Earlier this week we blogged the issuance of IFC's second $1 billion green bond. IFC's press release about the bond says it "was heavily over-subscribed". IFC vice president and treasurer Jingdong Hua told Environmental Finance. “We had a pretty large book – well over $1.5 billion – and we were able to tighten the pricing. Demand remains strong.”
Hua called on other multilateral development banks to issue their own benchmark-sized green bonds – by which he means at least $1 billion in size – to help attract institutional investors to the fledgling market.
“I would like to see our fellow issuers come into the market and issue at a benchmark size,” he added. “That’s really the vehicle to increase liquidity for secondary market trading. Institutional investors need to see a market that’s deep and liquid and often-traded, and the size of the market matters. If we could see total issuance from our community increase, not only would it demonstrate commitment, it would help develop it as a viable thematic instrument that has mainstream appeal.” Absolutely right.
Investors included Blackrock, CalSTRS, Calvert Investments, Deutsche Bank Asset and Wealth Management, Ford, Microsoft, Praxis Intermediate Income Fund and Everence, State Street Global Advisors, Trillium Asset Management, UNDP, and the UN Joint Staff Pension Fund.
An interesting development this year has been demand from central banks specifically for green bonds. IFC buyers this time were Germany’s Bundesbank and the Central Bank of Brazil.
In terms of plans for the rest of the financial year, IFC seem to have revised their plans for another $3 billion this year. They're now telling us they are looking at roughly $3 billion of thematic bonds, not all of which will be green. That means some of them will be like the $165m "Women's Bond" they also issued this week.
Wednesday's EUR500 million ($675.2 million) ‘sustainability bond’ from FMO apparently had EUR1.2 billion of demand. Not bad for their first foray into the area!
According to FMO’s financial markets director Huib-Jan de Ruijter, speaking to Environmental Finance, the coupon was reduced to 1.257% – three basis points lower than predicted - as a result of the strong interest. It actually ended up at 12 basis points above the benchmark ‘mid-swaps’ rate, not the 15bps initial guidance that we had reported.
FMO provided a bit more detail about buyers than IFC did: more than 50 investors were involved, with 75% of investors having "ESG considerations". Some of the individual investors were Aegon AM, AG2R, La Mondiale, Andra AP Fonden (AP2), Fjärde AP Fonden (AP4), APG, ASN, AXA IM’s Label Euro Obligations Fund, Natixis AM–Mirova and SNS Bank.
Buyer breakdown was:
- 29% banks
- 29% fund managers
- 23% insurance and pension funds
- 15% central banks and official institutions
- 4% corporations
Buyers were from:
- Nordics - 27%
- Netherlands - 26%
- German/Austria - 14%
- France - 13%
- Rest of Europe - 10%
- Asia and other - 10%
Just to remind you why we're worrying about bonds directed funds to climate investments ... this week the World Meteorological Organisation said that concentrations in the atmosphere of the three main global warming gases rose in 2012 to the highest on record, increasing impacts of climate change including ice melt and rising sea levels.
WMO Secretary-General Michel Jarraud said: “According to the IPCC, if we continue with ‘business as usual,’ global average temperatures may be 4.6 degrees higher by the end of the century than pre-industrial levels – and even higher in some parts of the world. This would have devastating consequences”.
“Limiting climate change will require large and sustained reductions of greenhouse gas emissions. We need to act now, otherwise we will jeopardize the future of our children, grandchildren and many future generations,” said Mr Jarraud. “Time is not on our side”.