Corporate green bonds
Apple Issues largest certified US corporate Green Bond ($1.5bn, 7 yrs, 2.85% S/A, Aa1e)
Apple dropped into the green bond market for the first time, as part of a larger $12bn bond sale, the second largest bond market deal so far this year. The global tech giant’s inaugural green bond of $1.5bn has a 7-year tenor, semi-annual coupon of 2.85% and is rated Aa1 by Moody’s. Lead underwriters for the deal are Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank and JP Morgan.
Sustainalytics has reviewed Apple‘s green bond framework and Ernst & Young will do an annual audit of how the green bond proceeds are used.
Proceeds will be used to ‘Reduce Impact on Climate Change’ by financing projects that fall under Apple’s eligibility criteria for renewable energy, green buildings and waste management.
Renewable energy projects include small scale solar and wind projects to power its main offices in Cupertino. Proceeds may also be used to finance energy storage for these renewable energy power sources to help provide a constant energy supply.
Green building projects span both building new green buildings and projects to improve energy efficiency or water efficiency in existing buildings.
New green buildings have to meet LEED Gold or Platinum or BREEAM very good, excellent, or outstanding standards . It is great to see Apple is leveraging a standard on its green buildings, especially using the higher levels of both LEED and BREEAM.
Projects to improve the energy efficiency of existing buildings include heating, ventilation, and air conditioning system upgrades, lighting retrofits (switching to LED lights for example), and the installation of energy monitors and controls to better manage energy use.
Water efficiency projects in existing buildings include upgrading to water efficient fixtures, implementing water efficient irrigation systems and technologies that increase the use of recycled water (especially important for buildings in a drought risk region such as California).
Waste and pollution management projects financed by the bond will improve recycling and reduce landfill waste from its Cupertino head office operations. Apple may also use proceeds to change the materials in products from natural resource intensive to bio-based materials and recyclable materials. We are not quite sure how much impact these projects will have but look forward to finding out in the first impact green bond report due in February 2017.
They also commit to deliver updates on the allocation of proceeds and environmental impact of selected projects via the annual green bond report.
ABS
Renovate America issues second green ABS with second review ($217.5m, 25.5 yrs, 4.05%, AA)
Renovate America tapped into the green market again, via a special purpose vehicle called Hero Funding Trust, with a second labeled green ABS of $217.5m. The issue has a tenor of 25.5 years, fixed coupon of 4.05% and is rated AA by both Kroll and DBRS. Morgan Stanley and Deutsche Bank are lead book runners.
This series of notes marks its sixth securitization of California’s Property Assessed Clean Energy (PACE) loans.
The latest deal is secured by 9,252 PACE loans levied against residential properties in 27 California counties. The PACE loans have on average around $24,236 outstanding, pay a weighted-average annual interest rate of 7.94%, and at issuance had a weighted-average maturity is 184 months. This gives you a flavor of these relatively small but long-term loans provided to residential property owners to improve the greenness of their homes.
Sustainalytics, as the second review provider, assessed the Green Bond framework and the environmental credentials of the green notes. The proceeds will go to the home improvement projects through the Home Energy Renovation Opportunity (HERO) program. These are either renewable energy or energy efficiency projects.
Renovate America also commits to impact reporting under various metrics including water savings, energy savings, GHG emission reduction, and renewable energy generation. The first report is due out Winter 2016 – so keep your eyes peeled!
Municipal, City & Provincial green bonds
Ramsey County (Minnesota) issues first $17.9m green bond (3% & 3.125%, 1yr - 25yrs, AAA)
Ramsey County issued its first green bond of $17.9m, with maturities spanning between 1 year and 25 years, coupons of 3% and 3.125%, rated Aaa (Moody’s) and AAA (S&P). Robert W Baird & Co INC. acted as the lead book runner.
Similar to other US municipal bonds Ramsey County made its green bond debut without seeking second review or certification.
Proceeds will be used for the acquisition of an existing solid waste facility located in the City of Newport, Minnesota (‘the Resource Recovery Facility’).
The waste processing plant has two key environmental aspects; waste-to-energy and waste management (recycling and reducing landfill).
It’s not the first time we’ve seen a waste management focused green bond. Last year French pure-play Paprec Holding issued a bond against their recycling plant. It got a second review from Vigeo and only processed recycling.
The Ramsey County facility recovers energy from waste by using anaerobic digestion to produce natural gas and uses gasification to convert shredded trash to produce biofuels.
Fuel produced through the waste facility is then at local power plants in Red Wing and Mankato (which were ex-coal plants that have been converted for waste-to-energy generation) to produce electricity.
The facility also aims to recycle the waste that is not used to produce fuels for energy as much as possible. The target policy for the State is 75% of waste recycled. An admirable ambition!
We’d like to understand more about the waste that doesn’t get used for fuel or recycling – here is where a second review would have been a useful addition.
Up till now, there have been 70 individual muni issuances in the market with 24 supported by second reviews and only the $780m MTA bond was certified under Climate Bonds Standard.
MTA Issues inaugural certified green bond upsized to $782.52m (1 to 20 yrs, 2% to 5%, A)
New York's Metropolitan Transportation Authority (MTA) planned its inaugural green bond for $500m; a wave of interest from institutional and individual investors has led to MTA upsizing the certified green bond to $782.52m!
The certified green issue consists of 46 tranches with maturities spanning between 1 year and 20 years, coupon from 2% to 5%. The deal is rated A1 (Moody’s), AA- (S&P), and A (Fitch). Samuel A Ramirez & Co is the lead book runner.
The bond was certified against the Climate Bonds Standard and its recently launched Low Carbon Transport criteria. All these projects or assets are electrified rail assets and supporting infrastructure selected from the MTA’s 2010-2014 Capital Plan. Sustainalytics has verified that the bond meets the Climate Bonds Standard.
A huge slice, $250m in total, of MTA’s green bond was bought by retail investors. MTA targeted New Yorkers via a mix of radio and online promotions. The success of the retail offering demonstrated an appetite amongst individual investors for green bonds – especially when the green credentials are verified by credible certification.
According to MTA communications, two high net-worth retail orders of $5 million were identified as specifically seeking a green certified bond. Fantastic news!
More details on our previous MTA market blog.
Development Banks
Development banks provide further currency diversification for green bonds with three new (small but important) issues in Indian Rupees and Turkish Lira
Three of key Development Banks have issued repeat green bonds in a range of currencies EBRD, IFC, and IBRD, all frequent issuers of green bonds, hit the market again in recent weeks with modest emerging market currency green issuances.
- EBRD issued an INR180m ($13.4m) green bond with coupon of 8.46%, tenor of 3 years, Credit Agricole CIB as the lead underwriter
- IFC’s new Uridashi issuance of TRY7m ($2.4m) has a coupon of 8.65%, tenor of 3 years, and Shinsei International as the lead underwriter
- IBRD’s new green bond features INR607m ($1.8m), coupon of 5.8%, maturity of 5 years, with JP Morgan as the lead underwriter.
The bulk of labelled green bond issuance continues to be in US dollars and Euros. However, the development banks increasingly issue smaller labelled green bonds in a range of currencies. 23 different types of currencies are represented so far.
We need currency diversification for green bonds both to help investors with green bond portfolios achieve currency diversification and to give access to the market for emerging market investors looking for green bonds in local currency.
Market Developments
Leading Netherlands Investment Manager NNIP launches green bond fund
Dutch based NN Investment Partners (NNIP) is set to launch a green bond fund of between €10 million and €30 million, focusing on euro-denominated issues with a small proportion of investment in non-euro denominated green bonds, according to Environmental Finance.
NNIP leverages the best practice guidelines of the Green Bond Principles and research from Sustainalytics to identify green bonds eligible for investment.
Green Bond Gossip
CoPower focuses on retail investors in its inaugural green bond
CoPower issues its inaugural green bond targeting CA$ 300k and focusing on Canadian retail investors. The green bond issuance is linked to loans to two solar projects and one energy efficiency project:
1) Rooftop Solar Projects in Windsor and Chesley (both in Ontario)
2) Energy Efficiency upgrades at the Harbourfront Centre in downtown Toronto.
CoPower is committed to impact reporting. We will provide more details in our next blog.
Disclaimer: The information contained in this market report does not constitute investment advice and the Climate Bonds Initiative is not an investment adviser. Links to external websites are for information purposes only. The Climate Bonds Initiative is not advising on the merits or otherwise of any bond or investment. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind for investments any individual or organization makes, nor for investments made by third parties on behalf of an individual or organization.
