Big news from the World Bank this week with two green bonds issued: the first is a long 30 year tenor for insurance giant Zurich and the second is the World Bank’s biggest ever green issuance of $600m. Repeat issuance seems to be the theme of the week with another green bond from Swedish property company Vasakronan.
Namaste to India’s Yes Bank who announced they too would be issuing green bonds this week; it’s the first India green bond - exciting! For more details and a market update from Delhi check out the latest blog. The US city of Tacoma announced a $21m green municipal bond for the city’s waste management programme. The disclosure is fairly limited about the use of proceeds so we will fully cover this bond when we get our hands on this information next month.
The latest EUR30m ($34m) World Bank green offering matures in 2045 making it the World Bank’s longest tenor green bond. It was designed to meet the requirements of the sole investor in the bond, Zurich Insurance Group. The bond has a fixed annual coupon of 1.0325% and is rated AAA. As with all World Bank green bonds CICERO provided a second opinion. Morgan Stanley was the underwriter for the deal.
DC Water’s 100 year green bond retains its crown as the longest tenor green bond to date. But, this new World Bank 30 year green bond beats all other green offerings in terms of tenor – the next being EIB’s 25 year Japanese green bond last March. Green bonds with long maturity dates are important for market development as institutional investors with long dated liabilities look to fill portfolios with green investments.
Having issued green bond for CALSTRS and California State, the World Bank has a track record of working with investors to design green products to fit the investor’s specific needs. IFC, the private finance arm of the World Bank has also done this: last year IFC issued a green bond in Peruvian Soles specifically for Peru’s leading insurance company RIMAC Seguros. Insurance companies have long liabilities and look for investments with long maturity dates in local currency. This latest offering from the World Bank does just that with a 30 year tenor in euros.
The World Bank also issued a large $600m green bond this week with a still lengthy 10 year tenor (actually the longest tenor in USD from a World Bank green bond). The coupon is semi-annual fixed at 2.124% and the bond is rated AAA by S&P. As with all World Bank bonds CICERO provides the second opinion on green credentials. Deutsche Bank, Morgan Stanley and SEB are the lead managers in the transaction.
According to a press statement the World Bank’s green bond programme continues to attract new investors – fantastic for such an established programme! Though some of the usual suspects of staunch green bond supporters, such as AP2, AP4, Blackrock, Mirova and Nikko Asset Management, were also part of the 25 investors in the green bond.
The majority of the deal was taken, as expected, by investors in the Americas (39%) and Europe (28%), but it’s great to see around a third go to investors in Asia (16%) and the Middle East and African (17%).
Swedish real estate company Vasakronan issued yet another green bond this week taking its total issuance to $588m over 7 bonds. The latest SEK 120m ($14.2m) green bond has a fixed annual coupon of 0.37%. CICERO provided a second opinion and Danske Bank was the lead manager of the deal.
Vasakronan was one of the first corporate green bond issuers back in November 2013, and it has committed to reporting on both the use of proceeds and the green impacts of the bond through annual investor newsletters – brilliant! An example newsletter is publicly available, however, it’s not clear whether such reports will be available to the public going forward as no other more recent newsletters are listed on their website. Nevertheless, it’s great to see an issuer following best practice and disclosing key information to investors. Bravo Vasakronan!
On Wednesday the European Commission officially launched its green paper and public consultation on building a Capital Markets Union (CMU), a priority area for the Commission to boost growth in Europe. What’s really exciting is that the recent green paper reveals that green bonds are explicitly on the agenda as part of the Capital Market Union reforms, as the draft documents that emerged in January suggested. In fact, the consultation document asks about steps the EU might take to support the development of green bonds. Many of the other priority areas for the CMU presented in the green paper are also relevant for green bonds, as we explored in the previous post (and will cover in a upcoming BusinessGreen article). We look forward to seeing what measures for green bonds make it into the CMU action plan expected in Q3.
Finally, Danish wind pure-play company Vestas is talking to investors about issuing an inaugural green bond in the coming week so keep an eye on the weekly blogs for more details.
Our blogs are written by a team: Sean Kidney, Tess Olsen-Rong, Beate Sonerud, Katie House, with help from Justine Leigh-Bell.