Wkly blog: 1st recycling #GreenBond from France’s Paprec, another 1st #GreenBond from Swedish Wallenstam for wind+hydro; + Australian Hallett Hill wind project bond met with huge demand! + more repeat issuance from EIB, EBRD & World bank

Development bank issuance

EIB taps their 2026 Climate Awareness Bond for a further EUR 250m ($274m), coupon 1.25%, AAA

This week the largest green bond issuer EIB tapped its 2026 Climate Awareness Bond (the term for their green bonds) for a further EUR250m ($274m). The tap takes the bonds total issuance to EUR1.25bn – not to be sniffed at! Alongside the announcement was a commitment to provide “extensive disclosure of EIB’s practice” in line with the Green Bond Principles. A nicely timed announcement ahead of the Green Bond Principles AGM and Conference this Friday. Great work from the EIB, which already provides a full list of projects funded by their green bond programme and periodic factsheets.

Repeat issuances also from EBRD: BRL48m ($14.8m) + IDR200m ($15m) and World Bank (INR63m ($1m) + TRY50m ($19.4m)

EBRD’s latest Uridashi green bond offerings were issued in both Brazilian Reals (BRL48m, $14.8m) and Indonesian Rupiah (IDR200m, $15m) (Uridashi are Japanese retail bonds). The BRL issuance has a 2 year tenor and a monthly coupon of 9.21%, while the IDR issuance has a 4 year tenor and a semi-annual coupon of 6.38%. EBRD provides green bond reporting on all its green bonds in its sustainability report, complemented by a periodic newsletter for investors. The latest version (2013) shows the breakdown of the portfolio by asset type; nice.

World Bank has also been active in the Uridashi market this week issuing a INR63m ($1m) green bond with a semi-annual coupon of 4.6%. Credit Agricole was the lead manager in the deal. Separately there was a TRY50m ($19.4m) green bond for (we think) European investors with annual coupon of 8.25% and maturity in 2022.  JP Morgan was the lead manager for this one. The main reporting on green bond use of proceeds is through annual newsletters. In addition, a selection of example projects funded by green bond proceeds are listed on the website.

Municipal bonds issuance

Another green bond for water from Indiana Finance Authority, this time slightly larger at $139.7m, 1-10 yr, coupon 2%-5%, AAA

Indiana Finance Authority has issued a second tranche of its previous $100m offering green bond to continue the trend of green municipal bond issuance from the US - $139.7m, 1-10 year tenors, coupons of 2-5% and rated Aaa, AAA and AAA by Moody’s, S&P and Fitch. Again, Citigroup was the lead manager. This second tranche has shorter tenors than the first and some lower coupons but otherwise it is very alike.

Similar to the first tranche of Indiana Finance Authority’s green bond, proceeds are being directed to the State Revolving Fund for eligible water projects that improve the quality of drinking water or reduce pollution in the water supply. As with their last green bond issuance, there is no second opinion provided on the green credentials. A key challenge in this space is the lack of green standards or criteria for water. CBI’s water group is working to develop this – until then we would urge new green municipal issuers to at the least report on the use of proceeds of green bonds and disclose whether they are addressing climate adaptation risks (that’s really a credit risk issue) – and get a second opinion

Corporate bond issuance

First recycling green bond from French company Paprec Holdings – EUR 480m in two tranches: EUR295m ($323m), 7yr, 5.25%, B+ and EUR185m ($202m), 8 yr, 7.35%, B-

French recycling company Paprec Holdings jumped right in with their first issuance and issued a whopping EUR480m corporate green bond.  The issuance was split across two tranches with differing debt ranking of secured (EUR295m) and subordinated (EUR185m). A larger secured tranche of EUR295m was provisionally rated as B1, B+ from Moody’s and S&P respectively with a 7-year tenor and semi-annual coupon of 5.25%. The subordinated tranche (being lower in the pecking order) was for EUR185m with a lower rating of B2, B- (Moody’s/S&P) with a tenor of 8 years and semi-annual coupon of 7.35%. Credit Suisse and BNP Paribas were the global coordinators on the deal.

Paprec is a SME (small-medium enterprise) focusing on recycling. Proceeds from the green bond sale will be used to refinance investment in recycling assets (machinery) and acquisitions of recycling companies. Now, assuming recycling is green is fairly uncontroversial - though it does have the potential to be water intensive (a big issue in water scare areas) and energy intensive. However – most of the time the alternative to recycling (more use of natural resources) is a far worse option. So we were excited to see the first corporate green recycling bond!

ESG research house Vigeo provided a second opinion on the adherence with best practice guidelines and ESG assessment of the issuer. Vigeo also helped develop the eligibility criteria which fall into four domains environmental protection, social, governance and economic sustainable development.

The recycling projects are classified in the second opinion as circular economy projects. It's worth highlighting that recycling projects are the type of circular economy projects with lowest potential environmental savings; reuse and remanufacture are circular economy options with a much higher potential for emissions cuts and reductions in resource use

Paprec has committed to annually report on the use of proceeds and on a range of sustainability key point indicators developed with Vigeo. Though it is worth noting that proceed allocation will not be audited – an all too common theme amongst green bonds.

Altogether a great addition to the green bond list – très bien!

Wallenstam issues a SEK500m ($57.8m) inaugural green bond for renewable energy projects (4 yr, coupon STIBOR+110bps, BBB-)

Swedish company Wallenstam issues its inaugural SEK 500m $57.8m green bond this week. The bond has a tenor of 4 years and a quarterly coupon linked to STIBOR (Swedish inter bank lending rate) +110bps. The bond will be listed on NOMX Stockholm. The Swedbank shadow rating for Wallenstam bond is BBB- .

Wallenstam is a real estate corporate that builds, develops and administers properties – but it also has a subsidiary that supplies the buildings with electricity. Proceeds from the sale of the bond will be used to finance the subsidiary, Svensk NaturEngeri, which operates wind and hydropower projects.  Svensk NaturEnergi has 64 wind turbines and 3 hydro power stations – with a potential electricity output of 139MW. Not bad! The bond is a great example of how the credit profile of a parent company can be used to fund a renewable energy subsidiary through green bonds.

DNV GL provided a second opinion on the green bond framework by which proceeds are allocated to eligible projects. We’ve not yet seen it but fingers crossed it will be publicly available soon.

Project bond issuance

Australian Hallett Hill wind green project bond oversubscribed with a successful private placement in US market in two tranches of A$99m (US$78m) and A$76m (US$60m), coupons 175bp and 185bp above Treasury, BBB

Australian Infrastructure Capital Group’s Energy Infrastructure Trust has issued a wind project bond split into two tranches (A$99m and A$76m) both with a 12 year tenor and coupon of 175bp and 185bp above Treasury respectively. The notes have a BBB rating from S&P. NAB and BNP were the managers for the deal.

The transaction was a private placement for US investors (great for smaller bonds or groups of assets like project bonds). Proceeds from the bond will be used to refinance the Hallett Hill wind farm located near Adelaide in Southern Australia. Hallett Hill operates 34 turbines generating a potential 71.4MW of electricity. DNV GL provided a second opinion on the green credentials of the project bond. We are yet to see the report but – being a wind farm - we’re reasonably confident it will to confirm the green credentials.

According to Infrastructure Capital the deal was “heavily oversubscribed” – investor demand remains strong.

Market Developments

Last week the International Investor Group on Climate Change (IIGCC) launched a report advocating 12 policy fixes for the European Union Investment (Juncker) Plan.  Green bonds got a mention in there as a useful way for public or private sectors to raise capital – we wholeheartedly agree! The IIGCC are one of CBI’s Standards Board members.

Any issuers out there looking for a guide on how to issue green bonds – KPMG has released a useful document that incorporates key aspects for issuers looking to develop a green bond strategy with details on Climate Bonds Standards and Green Bond Principles discussed.

Talking of market guides - UK’s Green Investment Bank just launched a Handbook for Green Investment. Although not a green bond specific resource, it is definitely useful to green bond market players, as it covers how to assess, monitor and report on green investments. A must read covering insights on reporting amongst other topics.

Here at Climate Bonds Initiative we are also working on the reporting topic: we will soon launch a new resource, a reporting snapshot, providing an overview of post-issuance reporting from every green bond issuer. This will show what type of disclosure is being provided for each green bond. If you are interested in contributing towards the reporting snapshot document, please do get in touch.

Finally, the first ever Green Bond Principles annual general meeting and conference is to be held this Friday in London. First launched last February, GBP is hosted by the International Capital Markets Association and is governed by a board of investment banks, issuers and investors. At our last count 64 banks and 60 organisations had signed up as members or observers to the principles.

Green bond gossip

As mentioned in last week’s blog the Export-Import Bank of India is issuing a green bond with a target size is $250m (which is already looking like it may increase); expected rating is Baa3/BBB. We are yet to see the documents so unsure about a second opinion or the green credentials of assets. We will keep you posted.

KfW has announced it will be releasing a green kangaroo (Australia dollar denominated) bond. The green offering is expected to have a tenor of 5.25 years and is due out in the next month.

Another upcoming green bond is from Chicago’s Board of Education, according to Environmental Finance. We can’t find any firm details from the issuer to confirm rumours though. We expect the prospectus to be made public in the next month which should give granularity on use of proceeds. This wouldn’t be the first time a green bond was used for a school – Essonne’s green bond uses proceeds to fund an energy efficiency upgrade to a local secondary school.