Electricité de France (EDF) today set a new high for a green bond - a benchmark-sized EUR1.4 billion (nearly $1.9bn). A terrific achievement.
The bond was two times over-subscribed - so I guess that's another EUR1.4bn that's still looking for a green home.
Ratings are A+ S&P / Aa3 Moody’s / A+ Fitch. The bonds are tied to EDF's renewable energy assets - which makes them a climate bond in our eyes.
Morgan Stanley were the structuring advisor. Bookrunners were Credit Agricole, Morgan Stanley and Societe Generale. Commerzbank, JP Morgan and Mizuho are also down as "passive bookrunners".
EuroWeek reports that half a dozen banks are now looking at issuing corporate green bonds.
The green bonds market has to date been dominated by AAA issuance with minimal yield - at rates of less than 1% investors are more or less paying issuers to look after their money. The next step was going to have to be a shift to modest yield, and the EDF bond, along with other corporate green bonds this week, shows that shift is well and truly here.
The investor breakdown for the EDF bond was:
- France 36%
- German & Austria 17%
- Southern Europe 10%
- UK & ireland 9%
- Benelux 8%
- Asia 7%
- Nordic 7%
- Switzerland and other 6%
Investor types
- Funda managers 70%
- Central banks 13%
- Insurance & pension funds 13%
- Banks and others 4%
60% of the bonds went to "SRI investors".
The eligibility criteria have been drawn up by french ESG ratings company Vigeo, and Deloitte's will review EDF's use of funds to ensure the linkage to assets. It's excellent that EDF have accepted the need for third party verification - confidence in a corporate green bonds market will depend on that.
The only niggle we have in the face of this fabulous bond is that Vigeo's criteria are not about which types of projects can be included and which can’t, but are a broad set of ESG guidelines: country governance and human rights, environmental impact monitoring, health and safety, responsible relationships with suppliers and consultation with stakeholders. They're useful to assure investors that there is low ESG risk to the bond but don't address whether funds are going towards green projects - we need transparent criteria for what assets can and cannot be included if this market is going to grow this market so it genuinely addresses climate change. Not an issue with EDF, who we have allocated bond proceeds to their wind, solar and EU hydro energy assets.
Niggles aside, a EUR1.4bn "labelled" green bond marks a new stage in development of a market designed to make it easier for investors to vote "climate" with their capital.
