A busy end-of-summer for the green bond market in Europe with issuance from development bank EIB, three Swedish corporate green bonds and a huge EUR1bn green bond for water from Dutch bank NWB. We are expecting this momentum to continue through September in the build up to the UN Climate Conference in Paris (UN COP21).
CORPORATE GREEN BONDS
WOW! EUR1bn green bond for water projects from NWB Bank (Nederlandse Waterschapsbank N.V.) EUR1bn, 1%, 10yr, Aaa (estimated Moody’s)
The past year has seen a lot of action around green bonds in water but it’s all been in the US municipal space, with only a handful in the rest of the world. So when we heard about the NWB Bank bringing a second green water bond to market we got excited – and then we saw the size – EUR1bn ($1.2bn) we got even more excited!
NWB Bank is a Netherlands based bank. It first brought a EUR500m green bond to market last year; the latest bond sits under the same green bond framework, which has an independent second review from CICERO. Lead underwriters were BAML, Barclays Bank, HSBC Bank and SEB.
The deal was successful with a large order book enabling NWB Bank to tighten the bond price by 2bps to midswaps +2bps. Investors were mainly green bond specialist investors based in Europe such as ACTIAM, APG, AP2, Mirova, La Mondiale, Union Invest, KfW, SEB Asset Management, Nordea Asset management and Syntrus Achmeav Vermogensbeheer. 70 investors participated in the deal overall. Over half (54%) of the bond was allocated to fund managers or insurance companies, 18% to banks, and the rest split between central banks and official institutions.
Similar to the first NWB green bond, proceeds will be linked to its lending to Dutch water authorities. The green projects financed will fall into three areas: climate mitigation, climate adaptation and biodiversity. Let’s take a closer look:
The main project type under mitigation is energy recovery from wastewater; the capture of biogas released by wastewater and its subsequent use in energy production. Extraction of phosphor from wastewater is also included in this topic as it stops pipes clogging up and making the system more efficient in transporting water by using less energy.
Building climate resilience – such as flood protection (crucial in a low lying country such as the Netherlands) - to adapt to changing rain patterns and rising sea levels are important investments as well as waterway management to ensure water can be efficiently channeled into the sewer system and to pumping stations.
Biodiversity and pollution control
Waste management projects such as water treatment and the sanitation and dredging of water beds. Further clean water projects include the transport and cleaning of wastewater. Finally a mention of sewage sludge disposal is also relevant with methane leakage making these projects important to finance from a climate perspective.
All in all it’s great to see such a large green water bond come to market successfully – bravo NWB Bank!
Two Swedish corporates bring SEK 500m ($59m) green bonds: Uppsala Hem (5yrs, 0.36%, no rating) and Stångåstaden (5yrs, 0.36%, no rating)
Housing company Uppsalahem, located in Uppsala the fourth biggest city in Sweden, and Stångåstaden, located in Linköping, the fifth biggest city in Sweden, have both issued SEK500m green bonds. There are lots of similarities between these in terms of the eligibility criteria (almost the same) and probably reflects the fact that both entities are wholly owned by their local municipality.
SEB is the lead underwriter for both deals.
The green bond proceeds will finance new or existing commercial buildings with a minimum certification of Miljobyggnad silver or Svanen (similar to BREEAM according to CICERO) and uses less energy per 25m2 than the relevant regional building code. Re-developments will be eligible for residential and commercial buildings, if the work leads to reduced energy use per m2/year at least 40%.
Both bonds also allow proceeds to be allocated to renewable energy (Uppsalahem allows both wind and solar, whereas Stångåstaden is only wind).
Interestingly the green bond proceeds will be placed into a segregated account (one step beyond only earmarking) for both of the bonds.
Reporting looks promising, and includes a list of projects financed, examples of the projects and a summary of development. Overall brilliant to see an exciting double green bond issuance! Great work Uppsalahem and Stångåstaden!
EIB continues its prolific green bond issuance with a new EUR600m green bond; cpn 0.5%, 8 yr, AAA
European Investment Bank (EIB) issues a EUR600m green bond, known as a Climate Awareness Bond (CAB). The latest issue takes the total green issuance from EIB over the EUR10bn mark! Jeez!
And still there is no sign of investor appetite for the CABs being sated. The latest green bond was a hit, oversubscribed by 120m and enabling EIB to upsize the size from EUR500m to EUR600m.
Bank of America Merrill Lynch, BNP Paribas, Barclays Bank, Credit Agricole-CIB and HSBC were the joint lead bookrunners.
CERTIFIED GREEN PROJECT BONDS
Big60Million successful with 3 small certified green bonds backed by solar projects aimed at retail investors
Big60Million, pioneers of the green bond certification against the Climate Bond Standard, brought another three certified green project bonds to market in the past month. Each was focused on retail investors and certified against the Climate Bonds Standard for Solar.
Their success shows the appetite in the retail space for green investments. The bonds are backed by solar projects with a combined capacity of 34MW all based in the UK.
It’s great to see more certified bonds in the market. Look out for standards announcements on Water, AFOLU and Low Carbon Transport in the coming months – widening the pool of assets that can be certified under the standard.
Aligera’s new second review from CICERO enables it to join the Stockholm NASDAQ green bond list
We were thrilled to see that Swedish issuer Aligera Holdings, which issued its first green bond last year, decided to get a post issuance second review of its green bond framework; bringing it in line with market best practice. The publicly available review was completed by CICERO.
Why – you may ask – would Aligera want to get a second review when the green bond was already successfully sold? Well, here is the interesting bit, the listing rules for Stockholm NASDAQ green bond list requires a second review and now that Aligera’s green bond has a review it’s been able to join the list. Fantastic! Great to see the influence such list's rules have on driving best practice the market.
Stockland releases its first annual green bond report with KPMG assurance for allocation of proceeds
For all of those readers interested in green bond reporting, check out on the latest annual green bond report from Stockland for its inaugural green bond issued in October 2014. The report provides information that proceeds of the green bond have been allocated to 8 commercial buildings (3 new constructions and 5 redevelopments) all hitting the minimum Green Star level 4. In addition, a small amount of proceeds (A$2.1m) has been used to finance rooftop solar on one of the commercial properties.
KPMG provides assurance on the green bond reports. Plus there’s more to come as the promise of more details of the performance of the assets in the Group’s sustainability report due out later in September.
Scandinavian green bond powerhouse SEB is starting to issue more green loans to customers. Interesting because as SEB builds a green loan portfolio they will have the option to follow the likes of Bank of America, Credit Agricole, DNB and Morgan Stanley and issue a green bond linked to the green credit portfolio. SEB has already provided such green loans to companies such as Skanska for green residential buildings. Watch this space!
IREDA issues an INR6bn (approx. $90m) green bond due to close in the next week. The 10 year green private placement is expected to have a 7.3% coupon. Proceeds of the bond will be linked to renewable energy projects. Exciting news as India ramps up its green bond market to finance its wider clean energy agenda.
Renew Financial issues a $50m securitisation of residential clean energy PACE bonds in California. Look out for more details in next week’s blog.
Our blogs are written by a team: Sean Kidney, Tess Olsen-Rong, Beate Sonerud, with help from Justine Leigh-Bell