World Bank’s first ‘Kangaroo’ green bond hops into Australian market: AUD300m ($280m), 5yrs. UniSuper jumps in as “lead green bond investor”, bringing others in. Now that’s a good idea for other markets! USS in the UK? ABP in Netherlands? CPP in Canada?

Posted on 22. Apr, 2014 by in blog, Green Bonds

The World Bank last week issued its first ‘Kangaroo‘ Green Bond (yes, that is really is the financial markets term!): AUD300m ($280m), 5yrs, AAA. This is the first AUD benchmark green bond. Proceeds are used to fund climate change related projects. Price was 20 basis points over swaps – the same as other World Bank Kangaroo bonds.

UniSuper, Australia’s AUD39.5 billion university employees pension fund, has advertised its role as role as “lead investor”. They bought AUD 100 million to allocate to their Socially Responsible (SR) Balanced ”option” – making up half its current fixed-income component. They then advertised to their 450,000 members that they could have exposure to the bonds by actively selecting that option. Great approach!

There were 15 investors, including Aberdeen Asset Management, AMP Capital, Australian Ethical Investment Ltd, Colonial First State Global Asset Management, Local Government Super (a foundation buyer of green bonds in the Australian market) and QBE Insurance Group Ltd. All investors have a specific interest in supporting climate projects as part of their investment mandate.

Australian bonds newsletter Kanga news reports widespread excitement about the prospects for green-bonds.

On the back of this cracking open of the market we expect to see a flurry of Australian domestic green bond issuance. We expect at least AUD 1 billion by the end of the year.

Joint-lead managers were RBC Capital Markets and Westpac Institutional Bank.

Investor types:

  • Asset managers = 42%
  • Superannuation funds = 35%
  • Insurance companies  = 30%
  • Banks = 3%


  • Australia = 77%
  • Japan = 10%
  • US = 11%
  • Other Asia = 21%

This bond follows two benchmarked sized World Bank green bonds in 2014 so far in EUR and USD. The bond takes the World Bank’s total issuance for 2014 to approximately $1.6 billion.


Green Bond Principles: BankTrack & NGO group “cautiously welcome”, but call for transparency, science-based criteria for ‘green’ & independent verification

Posted on 16. Apr, 2014 by in Banks, blog

BankTrack is a global network of civil society groups tracking the operations and investments of commercial banks and “their effect on people and the planet”.

This week they published a letter to the Green Bond Principles signatory banks, giving a cautious welcome to the Principles, but saying that the lack of clarity over what projects can be considered “green” risked setting the project up to fail.

BankTrack director Johan Frijns said: ”Principles which allow banks to decide for themselves what is and isn’t ‘green’ do not exactly inspire confidence”.

They also call for banks to:

  • Ensure high standards of transparency and disclosure for bond issuances they underwrite
  • Reference clear and science-based definitions and criteria of what constitutes ‘green’ under the Principles
  • Commit unambiguously to third party, independent verification of the information on sustainability and use of proceeds reported by Green Bond issuers.

(BTW, they suggest using the Climate Bonds Initiative criteria, referenced in the appendix to the Principles, as a useful starting point.)

The letter came out just after it was announced 12 new banks had joined up. It was co-signed by Friends of the Earth US, Rainforest Action Network, International Rivers, Amigos da Terra – Amazonia Brasileira, Global Witness and Berne Declaration.

The letter also called on banks to match their commitment to growing the green bond market with an urgent move to curb fossil fuel financing in order to avoid dangerous climate change.

See the full text here.


Now it’s 25! A dozen more banks sign on to “Green Bond Principles” + ICMA takes on Secretariat role. Can they make it 100 banks signed on by UN Climate Summit in Sept? Go on, Ban Ki Moon needs some good news.

Posted on 16. Apr, 2014 by in Banks, blog

The Green Bond Principles were published by 13 banks in January this year to encourage transparency, disclosure, and integrity in the Green Bond market. (We expressed our support for the initiative as a useful step to drive the market forward.)

It was announced yesterday that another 12 banks were signing on to the Principles and that the International Capital Markets Association (ICMA) had taken on the job of providing Secretariat services. This is good news.

A governance framework for the Principles was also announced; it allows for stakeholder input into the Principles and sets out the membership eligibility, which requires organizations to have issued, underwritten, or invested in Green Bonds. A new executive committee will include underwriters, issuers, and investors with global geographic representation.

The original signatories were the four founding banks – Bank of America Merrill Lynch, Citi, Crédit Agricole CIB, and JPMorgan Chase – and nine others: BNP Paribas, Daiwa Capital Markets, Deutsche Bank, Goldman Sachs, HSBC, Mizuho Securities, Morgan Stanley, Rabobank, and SEB.

The new signatories are Barclays, BMO Financial Group, Credit Suisse AG, DNB, DZ BANK AG, ING, Lloyds Bank, Mitsubishi UFJ Securities, Nomura, RBC Capital Markets, Santander, and Société Générale.

Now the question on my mind is can they make it 100 banks by the time of the UN Secretary General’s Climate Summit on 23 September this year? It would be a great story for Ban Ki Moon to highlight, in contrast to the depressing lack of progress in the UN climate negotiations. Go on folks!


Arise Windpower issues SEK1.1bn ($167m), 5yr green bond linked to wind farms. Nice.

Posted on 16. Apr, 2014 by in blog, Renewable Energy

Swedish company Arise Windpower has just announced the successful issuance of a SEK1bn ($167m) 5 year green bond linked to wind farms. Interest rate was set at 3% above STIBOR (the Stockholm Interbank Offered Rate).

Arise indicated that investor interest was ‘strong’, partly due to the green stamp on the bond.

This is the first senior secured bond issue in Sweden in the wind power sector. DNB Markets was the sole bookrunner. DNV GL also provided a second opinion on the bond. All good.

The bond will be used to refinance existing wind farms in the southern part of Sweden, all of which have production and operating history. Wind is a clear part of the low carbon economy and Arise’s earlier unlabelled bonds are already included in our annual market sizing report as they are a pureplay company in this space.

By refinancing its debt, the bond allows the company to diversify its financing and, because bond rates are so low, improve cash flow by SEK30 million ($4.5 million) a year.  Nice.

Refinancing is important for the capital pipeline, especially for pureplay companies like Arise who will be building more wind farms.

So the bond is good … but something in the press release is not quite right:

“DNV GL has given an opinion stating that the bond meets the criteria for the Green Bond Principles …  by this opinion the green integrity of the bond is verified.”

This is a little misleading. Scanning the press coverage in past months it’s clear there’s confusion about whether the Principles constitute “Standards” or not.

The Principles are important as a guide to issuers and underwriters about a number of key features of green bonds: a focus on the utilization of the proceeds of the bond rather than the issuer’s “green-ness”; identifying that transparency is critical; saying issuers should regularly report; etc. But they are not definitive. When it comes to “what is green” the Principles first make a very broad statement that assets linked to green bonds are:

“… projects and activities that promote climate or other environmental sustainability purposes.”

They do go on to say that several broad categories are “recognized”: renewable energy; energy efficiency; sustainable waste management; sustainable land use; biodiversity conservation; clean transportation; and clean water. But then …

“There is diversity of opinion on the definition of Green Projects; therefore it is not the intent of the Green Bond Principles to opine on the eligible Green Project categories.”

To look for criteria you can use about “green-ness” you’re then referred to go the Appendix of the Principles for examples you could use. The Climate Bonds Initiative’s taxonomy is in there, as well as those for the World Bank, IFC, EIB and EBRD, and the OECD. They are all reasonably in sync.

The Principles are broad guidelines; doing as the guidelines suggest is great. But for a reference definition to back up your claims of being green you need to look beyond them.

But back to Arise – Bravo!

Île-de-France issues EUR600m( $830m), 12yr, AA+ Green Muni. They had so many orders in one hour they upped it from 350m to 600m!

Posted on 15. Apr, 2014 by in blog, Green Bonds

Île-de-France is the regional government that Paris sits within. Yesterday they issued their second green muni bond, which they are calling a Green & Sustainability Bond, to finance an eclectic mix of green investments. The first green bond they did was for EUR350 million; this one is EUR600 million, again for 12 years. Rating is AA/AA+ (stable/stable, S&P/Fitch).

Interest rate was expected to be 20 basis points above French Treasury bonds, but was finalised at 18 basis points above. For those wondering what that means, it translates into EUR120,000 less interest paid out each year than expected.

They went to market looking for EUR350 million. After one hour they closed with EUR750 million of orders. They ended up issuing EUR600 million. I guess we can take that as another market signal.

Buyers were “high quality”. 40 orders have been accepted. The most recent Ile de France bond was largely placed with French investors; this green bond has slightly broader appeal, with buyers down to 76% French this time, 12% German and Austrian, 9% Dutch, and even a US fund manager, a first for Île-de-France. 84% were classed as “SRI Investors”.

Third party review (called a “Second Opinion” in this case) was done by Vigeo. Thank you Île-de-France for showing others what good practice requires!

Proceeds of the bond will be used for a broad array of investments, including:

  • Construction and renovation of buildings, including high schools, with an “eco-construction” objective.
  • Public transport with a “sustainable mobility objective”, including a tramway extension and dedicated bicycle lanes.
  • Renewable energy projects, such as geothermal installations and “extension of heating networks”.
  • Purchase of green space and creation of “ecological corridors”.
  • Protection of water resources.
  • Energy efficient buildings for accommodation for vulnerable people and the elderly, and for social housing.
  • Support to small and medium-sized companies integrating corporate social responsibility initiatives.

The extent of detail Île-de-France is providing is commendable (click here for their PDF).

Of course there’s still room for improvement: for example, specifying the level of building efficiency that will be achieved (which I imagine will be high), or a better explanation of the “support” for small companies, which sounds worthy but it’s hard to tell what it actually means. That sort of issue may become easier to address as standards develop.

Île-de-France say they will report on the projects financed each year, until the notional amount of the issue is invested.

Bookrunners were Crédit Agricole CIB, HSBC France and Natixis.


Canada’s first corporate green bond: TD Bank’s 3yr AA- CAD500m (USD454m) bond was 1.5 x oversubscribed. Our take: underlying structure & intent solid but better upfront disclosure needed + third party review.

Posted on 11. Apr, 2014 by in Banks, blog, Green Bonds

A beautifully sunny day in Toronto today; the local weather’s looking good for green bonds as well.

Nearly two weeks we blogged that TD Bank had become Canada’s second “labelled” green bond issuer, with a CAD500 million, 3 year, fixed interest corporate green bond. Here’s the review:

This is Canada’s first corporate green bond, and the world’s second green bank bond (Bank of America was the first). A corporate green bond means a bond fully backed by the company – and so AA/AA-/Aa1 rated in TD’s case – but proceeds are allocated to green investments. TD’s pricing was around 60 basis points more than government benchmarks. Manager was TD Securities.

Of particular interest is that TD issued two bonds at the same time: a standard bond at 5 years, and the green bond at 3 years. Both bonds were over-subscribed and pricing was similar. The green bond was 1.5 times over-subscribed and attracted 39 investors, 12 of whom were new investors to TD.

Proceeds in the green bond will be “used by the Bank to finance its customers’ and/or its own projects/operations that support the green economy”.

As regular readers of this blog will know, we believe that standards around definitions of green and around use of proceeds are needed if we’re to avoid green washing and ensure confidence in the green bonds market.

TD has clearly set out to do a green bond as an example to others, which is a good thing. But in that context we have two concerns with the bond: its rather broad stated definitions of green and the lack of upfront external review of its green credentials.

TD lends some $2 billion a year to cleantech, so they have more than enough deal-flow to back a bond and justify its green credentials. But in this bond, as part of raising awareness among investors around the range of projects that can be considered green; they’ve chosen to say they will allocate funds to a broader set of investments. Fair enough; laudatory even. But the stated criteria are very open, making for potential uncertainty about what sorts of investments could be included. TD does say that they felt they couldn’t be clearer because of a lack of standard criteria in areas such as green buildings and infrastructure and that they’re “working with credible third parties to establish suitable criteria”. Apparently additional information will be coming soon; good, but should have been upfront at the time of sale.

In TD’s Green Bond FAQ, green is defined as:

1.    “Renewable and low carbon energy and related infrastructure, such as hydroelectric, wind, solar and geothermal.”

The term ‘low-carbon’ is, for some people, very broad. Our first question was whether bio-energy is included and if so, what forms – some forms of biofuels are a bad idea. Equally, gas is seen by some folk (and by gas companies) as low-carbon. TD have subsequently publicly confirmed that gas and biofuels are not included; of course it would, again, have been good for a demonstration bond to be explicit on these things upfront.

2.    “Energy efficiency and management, with a focus on green buildings.”

The Term Sheet notes that TD “has 127 LEED certified locations in North America and 100 facilities generating solar energy, including two branches designed to be net zero energy”.

Zero-energy performance is great; but LEED is not always an adequate proxy for emissions performance. Performance hurdle rates are needed as well. As the IEA says, small improvements can be counter-productive, locking in assets to emissions profile that are not adequate to the built or industrial emission reductions we have to achieve to address climate change. 5-10% is generally not seen as adequate, for example. Whatever, we would want to know what level of LEED certification – or Energy Star rating – the buildings achieve.

We’re worriers, and the next anxiety was, on the basis of the disclosed criteria, whether fossil fuel power plant retrofits be included in there? Are there any limits? For example, could loans to energy efficiency investments in the Alberta tar sands be included? Note that the World Bank has specifically excluded coal-fired power plant retrofits from its green bond, because CICERO (and they’re right) said that, in most countries, extending the life of coal-fired power plants was antithetical to the emission reductions trajectory the world needs. TD said no no no on fossil fuels – music to our ears. Again, please be explicit to show others.

3.    “Green infrastructure and sustainable land use management […]  includes municipal and regional infrastructure projects that contribute to energy reduction and projects that involve certified sustainable agricultural and forestry practices”.

Green infrastructure is a pretty wide definition. For example, will they expect water infrastructure to have climate adaptation plans?

Clarity of definition, so investors can easily compare apples with apples, is important if green credentials are to remain robust.

At the moment, the available documentation for the TD bond gives the perhaps unfair impression of TD judging by itself what is green.  Of course it’s true that the green bond market is taking off without protocols, standards, verifiers and reporting requirements fully established – a common feature of rapid market adoption.  We’re working to fix that with the Climate Bond Standards & Certification Scheme; for example we’ll be releasing green property and low-carbon transport definitions (eligibility criteria for certification) in coming months..

The lack of clear definition for this bond would be ameliorated by credible third party review of green claims, or even by referencing a recognized third party set of definitions, as per the Appendices of the Green Bond Principles, and outlining any specific areas of exclusion (e.g. gas). TD are working on this, but this should have been in place when the bond came out.

TD says that they “will provide investors with annual updates regarding the use of the TD Green Bond proceeds”. We understand an auditor will sign those reports off – excellent – but, again, details haven’t yet been announced. Sigh.

They’ve also said that: “pending the allocation to finance the above projects, the proceeds of the TD Green Bond will be segregated and invested in short term financial instruments.” Excellent.

By the way, TD bank says it “will fund new projects or refinance continuing business operations”. Sounds good to us; bonds are primarily a re-finance instrument; the easier it is for equity investors and lenders to re-finance the easier it is for them to decide to invest upfront. We need more examples that involve re-financing; this week’s Iberdrola bond was another.

Finally, TD notes that their bond is available to retail investors through TD Wealth Management. Given that we often get asked by individuals how they can get hold of green bonds, this is a useful add-on.

Perfecto! Spain’s Iberdrola issues 8.5yr EUR750m ($1.04bn), BBB but very tightly priced, green bond tied to their renewable assets; 2nd utility to enter market; 4x oversubscribed. Yes, that’s right, 4 times as many buyers as they needed!

Posted on 09. Apr, 2014 by in blog

I’m at the Bloomberg New Energy Summit in New York, and we’ve had green bonds green bonds green bonds on the agenda – that’s good news.

But talk today is all about yesterday’s bond from Iberdrola - EUR750m, BBB, 8.5 years – and how it was four times oversubscribed! That’s right, four times as many orders as they could fill – and they hadn’t even bothered with a roadshow.

Whoa! That’s what you call a market signal.

Iberdrola is only the second electricity utility (first was EDF) to issue a green bond. This is the first Spanish corporate green bond. ¡Hola España.

Proceeds will be used for their renewable energy business, to refinance existing investments (very important for bank bond teams to note) as well as new investment in:

  • Renewable energy (hydro, geothermal, wind, solar, waves, tidal or ‘other’ non-fossil energy)
  • Transmission and distribution that connect renewable energy
  • Smartgrids that improve efficiency and demand management of networks

A third party opinion was provided by Vigeo and is published on the company website (Yes! Transparency! That’s what we want!). Vigeo was commissioned to advise on compliance with the Green Bond Principles as well as provide an opinion on issuer and the environmental purpose of the projects.

Iberdrola’s green bond portfolio fits very much within our taxonomy of a low carbon economy. With Vigeo providing additional criteria, proceeds are unlikely to be made in difficult ‘renewable’ areas such as large scale tropical hydropower. We are encouraged by the company’s transparency and commitment to annual reporting in the Green Bond section of its Sustainability Report.

Seeing more green bonds from utilities is a welcome development. Utilities clearly need to be major contributors to the low carbon economy by building clean energy assets; the easier it is for utilities to fund these types of project, the more likely they are to make them and so lead to genuine additional investments. This particular bond also enables SRI investors to invest in the renewables part of the business alone, something they have not been able to do at the equity level since Iberdrola Renovables was merged back into the main group in 2011.

The bond was priced with a zero NIP, in line with where a vanilla/brown bond would price. At 2.5% this is Iberdrola’s lowest ever coupon. This is the tightest spread on any tenor EUR deal since March 2010 and 41bps tighter than their 7yr deal from 6 months ago. I’ll let you read the tea leaves on that one, but it’s very good news for Iberdrola whichever way you look at it.

The EUR750m bond was 57% placed with SRI/green investors. Investor types were:

  • Fund managers = 68%
  • Insurance & Pension funds = 21%
  • Bank = 7%
  • Others = 4%


  • Germany & Austria = 28%
  • France = 24%
  • Iberia = 17%
  • UK=14%
  • Benelux=8%
  • Switzerland = 3%

Joint bookrunners were Santander, Bank of America Merrill Lynch, Goldman Sachs, HSBC, JP Morgan and Lloyds Bank.

SolarCity on the road with a $70.2m, 8yr, BBB+ rooftop solar leases securitization; closes Thursday

Posted on 08. Apr, 2014 by in blog, Climate Bonds, Securitisation Market, Solar Energy

US company SolarCity has priced a solar bond backed by cash flows from a pool of 6,596 mainly residential solar panel systems and power purchase agreements in California, Arizona, and Colorado.

Expected bond figure is $70.2 million, but the bond doesn’t close until Thursday this week. Interest rate is 4.59%. Credit Suisse is structurer and sole bookrunner.

This is SolarCity’s second solar securitization in six months. Their previous (ground-breaking) bond was for $54.4 million with an interest rate of 4.8% – but 13 year tenor.


Swedish construction co. Skanska (Ground-Zero, Gherkin) issues 5yr, SEK850m ($131m) green property bond … CICERO sign-off but report not public … yet?

Posted on 08. Apr, 2014 by in blog, Corporate Bonds, Energy Efficiency

Swedish construction company Skanska last week issued their first green bond at SEK850 million. The use of proceeds will be ‘exclusively allocated towards investments in green commercial property development’. Swedish bank SEB was sole bookrunner.

Skanska say they’ve done the bond to diversify their investor base. The company isn’t rated, but Handelsbanken gives it an indicated rating of BBB.

Skanska, according to Environment-Finance, built London’s landmark Gherkin building and is involved in the restoration of the Ground Zero site in New York. It’s the second Swedish corporate to issue a green property bond; Vasakronan has now done two of them. France’s Unibail-Rodamco kicked off the green property sub-theme in February with a EUR750 million green bond.

The bond’s green credentials have been reviewed by the Centre for International Climate and Environmental Research (CICERO), but their report is not publicly available (or at least not yet – keep asking folks). So we’re not sure what benchmarks they used to evaluate the ‘greenness’ of their property or what standards and metrics they’re using (Vasakronan and Unibail-Rodamco used BREEAM and LEED). Transparency is useful, especially in tricky areas like energy efficiency in buildings.

We’re hoping to get more info on the bond in coming days.

Q1 roundup 2/3: Underwriter league table for Q1 – SEB out in front followed closely by, Morgan Stanley, Credit Agricole and DB

Posted on 07. Apr, 2014 by in Banks, blog, Bonds, Corporate Bonds

By Bridget Boulle

As part of our Q1 roundup, here is the league table of the largest underwriters in 2014 so far. With USD9bn of issuance to date, it’s been a BIG and there are plenty more deals to come.

SEB is still the bank to beat, out in front with over a billion underwritten (this is their share of the total bonds they’ve been involved with). SEB deals have included development banks such as the Export Development Bank of Canada and EIB as well as corporate bonds – they were sole bookrunner for the two Swedish corporate green bonds – Vasakronan and SCA.

Following closely on SEB’s heels are Credit Agricole, Morgan Stanley and Deutsche Bank all with more than USD800m.

Credit Agricole (CA) and Morgan Stanley (MS) are regulars in our league table top 5’s, both appearing in the top echelons of the 2013 league table. Both have been involved in development bank deals and corporate deals with CA on the Unibail-Rodamco bond and MS on the Unilever bond. Credit Agricole also have a number of their own smaller retail green bond details which they are the bookrunner for.

Deutche Bank did not appear on the 2013 league table so are the biggest mover of the group (they did underwrite green bonds before 2013 so appeared on our all years table). They have been on development bank (EIB, EBRD) and corporate bond deals (Unilever).

q1 14 league table

To put these figures in context, here is our updated ‘all time’ league table top 20 which includes all green bonds (on our records) from 2007 up to end of Q1 including those that have already matured (we realise that this is a fairly unusual way of doing a league table but it gives an idea of the market from 2007 until now). In this table, JPM and BAML join the top 5 while DB is a way down the list having not been active in 2013. For more context as well as some notes and caveats around our league tables, see our 2013 league tables.

 league table to date

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