country’s financial regulator FMA.

Interest – set daily by the Treasury – will start at 3.5% for 1-month maturities and 2.5% for 10-year retail bonds. That compares with an average 2.5% offered by banks on 6-month online deposits, according to the Austrian National Bank, and the 3.8% 1-month Euribor rate.

Austria is the first country in the world to offer investors short-term, euro-denominated green investments without expenses, Finance Minister Magnus Brunner said.