Hot off the press…
ABN Amro issues another certified EUR500m green bond
ABN have just announced their second green bond with a maturity of 6 years and a fixed coupon of 0.625, a rating from Moody’s of A1e. Joint bookrunners were: ABN Amro, Barclays and SEB.
Proceeds will finance mortgages of recently built highly energy-efficient homes, loans for solar panels and/or energy improvement measures for existing homes and sustainable commercial property. They have also added new assets to their second green bond including energy-efficient renovations and transformations to existing commercial property.
Another Certified Climate Bond with criteria validated by Oekom Research.
Rabobank's mortgage lender Obvion NV about to take the green bond market by Storm
Dutch mortgage lender, Obvion NV has just started its road show for Green Storm - a green asset back securities bonds backed by mortgages on energy efficient homes. The bonds will have a maturity of 5 years and will be structured in line with other notes in the Storm program. It is expected to price on 6 June, we should have details about the size shortly.
The bond received Climate Bonds Certification. Sustainalytics completed verification against the Climate Bonds Standard confirming that assets were compatible with the Low Carbon Building Criteria.
Oh, and where is the name from? Obvion's mortgage securitization program is called Storm - so this is the green version. Ah ha!
Green Muni bonds
SFPUC World First for Water Bonds
The San Francisco Public Utilities Commission SFPUC has become the first organisation to issue a green bond certified under the Climate Bonds Water Criteria.
The certified bond was issued for USD 240m with tenors ranging from 7 – 30 years and coupons of 4% and 5%. Moody’s and S&P rated it as Aa3 and AA respectively.
Proceeds from the USD 240m Waste Water Revenue Bonds will fund eligible sustainable storm water management and wastewater projects from Phase 1 of the utility’s Sewer System Improvement Program (SSIP).
Read more in our special blog post here.
Thematic bonds
Turkey’s development bank TSKB issues a Sustainability Bond
Türkiye Sınai Kalkınma Bankası (TSKB) is Turkey’s privately-owned development and investment bank; the first in the region to come to market with a thematic bond. It issued a USD 300m Sustainability Bond early this week, with Sustainalytics as the second review provider.
The use of proceeds are bound by both social and environmental eligibility criteria and fall into three main areas: Climate Mitigation, Climate Adaptation and Sustainable Infrastructure.
Some brief thoughts:
Mitigation: Our understanding is that this portion consists primarily of existing wind and hydro power plants (eligibility criteria also include solar, biomass energy and resource efficiency). Wind is easy, it’s in. Fantastic. Hydro is definitely trickier to assess - we are busy working with experts to come up with guidelines and a standard (watch this space). The only thing we do know is it’s likely that hydropower with large reservoirs in tropical areas will not qualify – Turkey isn’t in the tropics so all fine on that front.
Adaptation: The criteria cover projects that reduce vulnerability to climate change (with a very important caveat that the project shouldn’t also have negative impact on mitigation). Adaptation of infrastructure is a hugely important piece of the climate challenge so its great that TSKB have put this is. Adaptation projects tend to be specific to local contexts so we look forward to reading about the projects TSKB’s when its reporting comes out.
Sustainable Infrastructure: This includes health and education as well as electricity distribution networks and something we haven’t seen before - port development (it is in the Green Bond Principles). The modernisation of electricity distribution networks is aimed at retro-fitting to reduce energy use or integrate renewable energy. It doesn’t specifically exclude new networks that integrate energy from fossil fuels but it is unlikely that the proceeds would be used in this way. Port development is part of the banks plan to fund a modal shift from road to maritime cargo and passenger transport.
Stong Investor Demand
Approximately 90% of the proceeds will be used to refinance existing projects- this reduced risk and boosted investor demand. The bond sold very well attracting ‘jaw-dropping’ levels of demand (according to Reuters) and new investors from around the world. It also received a boost from the IFC who invested USD50m.
Fantastic development that a new region enters the bond market. Hopefully more to come!
Starbucks issues Sustainability Bond
Starbucks goes for its first foray into the thematic bond market this week with a Sustainability Bond. Proceeds will finance initiatives that make a positive social and environmental impact in the coffee supply chain.
These fit three categories:
1) purchasing of coffee which meets is ethical sourcing requirements;
2) expenditures relating to the development and operation of farmer support centres;
3) Loans to farmers through the Global Farmer Fund.
Evaluation of the effectiveness of the social aspects of a bond is not our territory – hard to pin down clear metrics here - so we won’t get into the nitty gritty other than
2 brief comments:
One - we nearly got very excited by the third category (farmer loans) – it’s a great initiative that provides loans at a ‘reasonable interest rates’ to farmers around the world.
For a moment, we thought the loans might be contingent on specific criteria relating to sustainable agriculture and land use but from what we can gather, they aren’t (although many of the loans may be financing such projects, it isn’t a requirement) – an opportunity missed in our view! (see our work on this topic here)
Two - what they’re proposing is quite different to most green bonds thus far, in that they’re raising money to fund operational expenditure rather than capital assets.
In our opinion, this is not where thematic bond markets are most effective.
A second review was prepared by Sustainalytics.
Market Developments
Berlin Hyp issues its first report on its Green Pfandbrief, showing the extensive information gathered on its green building mortgages
The reporting provides some depth into the mortgage cover pool, including the certification levels achieved by the buildings being financed. It shows 10% achieving BREEAM Excellent, 21% BREEAM Very Good and 35% with EPC Level A.
In addition, it provides an impact report estimating avoided emissions. It’s some of the most detailed reporting we’ve seen, an example of best practice – check it out here.
Swiss State Secretary for Economic Affairs Backs Climate Bonds & Global Standards
Swiss Minister of Finance Marie-Gabrielle Ineichen-Fleisch, speaking at the recent European Bank for Reconstruction and Development (ERBD) Conference held in London:
"We think developing global standards is important to developing a level playing field. That's why we're supporting the Standards work of the Climate Bonds Initiative."
"We're the first government to support the Climate Bonds Initiative - we're very proud of that."
Say no more.
India’s PNB Housing get INR5bn investment from IFC
The IFC have been busy recently in their role as a buyer of green bonds with the announcement of a INR 5bn (approx. USD 74.7m) investment in green bonds issued by PNB Housing Finance.
Details about the criteria are limited at the moment, but our understanding is that they will be using the IFC performance standards, including EDGE (certification program developed by IFC) to determine suitable investments.
PNB Housing Finance is India’s fifth largest housing finance company.
55% of investors expect to invest in green bonds-Asian bond investor survey
The inaugural bond investor survey was carried out on behalf of FinanceAsia in association with HSBC and S&P Global Ratings. It surveyed 150 Chief Investment Officers and Heads of Asian Fixed Income 55% said they were likely to invest in green bonds over the next year, only 20% of respondents said they were unfamiliar with green bonds while
See the report, which covers a range of topics, here.
Green Bond Gossip
Deutsche Kreditbank (DKB) is talking to investors about a potential euro denominated green bond in the coming months. The deal would be its inaugural green issuance.
Environmental Finance names Climate Bonds chief Sean Kidney, Bonds Initiative “Personality of the Year” 2016. Our CEO has been working to get green bond markets started around the world. See this story from EF Editor Peter Cripps.
New York MTA in second certified bond offering. MTA is currently pricing the $500 million Dedicated Tax Fund Green Bonds, Series 2016B (Climate Bond Certified) transaction according to an MTA notification. This is the second climate certified transaction for MTA, following their ground-breaking USD 782m green debut in February.
AIM Hits Green Bonds Award
London based Affirmative Investment Management (AIM) have been a long term participant in green bond development and markets.
They just picked up some well-deserved recognition at the recent cfi.co awards. It’s always good to see proponents of green bonds in the news. Read more.
Well done AIM!
NRW.Bank Makes Green Bond Commitment
German based Green Bonds Pioneer award recipient NRW.Bank, the state development bank of North Rhine-Westphalia has just had its first three green bonds rated by Oekom, gaining a positive response.
Even more pleasing, NRW has now committed to issuing a minimum of one green bond per year. Now, if every one of Europe’s national and regional based development banks were to make the same commitment…
Till next time,
The Markets Team
Disclaimer: The information contained in this communication 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 accepts no responsibility for content on external websites.
The Climate Bonds Initiative is not advising on the merits or otherwise of any 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 organisation makes, nor for investments made by third parties on behalf of an individual or organisation.
