German utility E.ON has raised 1.5 billion euros by issuing its first green bond, which ties the generated capital to sustainable infrastructure and energy efficiency projects, the company said. The fixed-interest financial instrument will primarily be used to fund grid modernization and customer solutions, such as smart meters, E.ON said.

The utility joins a growing number of companies in Germany that issue green bonds to raise capital for climate-related or other environmental projects. Utility EnBW issued bonds worth 500 million euros in late 2018 and a further 1 billion euros in July to fund wind power, solar power and electric mobility projects, arguing that “increasing numbers of institutional investors now prefer sustainable investments,” according to cleanenergywire.org.

As one of the first industrial companies, car-maker Porsche issued a green “Schuldschein”, a financial instrument similar to green bonds, in August. According to Porsche, the funds will be used exclusively to finance the development of its new e-car model Taycan. The company said its issuance generated “huge interest”, particularly among investors from Asia.

The rising importance of green bonds as a commercial financing instrument illustrates the financial sector’s growing role for climate action. The targeted funding of environmentally friendly projects and a phase-out of emissions-intensive investments are seen as a prerequisite for achieving the Paris Climate Agreement’s goals. The German government set up a sustainable finance advisory council in early 2019 to better manage the financial sector’s integration in climate policy.