Green Bond Market Report: Korea! Hyundai inaugural $500m for hybrids & EVs, China! Bank of Qingdao RMB 4bn ($615m), Sweden! Sveaskog SEK 1bn ($116m) forestry, US! Georgia Power $325m, and Philippines! APRI certified green bond $500m w/ADB guarantee

Corporate Green Bonds


Hyundai Capital Services issues first Korean corporate green bond for hybrids and electric vehicles (5yrs, 2.87%, $500m)

Hyundai Capital Services, the subsidiary of Hyundai Motor Company that provides loans and leases for new Hyundai and Kia cars, issued a $500m green bond. The inaugural green deal has a 5-year tenor and fixed semi-annual coupon of 2.87%. Lead underwriters for the deal were Bank of America Merrill Lynch, Citi, and Credit Agricole.

The green issue is the first corporate Korean green bond and only the third out of Korea after KEXIM’s initial green bonds in 2013 and 2016. It’s also number 3 on the list of green bonds issued for green vehicles following Toyota’s two green ABS for hybrid and EV assets in the past couple years.

Similar to Toyota, Hyundai does not have a second review of its green bond. Independent reviews of a bond’s green credentials provide investors with an important insight to the bond’s adherence with best practice guidelines. Next time round, it would be great to see Hyundai adopt a market leader position and obtain a review.

Proceeds from the Hyundai green bond will finance a range of Hyundai and Kia hybrids (HEV) (including the Sonata HEV, Grandeur HEV, Ioniq HEV, K5 HEV, K7 HEV, Sonata PHEV) and electric vehicles (EVs) (including the Soul EV, Ray EV and Tucson ix Fuel Cell).

So, how do we determine what vehicles are green?

Late last year we finalised the Climate Bonds Standard for Low Carbon Transport, which includes eligibility criteria for low emission passenger vehicles. Our Technical Working Group (TWG) and public consultation process both concluded that private vehicles should meet emissions threshold (based on data from the IEA mobility model and Global fuel economy initiative).

For cars to be considered green under the Climate Bonds Standard, they must meet, or be below, a maximum emissions level of 85-90 grams of CO2 per passenger kilometre travelled (g CO2 p/km).

The Hyundai and Kia Hybrids in this green bond are all under a 110 g CO2/pkm maximum emissions – so not far off the standard threshold. This is compared to the top performing petrol and diesel cars, which struggle to get below 110 g CO2/pkm in emissions.

This threshold decreases over time as part of a trajectory to achieve a 2-degree world by 2050.  As we get closer to the mid-point of the century we need vehicle technology to be improving to achieve lower and lower emissions. It's about pushing fuel efficiency across all modes of transport. ​

These thresholds apply to hybrid vehicles that use both fossil fuels and electric technology for motive power but it’s much easier to classify all electric or fuel cell vehicles.  These types of vehicles ​are considered ​green under the Climate Bonds Standard​.

We sometimes hear arguments along the lines of ‘but what if the electric vehicles are using electricity from a brown grid – is that still green?’ – well, yes! Here’s why: we can’t hang around for 20-30 years until we’ve transitioned all electricity grids to green energy sources before developing and adopting low emission vehicles technologies.  

If we wait until 2050, we will be too late. ​​​

We need to use the time now to get our technology up to scratch so that we develop highly efficient vehicles by 2050. So, all electric vehicles are in; full stop.

Back to this deal - it’s fantastic to see another green bond from a car manufacturer. It is financing technology crucial for a transition to a 2-degree future.

Welcome to green bonds Hyundai!


Forestry green bond from Sveaskog for certified forestry assets (SEK 1bn/ $116m)

Swedish State owned forestry company, Sveaskog, issued its first labelled green bond for its FSC certified forestry assets. The bond is split across two tranches of SEK 700m with a fixed annual coupon of 1.49% and SEK 300m a floating coupon of +1.20% 3M STIBOR. Both tranches have a 5 year tenor. DNB was the sole underwriter for the green deal.

Sveaskog chose to follow best practice and gain a second review from DNV GL. Bravo!

However, Sveaskog follows in the footsteps of Vestas and Goldwind by issuing a green bond for general corporate purposes because it’s a pure-play green company. A pure-play company has over 95% of revenues from green assets – in Sveaskog’s case the assets are FSC certified forests.

Usually corporate issuers earmark proceeds for specific green projects. Although Sveaskog chose a pure-play approach it could easily have linked some of its SEK 37bn certified forest assets to the bond. This would give investors confidence that the company won’t suddenly decide to sell off its green assets in favour of buying brown assets – unlikely but still it’s a risk with pure-play bonds. Linking the green assets to the bond gives investors direct transparency.

Sveaskog have committed to reporting on the green bond, which should then include confirmation that it still owns certified forestry assets in excess of the bond principle (SEK 1bn). According to the second review, the company will indeed be including data on its FSC/PEFC certified woods as part of its annual report.

We’ve brought together a Technical Working Group to discuss green bond criteria for FAF (Forestry, Agriculture and Food), previously known as AFOLU (Agriculture Forest and Other Land Use).

The FAF draft criteria were opened for public consultation in Sep 2015 and are now with our Climate Standards Board (which has investor representatives of $34trn AUM).

Look out for more updates from us on this!

Wonderful to see Sveaskog come to market with the first ever Forestry pure-play green bond!


US utility Georgia Power issues green bond for renewable energy projects and EV infrastructure ($325m, 10yr, semi-annual coupon 3.25%, A-/A3/A+)

Following the momentum created by Apple’s corporate green bond last month, Georgia Power Company (GPC) adds another corporate green bond to the US market.  The Southern Company subsidiary issued a $325m green bond for renewable energy (solar and wind) and EV infrastructure. The green bond has a maturity of 10 years, and semi-annual coupon of 3.25%. The deal is rated A- (S&P), A+ (Fitch) and A3 (Moody’s). The joint underwriters were JP Morgan, Bank of America Merrill Lynch, Scotia Capital, SunTrust Robinson Humphrey and US Bancorp. 

Significantly for a corporate bond, proceeds will be clearly earmarked for the eligible green projects and eligible green payments.

Proceeds from the bond will primarily finance solar power facilities in Georgia (or elsewhere in the US), and electric vehicle infrastructure in the US. To a lesser extent proceeds will also be used as ‘green payments’ as part of power purchasing agreements for electricity generated through solar or wind.

Using green bond proceeds for operating expenditure is a divergence from the Green Bond Principles and Climate Bonds promotion of green bonds for projects and assets.

Having said that, the payments are for electricity from renewable sources and clearly investors are happy as the bond sold well.

We think this topic is worth a discussion – what do you think? Tweet us @Climatebonds or email

GPC commits to reporting on its green bond proceeds annually via a dedicated webpage until all proceeds have been allocated. In addition, the company’s auditor will be providing further assurance on the use of proceeds. Excellent work GPC!


Green Bank Bond


More action from China: Chinese Bank of Qingdao issues two tranches green bond (3yr & 5yr) totaling RMB 4bn ($615m) in the Chinese inter-bank bond market

Bank of Qingdao (BoQ) has hit the market with an inaugural green bond; split into two tranches. One tranche is RMB 3.5bn ($539m) with 3-year term and 3.25% coupon, and the second tranche totals RMB 500m ($77m) and has a 5-year term and 3.4% coupon.

Lead underwriters for the deal are Guotai Junan Securities (China) and Zhongtai Securities (China). The green bond is rated AA+ by Shanghai Brilliance Credit Rating.

To label a green bond in the Chinese Interbank Bond market the issuer must provide the main regulator, People’s Bank of China (PBoC), with a report showing compliance with its green bond guidelines, which it launched in December 2015. (More details check out our earlier blog.)

BoQ engaged EY to provide a second review of the green bond against the PBoC guidelines. Proceeds of the bond sale will be linked to 13 projects that fall into the following categories:

  • Energy efficiency
  • Low carbon transport (rail)
  • Renewable energy (solar, wind, water, geothermal and marine)
  • Waste management (pollution management, resource conservation, recycling and waste water treatment)
  • Climate change adaptation and ecological protection

All of these projects fit into the PBoC’s green catalogue of eligible green projects and Climate Bonds Taxonomy.

Estimates for the Chinese market green bond indicate up to RMB 300bn (over $45bn) could be issued every year. We’ve already seen $5.3bn so far in 2016, remarkable given the PBoC guidelines were issued in December 2015.

Welcome to the green bond market BoQ – we’re looking forward to seeing reporting on the projects financed next spring.


Green Project Bond


Philippine Energy Company AP Renewables Inc issues Climate Bonds Certified project green bond in local currency (Philippine Pesos) thanks to an ADB credit enhancement (PHP 10.8bn, $225m, 10 yr)

AP Renewables Inc (APRI) issued a P10.7bn ($225m) certified green project bond with an Asia Development Bank (ADB) guarantee on 75% of the bond’s principle and interest.

That’s a really significant credit enhancement from ADB!

BPI Capital Corporation was the lead arranger and sole underwriter of the private placement.

Two reasons why this green project bond is fantastic: geothermal energy and the role of development banks.


Geothermal project is verified against Climate Bonds Standard for Geothermal

Proceeds of the project bond will be used to refinance the capital expenditure and ongoing operations and maintenance at Tiwi and Makiling – Banahaw (Tiwi-MakBan).

DNV GL provided the verification against the Climate Bonds Standard and the sector-specific criteria for Geothermal, which was launched earlier this year.

The verification confirms that the carbon intensity of the geothermal facilities are less than the carbon intensity of the overall grid (in the Philippines) and that elongating the life of the facility is not displacing other low carbon energy technologies.

Tiwi-MakBan also complies with ADB best practice guidelines for environment, health, safety and social.


ADB provides a credit enhancement enabling APRI to get a cheaper capital cost whilst issuing in local currency Philippine Pesos - Napakahusay (excellent in Filipino)

The scale of what we have to invest to transition our economies to low-carbon and climate resilience is huge: some $50 trillion over the coming 35 years. And we have to do it quickly to avoid the catastrophic climate change we're currently headed towards.

There is not enough public sector capital to do the job, by a very long shot. But if we cleverly use our available public sector capital to bring in private investment in support, we can do this. That means changing the way we work with public sector capital - including development banks.

That's why the Asian Development Bank's support of the geothermal green bond issued by APRI in the Philippines is so important. It's a great example of what we need to see happening much more: development banks looking for creative ways of helping companies raise private capital.  

Of course this is not new; the IFC and some other development banks have been doing it in various sectors for years; but it is the first Certified Climate Bond in East Asia, and a wonderful example of what we expect to see happen much more often in the green bonds space.

So, the recipe: first demonstration issuance and enough green bonds to provide market liquidity, plus a little cornerstone investing (IFC did this with Yes Bank for example); then shift to supporting private sector issuance; once private sector issuance is established, shift focus to selective support in newer and riskier green transition sectors, like small business lending in African sustainable agriculture or marine energy in Indonesia.

Bravo ADB!


Sustainability Bonds


Huge sustainability bond issued last week by North Rhine-Westphalia for its municipal lending’s based on ESG criteria (EUR 1.59bn, 7yr, 0.125% coupon)

We regularly cover ESG, sustainability or other thematic bonds, which are in part aligned with green in our Blog. The latest deal of this type is the German Federal State of North Rhine-Westphalia (NRW) Sustainability bond - their second thematic offering. 

Proceeds will finance a range of green and non-green (social) projects. These include public transportation and local mobility, climate protection and energy transition, protection of natural resources, sustainable urban development and moderation of education and health facilities, education and sustainability research, inclusion and social coherence.

For more details see the second review from Oekom.


Market Update


Lloyds to provide up to £1bn in green loans for commercial property indicates potential of green bonds in the British banks’ future

Lloyds bank is to start providing cheaper loans for commercial property borrowers that are reducing their CO2 emissions. The Green Lending Fund will offer rate discounts of up to 20bps for new borrowing above £10m from entities given they achieve an Energy/CO2 saving KPI (which is determined at the start of the loan term).

Trucost has provided a tool and criteria for the loan program. 

Once up and running this loan portfolio would be perfect for issuing a green bond. To date Lloyds has issued two ESG bonds to finance a range of green and social projects, however its first green bond may be coming down the pipeline shortly! 


Green Bond Gossip


More Chinese green bond launches coming

Following the phenomenal Chinese green bond issuance of $4.7bn (from CIB and SPD – see our blog for details) in January, more Chinese issuers are joining the market including the Industrial & Commercial Bank of China (ICBC), the largest bank in the world in terms of total assets, according to Business Times. ICBC is reported to own RMB 702.8bn of green assets in the book.


TenneT may issue up to EUR 22bn of green bond in the coming decade as it finances its transmission projects for renewables

After its inaugural EUR 1bn green bond last year TenneT has indicated that its pipeline of projects, to link on-shore and offshore renewables to the grid, totals a huge EUR 22bn. These are ripe for refinancing through the green bond market. Fantastic news for the market.


City of St Paul Water Authority Minnesota due to issue its second green bond next month.

The issue will follow its inaugural green bond in 2015. Last time round we advocated a second review or for St Paul to provide additional details of its climate adaptation plan. We’re looking forward to taking a look at the new issuance to see if anything has changed.


Swindon Borough Council issued the UK’s first council solar bond of £4.8m ($6.7m), with a tenor of 20 years and a fixed coupon of 6%.

The bond is being sold to retail investors through UK peer-to-peer lending platform Abundance with a minimum investment amount of £5.

Proceeds of the issuance will be used to finance the construction of a 4.8MW community solar farm in the village of Wroughton in Wiltshire and will be run by Swindon Common Farm Solar. The council has a plan to build 200MW of renewable energy capacity by 2020 in Swindon and hope the bond will the beginning of green financing in the years to come.

Sweden’s Kommuninvest is expected to issue its first green bond (a $500m with a 4 year tenor) this week, according to Global Capital.

Look for more stories in our next Market Blog. Ciao till then.



Disclaimer: The information contained in this market report does not constitute investment advice and the Climate Bonds Initiative is not an investment adviser. Links to external websites are for information purposes only. The Climate Bonds Initiative is not advising on the merits or otherwise of any bond or investment. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind for investments any individual or organization makes, nor for investments made by third parties on behalf of an individual or organization.