The European Investment Bank (EIB) yesterday issued a new ZAR 300 million (US$28 million), AAA, 4 year Climate Awareness Bond.
The interesting thing about this bond is that it's targeted at the broader retail community - sales are to individual customers through distributing banks and institutions, largely in Switzerland, Italy and Germany as far as we know. We often get emails asking about how individuals can buy climate and green bonds; here's a good example. We need more.
This is EIB’s fourth South African Rand climate bond. The interest rate is 7.75%, an attractive yield for many investors - but you have to be willing to cope with the risk of exchange rate fluctuations.
Funds for EIB Climate Awareness Bonds go to:
- renewable energy projects such as wind, hydropower, wave, tidal, solar and geothermal production,
- energy efficiency projects such as district heating, cogeneration, building insulation, energy loss reduction in transmission and distribution, and equipment replacement with significant energy efficiency improvements.
EIB’s earmarking approach entails the ring-fencing of proceeds in a dedicated liquidity portfolio. Until funds are actually invested, the sub-portfolio is invested in money market instruments. This is absolutely best practice, as required in the Climate Bonds Standard.
The EIB provides regular reporting through its annual Sustainability Report and through a dedicated Climate Awareness Bond Newsletter. See the latest newsletter here.
Lead Manager for the transaction was RBC Capital Markets.
