Mkt update: roaring wk in GB mkt -Renovate America 1st labeled Green ABS $201m +2nd review! Big demand HSBC €500m 4x oversub; Oslo NOK1.5bn, CN’s $65m water, Repeats from EDC, EIB, OPIC, detail on SocGen; & gossip!


HSBC inaugural  500m ($547m) green bond is BIG success with 4x oversubscribed (0.625%, AAA, 10 yrs)

UK Bank (and long term supporter of the green bond market) HSBC successfully completed its first green bond issuance at a total of €500m, receiving big welcome from investors at 4 times oversubscribed (with over €2bn of orders). The bond priced at MS+58 but was already trading at MS+50 in the secondary market a couple days after the deal closed.

The bond offers a 0.625% coupon and matures in 10 years. It has a AAA with the HSBC itself being the sole underwriter.

Social Responsible Investors accounted for 64% of investors in the bond showing the huge appetite in the SRI community. Geographically the investor base was diverse across Europe with France 27%, Benelux 24%, UK 18%, Germany 16%, Nordics 6% and the remaining 9% from other countries.

HSBC published its Green Bond Framework, which CICERO reviewed and rated as ‘dark green’. Proceeds of the bond will be used to finance loans to projects and business within 8 eligible green sectors listed below. Eligible business is defined by HSBC as deriving 90% or more revenue from activities within these sectors. In other words loans are only made to pure-play businesses that operate in green sectors. Once this eligibility is met, proceeds could be used for general purposes of the eligible businesses.

  • Renewable energy
  • Energy efficiency
  • Efficient buildings (new construction or renovation at LEED gold, BREEAM good/very good, HQE very good/excellent, or CASBEE A(very good)/S(excellent); importantly no matter what they have to have energy use 20% lower than baseline)
  • Sustainable waste management
  • Sustainable land use (FSC or PEFC forestry; RSPO or RTRS agriculture; alignment with HSBC’s Agricultural Commodities Policy; protection of environment, local community or biodiversity)
  • Clean transportation
  • Sustainable water management
  • Climate change adaptation

HSBC’s Green Bond Framework makes references to existing standards for energy efficient buildings and sustainable land use to ensure the green credentials of eligible sectors. It also explicitly excludes certain asset types within these eligible sectors; such as nuclear energy generation. Each selected company or project will be evaluated for their use of fossil fuel by HSBC to ensure robustness of the green credentials.   

The bank commits to produce a Green Progress Report annually to disclose proceeds allocation and details of type of business and projects financed. Reporting is important here, as it will demonstrate which pure-play companies have received the loans.

Overall it looks to be a great green bond program with well-structured internal review process and policies! Fantastic to see yet another great example of a commercial bank green bond in Europe! Bravo HSBC!


More details on Société Générale’s Positive Impact Bond – ex-ante project impact reporting and third-party assurance

Staying on the hot topic of European banks we found more details about the Société Générale (SG) green bond this week that we wanted to share with you. First of all, SG have already made project selections and disclosed details of the eligible projects. The deck provides a lot of details about each of the selected projects including the hydropower projects (all run-of-river). Further still there is an initial impact report on the project portfolio already available and it’s all very green. Brilliant work SG!


Second, let us clarify what the two different independent reviewers did for the SG green bond. Vigeo provided a second review  of the green bond’s alignment with Green Bond Principles. The other review is an assurance by EY on portfolio selection and bond management against the bank’s Positive Impact Assessment Framework.

Before issuance SG had already selected a number of eligible projects therefore EY provided assurance that these projects matched the green bond framework (and will continue to cover any new addition to the portfolio to ensure the robustness of the green credentials). This is slightly different to assurance of that proceeds which comes later on after the bond has been in the market for a year.

Il est bien fait! (Well done!)



Renovate America issues its first labelled green ABS & got a second review– signalling a shift in the US GB market towards independent review! ($201.5m, 4.28%, AA, 25 yrs)             

The California-based Property Assessed Clean Energy (PACE) financing provider, Renovate America (RA), issued its 5th PACE bond as green bond at the total of $201.5m. This time round Renovate America chose to label the securitisation of PACE loans as a green abs. We’ve previously commented on these in our blog as unlabelled climate-aligned bonds so it’s excellent to see Renovate decided to add the green label this time round.

More excitingly, RA chose to get a independent review from Sustainalytics since they were labelling the bond as green! This is a fantastic step forward, especially in the US green bond market which has been slower to adopt the independent review model, though in recent months US issuers Morgan Stanley and Puget Sound Transit decided to get a second review for their inaugural bonds – leading the US market forward. Great to see RA join the ranks of leading US green issuers!

The bond offers a coupon of 4.28% at 25 years tenor, rated as AA by Kroll and DBRS. Deutsche Bank and Morgan Stanley are the joint lead managers for this issuance.

Proceeds of the bond will be used to refinance home energy and water improvement by the Home Energy Renovation Opportunity (HERO) program through purchasing PACE municipal bonds from partnered municipalities. Eligible projects and products under the HERO program include:

  • Renewable and alternative energy (i.e. solar PV and thermal, small wind, advanced energy storage, EV charging station, stationary fuel cell power system)
  • Energy efficiency (i.e. high-efficiency HVAC, lighting, pool equipment, water heating, building envelope, etc.)
  • Water efficiency (i.e. indoor efficient fixture and fittings, outdoor efficient landscaping)

To ensure energy and cost savings, minimum and tested performance, products and projects are evaluated based on third-party performance standards (e.g. DOE Energy Star, California Solar Initiative Program) and other criteria such as non-proprietary technologies, refinancing productions funded within 24 months prior to the bond issuance,.

So it’s all very green and with an independent review - but there is more, RA also commits to provide impact reporting of the bond. Using its existing savings forecasting model and reference to models by U.S. EPA and DOE, metrics and methodology are defined to estimate the impacts for energy, water, renewable energy and GHG reduction of the funded assets. Wonderful, it will give investors a lot of detail on the green credentials of the loans.

Well done Renovate America – welcome to the glorious green bonds market!



Still going strong: State of Connecticut issued its third green bond for clean water projects ($65m, 2-5%, 4-20 yrs)

Connecticut State issued its third green bond of $65m as part of its $650m General Obligation Bond issuance. The green bond comes in two tranches, $32.5m each, maturing in 4 years and 20 years with coupons ranging from 2-5%. Barclays is the lead manager for this issuance. The state commits to report the proceed allocation and project descriptions on an annual basis until proceeds are fully allocated.

Similar to its previous issuances, the proceeds of this bond will be used on high priority clean water projects selected through:

  • Wastewater treatment program managed by the Department of Energy and Environmental Protection, which assess priority points of projects by its positive impacts on water quality, nutrient removal, human health, etc.; and
  • Clean Water Fund, which offers grants or loans to municipalities on wastewater treatment plant upgrades and expansions, sewer separation and supplemental combined sewer overflow treatment, new sewer system construction, new interceptor sewers, nutrient removal and other green projects

Great to see repeated issuance of municipal bond to strengthen the long life-span water projects! This is also a good example of leveraging existing environmental fund program to lighten the monitoring and screening requirement for issuing green bond.


Norway’s almost there! First Norwegian muni GB by the City of Oslo at NOK1.5bn ($176.6m) for water, energy efficiency building and massive transportation infrastructure (2.35%, 9 yrs) – means it’s only missing a sovereign green bond to complete it’s portfolio of types of green bond

The Norwegian capital city issued its inaugural green bond, marking the country’s first municipal green bond. The bond by Oslo Kommune (City of Oslo) comes in the total size of NOK 1.5bn ($176.6m), offering 2.35% coupon and 9-year tenor. Danske Bank, DNB Bank, Nordea, SEB, and Swedbank are the joint lead managers for this issuance.

The City issued a Green Bond Framework, outlining its commitment to ring-fence proceeds in a separate account. It will also provide project information at issuance and annual reports on proceeds allocation.

The framework specified the type of eligible projects:

  • Energy efficiency and sustainable housing projects (i.e. energy efficient buildings, phasing out fossil-fuel heating; however no standards or targets is referenced here for performance)
  • Water management and clearing facilities (i.e. new and expansion of water treatment plants)
  • Environmental transportation services (i.e. renewable public transit systems, improvement to encourage public transport, cycling and walking)
  • Environmental projects (max. 20% of proceeds, i.e. urban planning to reduce needs for vehicle transport)

Similar to ING and Société Générale, City of Oslo selected eligible projects and reported project information and expected climate impacts at issuance. Net proceeds of this bond will go to 4 projects – Midgardsormen sewer system project, expansion of Bekkelaget Sewage Treatment Plant, construction of Avløs Metro Depot for mass rapid transit, and new energy efficient building for Teglverket Primary School.

It is exciting to see the City’s commitment and transparent setup for this bond. Right on, Oslo!


Development Banks

Export Development Canada (EDC) issued its second green bond of $300m (1.25%, 3 yrs)

Near the anniversary of its inaugural green bond, the state-owned trade finance agency, Export Development Canada (EDC), completed its second green bond this week. The  $300m green bond offers a 1.25% coupon and 3-year tenor, underwritten jointly by the Bank of America Merrill Lynch, Credit Agricole CIB and Morgan Stanley.

It follows the same framework as the first green bond, which the second review was prepared by CICERO. Proceeds will be used to support EDC’s green asset portfolio such as loans to businesses in the field of preservation, protection or remediation of air, water, and/or soil, creation of renewable energy and mitigation of climate change.

EDC chooses only to report on a selection of projects it finances through its green loan program. Thought it is by no means the only issuer only providing partial transparency – it would be great to see them provide more details on all proceeds allocations rather than cherry picking case studies of a few projects. Hopefully for this latest bond EDC steps up it’s reporting game and comes out with a more detailed run down of all its green bond investments.

Canada’s potential for green bonds has become even more appetising given the political shift – for more details on why and how look out for our State of the Market 2015 – Canada Edition which will be launched in the next few days!


EIB issued a 500m ($533m) index-linked green bond (Climate Awareness Bond)  (index-linked coupon, 4 years)

The largest green bond issuer, European Investment Bank, issued a “Climate Awareness Bond” with a coupon is linked with the “Ethical Europe Climate Care Index.” The aim of this issuance, known as Tera Neva, is to link green impacts to financial returns.

The deal was supported by a group of institutional investors ACMN VIE, AVIVA France, CARAC, BNP Paribas Cardif, CNP Assurances, ERAFP, GENERALI, GROUPAMA, HSBC Assurances, NATIXIS Assurances, PREVOIR and SURAVENIR. . Proceeds of the bond will go to the Climate Awareness Bond program within EIB however there will be an emphasis on financing energy transition strategies.

This issuance is solely underwritten by BNP Paribas. The €500m green bond has a 14-year tenor and AAA rating.

This expansion of EIB’s green bond program reflects the ongoing interests of investors in impact investing through green bonds.


Two more Green Guaranties by OPIC on renewables in Chile and Israel ($12m, 0.178%, 18 yrs; $11.8m, 0.178%, 25 yrs)

Two more repeated green bond issuances by Overseas Private Investment Corporation (OPIC) (as called “Green Guaranties”) in the total of nearly $24m. Both bonds offers a 0.178% coupon and underwritten solely by Bank of America Merrill Lynch. One bond is offered at $11.8m with 25-year tenor, supporting the 110MW Ashalim Thermo Solar Power Plant (concentrated solar power, CSP) by Negev Energy in Negev Desert, Israel.

Another bond comes at $12m with 18-year tenor, financing the 531MW run-of-river hydroelectric power plant by Alto Maipo SpA in Santiago, Chile. This is the second tranche of Green Guaranty OPIC issued to support this particular project (see the first tranche we blogged before).

It is great that OPIC keeps up its support to renewable energy projects through Green Guaranties. Hydro projects could be quite controversial sometimes as large-scale power plants often involve significant impacts on biodiversity, habitat and local community. Look out for a under-the-hood blog exploring hydro financed through green bonds in the next month.  


Market moves:

Chance to shape green bond rules in India. Indian regulator SEBI released a discussion document setting out its approach to green bonds and potential rules for public comment (follow the link and it’s under the Reports heading). The deadline is 18th December. We’ll be responding so if you don’t want to respond direct let us know your thoughts!


Development banks jointly draft  guidelines for green bond impact reporting. This working group includes Asian Development Bank (ADB), World Bank, European Investment Bank (EIB), Inter-American Development Bank (IDB), KfW, and Nordic Investment Bank (NIB). The paper provides a list of principles and recommendations for impact reporting, including KPI for renewable energy and energy efficiency projects.


Green Bonds Gossip:

Two Uridashi green bonds in the pipeline! IDR 170bn ($12m) by European Bank for Reconstruction and Development (EBRD) closing on Dec 14; BRL 30m ($7.8m) by Crédit Agricole CIB closing on Dec 18. Expect more details from us soon!

France’s second largest bank, BPCE, issued its inaugural bond of 300m for renewable energy and energy efficient projects in the country. This is a special bond to raise money by the bank but project selection will be done through Natrix’s framework and process. We will tell you more about the bond in our next blog!

U.S. muni GB keeps on rolling! Three more year-end issuances over total of $110m in the pipeline: $13.46m by Rhode Island Infrastructure Bank (issuing in mid Dec), $48m by Mission Economic Development Corporation (issuing in late Dec), and $49m by San Diego Unified School District (issuing in early Jan).