Exciting development this week is the strong pipeline of green bonds. We always expected Q4 to ramp up in the lead up to UN COP 21 in December so its great to see a steady stream of green bond announcements from development banks, corporates (many from India) and municipalities. Plus, Bank of England's report for Insurance sector indicates role for green bonds in financing climate resilience.
World Bank issues second round of Uridashi green bonds this year at total of $3m ($1m, 1.2%, 5yr; $1m, 1.6%, 7yr; and $1m, 2%, 10yr)
World Bank issues three Uridashi green bonds at a total of $3m, as with all WB green bonds CICERO provided the second review. Underwritten by CA CIB, the bonds are at $1m each, with annual coupon of 1.2% at 5-yr maturity, 1.6% at 7-yr maturity, and 2% at 10-yr maturity.
EIB taps its 2024 green bond for a further EUR 400m taking the green bond to EUR 1bn (EUR 400m, 0.5%, 9yr)
Following its 2024 green bond issuance in August this year, European Investment Bank (EIB) taps its latest green bond (also known as a Climate Awareness Bond (CAB)) for a further EUR 400 million, increasing the outstanding total to EUR 1bn. The green bond offers a coupon of 0.5% with a maturity of 9 years. Joint bookrunners for the tap were Credit Agricole CIB, Rabobank, Societe General CIB and UniCredit.
As with all EIB green bonds, proceeds of the bond sale will finance renewable energy and energy efficiency projects. EIB continues to be a leader in green bond reporting and announced that its latest CAB newsletter links specific projects in its green bond portfolio with specific CABs/green bond issuances. This gives investors transparency on what exactly is being financed with their dollar or euro.
Pure-play wind manufacturer LM Group Holding places its inaugural green bond (NOK475m ($56m), 5 years, floating coupon NIBOR+875 bps)
The Danish wind firm LM Group Holding issued a NOK 475 million ($56m) green bond this week. The inaugural green bond has a 5 year tenor and floating coupon linked to NIBOR+875bps. Nordea was the sole underwriter.
LM Group is a “pure-play” with over 95% of revenue from wind turbine manufacturing, which is aligned with green. The proceeds are intended for financing new turbine manufacturing plants, upgrades of existing plants, acquisition of wind-only manufacturers, and R&D.
DNV provided a second review on the green credentials of the green bond. Based on the Green Bond Principles (GBP), the assessment concluded that the bond aligns with the principles and definition within GBP.
LM Group commits to earmark green bond proceeds with dedicated tracking and periodic reporting. This transparency and reporting commitment is important, especially for pure-play green bond issues. Without these commitments proceeds could, in an extreme case, be funneled off into developing a new non-green asset base for a company (i.e. if the company took a decision to switch manufacturing to fossil fuel extraction technologies). Its great to see LM Group provides investors with confidence that proceeds will only finance eligible green project by ensuring transparency and reporting are in place.
Welcome to the green bond club LM Group!
Landmark report from a government regulator as the Bank of England (BoE) highlights green bonds as a tool for insurers to invest in climate adaptation
The UK Prudential Regulation Authority (PRA), part of the Bank of England, released a report on the impact of climate change on the insurance sector. PRA recommended the insurance sector to take an active role as institutional investors, funding projects with environmental and/or climate benefits using debt instruments.
The report recognized the insurance sector is highly exposed to climate change impacts and green bonds are a tool to help the sector mitigate their high climate risks.
Green Bonds Gossip: Strong pipeline of future green bond issuances!
Washington State (WA) issues its first green bonds ($39m, Aa1 & AA+)
The State of Washington carves out part of its wider $944 million issuance to green bonds. The size is tentatively $39 million, with the proceeds for energy efficiency, clean water and water conservation, habitat conservation, and water body protection projects.
State of Vermont to issue tranches of green bonds up to $29.6m
The State of Vermont plans to issue a green bond of $29.6m in multiple tranches, maturing between 2016 and 2035. The bond is rated as AAA by Moody's and Fitch and AA+ by Standard & Poor's. The proceeds will be used towards energy efficiency and conservation in state buildings, water, wastewater, and waste management, climate mitigation and resilience, forest and ecosystem conservation projects.
Two more climate bonds from India:
$68m by ReNew Wind Energy (Rs.451 crore ($68m), AA+, 9.75%, 17.5yr)
The Indian independent power producer, ReNew Wind Energy, issues a $68m bond for its 84.65 MW wind power project in Maharashtra. Underwritten by IDFC, the bond offers an interest rate of 9.75% with the maturity of 17.5 years.
$58m by Hindustan Power (Rs.380 crore ($58m), AA+, 10.05%, 10yr)
Hindustan Power plans to issue a $58m bond to refinancing its three SPV projects. Underwritten by Yes Bank, the bond will be issued as private placement with an interest rate of 10.05% and maturity of 10 years. Both bonds have credit enhanced (from BBB to AA+) based on 30% credit guarantee by India Infrastructure Finance Company Limited (IIFCL) and 50% counter guarantee by Asia Development Bank (ADB).
OPIC issues green guaranty $13.8m with maturity 2033. OPIC has issued green guaranties for solar and hydro projects in emerging markets to date. It’s not yet clear what type of project back’s the latest issue, but we will bring you more details in the next blog!
EDF issues the biggest USD corporate green bond EVER!
The French power company just issued a total of $1.25bn green bond this week with a 10-year maturity and 3.625% annual fixed coupon. This new green bond will support EDF’s investment in new renewable energy projects. Look out for more details coming out soon!
World Bank issues bonds for PAF first auction winners
The World Bank will issue a total of $20.9m of bonds as Pilot Auction Facility Emission Reduction Notes (Paferns) to the winners of the first auction. The bond allows holders to sell verified emissions reduction credits back to the bank at a fix price of $2.40 / tCO2e. More details to come in our next blog!
Agricultural Bank of China sets to issue its inaugural green bond – largest green bond issuer-to-be in Asia!
The Agricultural Bank of China plans to issue its first green bond in the next week or so. This will set the bank to be the biggest green bond issuer in Asia and the first Chinese bank to issue its own green bond! Expect more details from us soon!