Green Bond Market Report: Four new ‘AAA’ rated benchmark sized green bonds: Kommuninvest inaugural $600m (3yr) NWB Bank $1bn (10yr) Chinese bank SPD RMB 15bn ($2.3bn, 5yr) IFC $700m (10yr); &1st ever green Schuldschein frm Nordex €550m is CB Cert


Kommunivest’s inaugural green bond upsized to $600m marks the largest Nordic issue yet ($600m, 3yrs, 1.5% S/A, Aaa)

Sweden’s largest municipal lender Kommuninvest leapt into the green bond market for the first time with the largest issuance. The Swedish lender’s inaugural green bond of $600 m has a 3-year tenor, semi-annual coupon of 1.5% and is rated Aaa by Moody’s. Bank of America Merrill Lynch, Crédit Agricole CIB and SEB were lead underwriters for the deal.

The issue received very strong investor interest and the books exceeded $850m, which led to the upsize of the final issuance to $600m.

In terms of investor breakdown, central banks and official Institutions accounted for 37%, asset managers 29%, banks 19%, pension and insurance funds 12%. Geographically, 30% was placed into the US investor base, 26% Nordics, 24% Middle East and Africa, 13% other Europe and the final 7% into Asia.

CICERO provided a second review of Kommunivest’s green bond framework and rated it as medium green.

Proceeds will finance eligible loans across five areas: renewable energy (wind, waste-to-energy, solar, wave, geothermal, hydro and bioenergy), public transport (rail, trams, buses etc), energy efficiency (primarily in district heating and buildings) water management and green buildings.

Let’s take a closer look at the green building criteria

Construction of new green buildings must have a minimum certification of LEED ‘Gold’, BREEAM ‘Very Good’, Miljöbyggnad ‘Silver’(Swedish building standard or Svanen (Nordic Eco-Label known as Nordic Swan which is similar to BREEAM). A further ‘zero-energy building’ certification (Feby-12) can be used to identify new green buildings. Importantly all of these eligible certifications are at the higher levels, which focus more on energy efficiency requirements than weaker levels.

Green building renovations are also eligible as long as energy use per m2 is reduced by at least 35% in line with current Swedish regulation (known as BBR21). It’s great that Kommuninvest disclosed this criterion for renovations, making buildings more energy efficient is an important area of investment over the coming decades, but we need to make sure that the ambition level is sufficient.

Our Climate Bonds Low Carbon Building sector standard requires a 5-year green bond renovation project to achieve at least 30% reduction compared to BAU – so Kommuninvest’s 3-year bond’s level is well above what the minimum would expect to see – brilliant work!

For most other categories (notably renewable energy, energy efficiency and public transport) Kommuninvest has provided a fair level of detail but there are some areas such as water management, waste management and adaptation to climate change projects could also have more detailed criteria. However, it’s important to note investors can take some comfort that these areas are not currently a large proportion of the existing portfolio of eligible loans.   

 To give readers  a flavour, currently Kommunivest’s eligible portfolio is comprised of:

  • renewable energy loans 55%
  • green buildings 36%
  • low carbon transport 5%
  • energy efficiency 3%
  • water management 1%

These proportions portfolio may change slightly over the three-year bond term and Kommuninvest provide the committed funds breakdown indicating how this may vary but broadly speaking it’s likely to stay consistent.  

Another eligible project type is ‘environmental management areas’ which includes projects such as nature conservation, biodiversity measures, sustainable agriculture and improving ecosystem services. This can only account for up to 30% of the bond and currently isn’t in their loan portfolio so we'll look out for the first report to see if any projects are  financed.

It’s wonderful to see that Kommuninvest commits to disclosure in an annual investor letter listing the green loans exceeding SEK 25 million (hopefully this means all loans – rather than missing out the smaller ones). Kommuninvest will also look to report on the environmental impact of the nominated projects in the annual green bond newsletter in March 2017.

We are already looking forward to it!


Nederlandse Waterschapsbank (NWB Bank) issues a third green bond $1bn (10yrs, 2.375%, Aaae)

Dutch public sector lender Nederlandse Waterschapsbank (NWB Bank) returns to the green bond market with another big  issuance, this time a billion US dollars rather than Euros. Similar to the EUR1bn issued in 2015, the latest issue also has a maturity of 10 years. The annual coupon is 2.375%, and the bond is rated Aaa by Moody’s. Bank of America Merrill Lynch, Daiwa, Deutsche Bank and SEB were joint bookrunners for the deal.

Within  two hours of the books opening NWB Bank’s green bond orders exceeded $1.5bn!

Although issued in USD, 62% of investors were from Japan, with a further 22% from Europe Middle East and Africa (EMEA), 3% from Asia and only 13% from the US.  Over half of all investors were Fund Managers or Insurance Funds with remaining allocation made up of Central Banks (24%) and Banks (20%).

Let’s refresh on NWB Bank’s green credentials - Cicero provided the second review on NWB's green bond framework in 2014. Proceeds from the bond be will linked to loans to Dutch water authorities for their general purposes.

The Dutch Water Authorities are considered as ‘pure-play’ as they only finance projects that fall into three areas:

  • Mitigation of climate change: specifically waterway management;
  • Adaptation to climate change: investments in climate-resilient growth, such as flood protection, other flood defences and pumping stations;
  • Water-related biodiversity: sanitation and dredging of waterbeds, water treatment, transport and cleaning of wastewater and disposal of sewage sludge.

We took a look at NWB Banks latest green bond report, issued in January 2016, to see what is being financed by the two previously issued green bonds. Since the green bonds are linked to water authority lending – rather than specific projects – the report gives an overview of the expenses of the authorities in  recent years. The majority of expenditure was allocated to flood protection, water treatment and waste-water (transport and cleaning).

Congrats on another successful green bond NWB Bank!


Second green bond (RMB 15bn) from Shanghai Pudong Development Bank hot on the heels of its first issuance in January 2016 ($2.3bn, 5yrs, 3.2%, AAA)

The Shanghai Pudong Development Bank (SPD) issued another mammoth green bond of RMB 15 bn ($2.3 bn). This sizable issue followed its green debut in January of $3.5bn and the total issuance from SPD amounted to $5.8bn. The bond was 1.53x over subscribed. SBCR rated the bond as AAA and Guo Tai Jun An Securities was the lead underwriter for this deal.

Similar to SPD’s first green bond, the second issue was approved by PBoC and use of proceeds falls into five categories which are aligned with the PBoC catalogue and Climate Bonds taxonomy. Specifically proceeds will go to energy efficiency, clean transportation (railways), clean energy (solar, wind, hydro, geothermal and marine), pollution prevention and control (mainly waste water treatment), and ecological protection and climate change adaptation.

EY did a second review for SPD and ensures that the bond meets the requirement of PBoC guidelines and the projects are aligned with the Catalogue developed by Green Finance Committee.

It is worth noting that EY’s second review only targets the pre-issuance stage of the second SPD green bond, rather than the bank’s Green Bond Framework which is more often adopted by European issuers.

As required, SPD commits to continued reporting on use of proceeds and the environmental impact of nominated projects. In the prospectus SPD also mentions that they will hire an independent third party to do annual verification on the use of proceeds and the environmental impact.

Welcome back SPD!


Development Banks

Overseas Private Investment Corporation (OPIC) issues another green guarantee for Mexican Wind Project ($6.2m, 18 yrs, floating rates, NA)

US government body OPIC issued another green guarantee ($6.2m) with maturities of 18 years, floating rates, and no rating. Wells Fargo was the lead underwriter for the transaction.This green guarantee is the fifth tranche of OPIC’s loan to finance Tres Mesas Wind Power in Mexico.


IFCs first benchmark issue of 2016 is over subscribed and has a 10-year tenor – that’s IFC longest ever maturity! ($700m, 10yrs, 2.125%, AAA)

IFC issues its longest ever dated green bond this week. The 10-year $700m green bond had a strong investor interest with over $1.1bn of orders for the deal.

The green bond has an annual coupon of 2.125% and is rated AAA (by Moody’s and S&P). Bank of America Merrill Lynch, Crédit Agricole CIB, JP Morgan and TD Securities were the joint bookrunners.

The proceeds will be allocated to eligible projects under IFC’s Green Bond FrameworkCICERO provided a second review on the green bond framework, made public in November 2015.

Eligible projects include renewable energy, energy efficiency, Agriculture, Forestry and Other Land Use (AFOLU), Waste Management, Transport, CCS, Climate Resilience, and Financial Advisory work (on carbon markets and mitigation through Financial Intermediaries – such as providing advice to local institutions on how to lend to green).


Further small issuances of green bonds from IFC and World Bank

IFC and World Bank, frequent issuers of green bonds, hit the market again in recent weeks with modest green issuances.

  • IFC’s new issuance of $1.47m has a coupon of 1.5%, tenor of 10 years, and INCAP as the sole underwriter
  • World Banks new green bond features BRL7m ($1.93m), coupon of 0%, maturity of 5 years, with BNP Paribas as the lead underwriter.

As mentioned above IFC has a second review from CICERO and similarly the World Bank also has a second review on the green bond framework  from the Norwegian Academic Research centre. Annual reporting on green projects and environmental impact are available on the websites: check out IFCs annual report here and World Banks’ report here


Green Schuldschein

Nordex issues first ever green Schuldschein – certified under the CB Standard for Wind – doubles in size /is met with huge success upsizing from EUR 250m to EUR 550m! ($626m, coupon between 1.5%-3%, tenors 3-10years)

Nordex took the lead in the German manufacturing market to issue a green bond of €550m ($626m) in the form of Schuldschein which is split into four tranches with maturities of 3, 5, 7, and 10 years, and coupons ranging from 1.5%-3%. BayernLB, BNP Paribas, Commerzbank, HSBC and Unicredit were the lead underwriter for this deal.

The Schuldschein is a type of privately-placed mid-term debt instrument unique to the German market and usually investors hold it to maturity. Check out our March 31st Blog for more details of Schuldschein.

Around 25% of investors were specialist ESG investors and German investors (savings and cooperative banks) accounted for almost half of the orderbook.

The proceeds of this issuance will go to financing €366.4m of Nordex  recent acquisition of Acciona Windpower, the high profile Spanish wind turbine manufacturer and operator. Acciona Windpower has 5,800 MW operational in 18 countries. The remaining proceeds will finance Nordex existing wind manufacturing assets.

DNV GL verified Nordex’s green issuance as aligned with the Climate Bonds Standard under the Wind sector criteria.

This bond follows hot on the heels of other green issuances certified against the CB Standard including  the New York MTA and India’s Hero Future Energies. It’s the eighth issuer to get certified and more are in the pipeline.

Es ist einfach wunderbar! (Wonderful work Nordex)


Retail green bonds

Canadian Retail green bond closes after successful offering period - Copower issues inaugural CA$ 300k green bond (5yrs, 5%, NA)

Copower, Canada’s first online platform for clean energy investing, issues its inaugural CA$ 300k green bond after targeting Canadian retail investors. This green bond issuance is backed by loans to two solar projects and one energy efficiency project. These are:

1) Rooftop Solar Projects in Windsor, ON, and Chesley, ON. These projects produce clean energy sold to the Ontario government under the Ontario Green Energy Act via a twenty-year Power Purchase Agreement. The Windsor project is expected to provide clean energy to twenty homes per year.

2) Energy Efficiency upgrades at the Harbourfront Centre in downtown Toronto. Senior loan to finance energy efficiency upgrades, including LED lighting and building automation. Savings on the energy bill are used to repay the loan.

Copower is committed to impact reporting and investors can monitor the financial and environmental performance of the bonds online. Fantastic work Copower!


Market Developments

Shanghai Stock Exchange Announced Its Corporate Green Bond Pilot Program

China took another step toward mobilizing debt capital to finance low carbon and climate resilient projects with a pilot program for green corporate bonds to be traded on the Shanghai Stock Exchange.

Shanghai Stock Exchange will use the Green Projects Catalogue, developed by the People’s Bank of China’s Green Finance Committee in 2015 as reference to select eligible green projects.

Corporate issuers are required to commit to eligible use of proceeds in the prospectus as well as by a commitment letter. It is also compulsory for them to set up a separate sub-account to manage proceeds and to track and disclose use of proceeds. This is stricter than ‘earmarking’ which is accepted for corporates elsewhere.

Corporates also have to report the environmental impacts of nominated projects, aligned with PBoC’s green bond guidance.

Notably this program targets only corporate issuances, which are dwarfed by the much larger interbank bond market that accounts for over 90% of China’s domestic bond market.

It remains to be seen whether the corporate market could get close to, or even supersede, the interbank market in the green space. Up till March 2016, there is over $8bn worth of green bond issuance from Chinese issuers and more is coming (see Green Gossip section below).


EIB issues its annual newsletter provides insight into its 2015 bond proceeds allocation

In 2015, EUR 3.6bn of proceeds from Climate Awareness Bonds (CAB) issuance were allocated to 63 projects in 30 countries. (As you may remember EIB only finances renewable energy and energy efficiency projects through its CAB program.)

Last year 90% of projects were in renewable energy category (financing wind, hydro, solar and geothermal), while the rest was for the energy efficiency (such as district heating, co generation, building insulation, energy loss reduction in transmission and distribution and equipment replacement).

According to EIB, thanks to its overall 2015 CAB allocations to projects, approximately 1.3 million tonnes of prorated CO2 emissions will be avoided per year. That’s like taking approximately 650,000 cars off the road.

Great job EIB!


Green Bond Gossip



Ma Jun, Chief Economist of Research Bureau of People’s Bank of China (PBoC), predicts $46bn green bonds from China this year! With regulations set up for interbank and corporate bonds in China as well as policy guidelines driving the market, the green dragon is pushing the market toward the $100bn annual goal.


Bank of Zhengzhou is to issue a green bond of RMB5bn ($770m)

Bank of Zhengzhou plans to issue an RMB5bn ($770m) worth of green bond and the issuance is waiting for approval by People’s Bank of China. Following the issuance from Bank of Qingdao, regional banks in China are fast gaining momentum for green bonds. Though smaller in scale than national banks bonds, such issuances are important to enhance awareness and mobilize the Chinese market.


Bank of Communications (BoCom) approved to issue a maximum of RMB 70bn ($10.8bn) in green bonds

Bank of Communications (BoCom) received an approval from People’s Bank of China to issue a total amount of RMB 70bn ($10.8bn) in green bond by end of 2017.


Century Concord Wind Power Investment issued first onshore Chinese corporate green bond ($31m, 3yrs, 5.65%, AA)

Century Concord Wind Power Investment issued first onshore Chinese corporate green bond with an amount of RMB 200m, a tenor of 3 years, fixed rate of 5.65%, rated AA by SBCR. China Development Bank was the lead underwriter for this deal.

KPMG was reported to have done a second review for the pre-issuance of the bond. The proceeds will be used to finance three solar PV projects, including two projects in Shanxi province with 200MW and 50MW respectively as well as one project in Sichuan province with 30 MW.  Two wind power projects will also be funded, namely Guangxi Chaodong 48 MW Wind Power and Guangxi Shijia 48 MW Wind Power. More on this one next time.


BRICS Development bank is set to issue green bond for clean energy projects

The BRICS-backed New Development Bank will issue between RMB3bn ($460m) and RMB4bn ($615m) worth of bonds in China to support clean energy projects. The issue is expected to be announced in April.



US muni market gaining momentum with incoming four issuances

Indiana Finance Authority is set to issue approximately $125.0 million state revolving fund (SRF) program bonds (series 2016A) and $72.8 million SRF program refunding bonds (series 2016B). Series 2016A will finance water and wastewater system projects in the state; Series 2016B will be used for refinancing.

California's state infrastructure bank is set to issue a green bond for water projects and City Saint Paul is coming back again with a new issue to reach financial close in mid-April.

At the White House last week (during World Water Day) San Francisco Public Utility Commission (SFPUC) announced it plans to issue a second green bond, AND it will be certified under the newly-launched Climate Bonds Standard for water.

Fantastic! Even Obama loves the new CB Water Standard.


Gossip in the press

Latin American development bank Corporación Andina de Fomento (CAF) eyes up green bond market, according to Global Capital.

Following the roaring success of Nordex, TenneT is set to issue a green Schuldschein for €300m, according to Environmental Finance.



At the end of the quarter we tally a respectable $15.7m of green bonds were issued. Add to that all this gossip and we are on course for a big year.

That’s your lot for this update. Catch you next time round!

Climate Bonds Market Team