EIB taps EUR400m from 2019 AAA Climate Awareness Bond — and prices at a negative yield!
Not to be outdone by last week’s flurry of World Bank green bonds from across the pond, the European Investment Bank (EIB) flexed its Climate Awareness Bond muscle on Wednesday by tapping its recent 5 year bond for a further EUR400m ($450m). That takes the bond up to a total of EUR3bn issuance, the largest outstanding green bond around. This is the EIB’s second green bond of 2015.
The EIB is rated Aaa/AAA/AAA (Moody’s / Standard and Poor’s / Fitch). The tap carries a coupon of 1.375%, which is effectively a negative interest rate of 0.026% when compared to inflation expectations! This is the first EIB green bond negative rates. The negative yield is still eight basis points more than is currently available from German government bonds of similar maturity. The Financial Times has a useful explanation of the attraction (!) of negative yields.
Joint Bookrunners were Crédit Agricole CIB, Credit Suisse, Nomura and Standard Chartered.
The transaction was announced the day EIB’s 2014 results were released — last year the bank dedicated over EUR 19bn, or 25% of its total lending, to climate action.
India’s fourth largest bank, Yes Bank, completed the country’s inaugural green bond this week. Originally planned for INR5bn, strong demand allowed them to double its size to INR10bn (IFR Asia reports that it was still oversubscribed at this higher amount). The bond is rated AA+ from local rating agencies Care and Icra (roughly equivalent to BB+ internationally). It has a coupon of 8.85%. Yes Bank arranged the deal in-house.
There were 15 to 20 investors involved, ranging from domestic (Indian) Insurance Companies, Pension and Provident Funds, Mutual Funds and one international investor.
Proceeds will go towards renewable energy and energy efficiency projects. Some examples are solar, wind, biomass and small hydro projects.
As mentioned in our previous blog, there is no second opinion provided on the green credentials of the use of proceeds – at this stage. However KPMG will provide reporting on the allocation of proceeds annually which at least will show investors what projects are being funded.
Deutsche Bank announced its intention to invest EUR 1 billion into a portfolio of high quality liquid assets in the form of green bonds. These will be held as part of the Bank’s Liquidity Reserve investments. Deutsche Bank has already made EUR 200 million in eligible Green Bond investments and plans for this portfolio to reach EUR 1 billion.
North Rhine-Westphalia is the most populous state in Germany, as well as the fourth largest by area. It's still not clear whether it's a green bond or an "SRI" bond; whichever, it'll be the first from a German State.
The other gossip this week is that Government-run Thai oil company Bangchak is planning to issue Thailand’s first green bond next month – and what would be the first corporate green bond from an oil company.
While at first blush this would seem worrying, the company does have a big portion of its business directed towards solar and biofuels, and the proceeds of the bond will be directed accordingly.
The concern for investors will be around the allocation and reporting of proceeds — they will be looking for confidence that the bond is in fact funding green and not brown assets. Independent verification would be very useful here, or even certification against our soon to be launched Climate Bonds bioenergy standard.