Just out - Swedish bank SBAB issues green bond SEK 2bn green bond for green buildings
The 5-year bond was rated A by S&P. Proceeds will be used to finance or refinance sustainable buildings that meet either of the following criteria:
1) Construction (new or renovation) that will achieve a recognised energy performance certification such as Miljöbyggna, LEED Gold or BREEAM Excellent.
2) Construction or renovation where the final energy use will be reduced by at least 35%.
Despite all the green bond issuance we've seen out of Sweden, apparently this is the first Swedish corporate bank to enter the green bond market. Demand was highly oversubscribed with the order book reaching SEK 3bn within hours. This was driven in part by demand from dedicated green investors, who made up 87% of the order book.
First Climate Bonds certified German green bonds from Deutsche Kredit Bank
We touched on the debut DKB green bond in late May when the bank was about to go to market and again last week after close. As it’s the first green bond issued in Germany, we thought it was worth another look now that more details have emerged.
Here are a few important extra details:
- Certified against the Climate Bonds Standard, with verification provided by Oekom Research here.
- Strong Demand: with over EUR 1.4b in demand – almost three times oversubscribed.
- Reporting has already been published: While the bond was only issued last week, clear reporting has already been put up on their website (more to come in the annual report) and shows that 61% of proceeds will be allocated to solar and 39% to wind.
- All proceeds are being used to refinance loans.
- There’s room for even more – the bank has a EUR 9bn portfolio of renewable energy in Germany – this has been increasing year on year from around 1bn in 2007.
We hope to see even more.
Another green bond from Southern Power – this time EUR 1.1bn (USD 1.2bn)
US power producer, Southern Power, has just returned to the green bond market for a second time with a EUR 1.1b (USD 1.2b) bond issued in two tranches: six-year and ten-year maturities, both with a BBB+ rating from Fitch.
The proceeds will be used to finance wind and solar PV (both very clearly part of the low carbon economy), as with their 2015 bond. No second or third party review was conducted but we note that reporting for the 2015 bond (here) is very clear and easy to access and we expect that similar reporting will be forthcoming for this bond.
Underwriters were: Bank of America Merrill Lynch International, Barclays, BNP Paribas London and UBS London.
Swedish forestry cooperative Södra issues first green bond – SEK 1bn
Swedish forestry cooperative Södra has issued its first Green Bond for SEK 1bn with a 5-year maturity issued under Södra's Medium Term Note (MTN) programme. SEB was the lead underwriter.
We’re still hunting around for a bit more information on the use of proceeds but it looks like the bond will “strengthen environmental performance and increase the production of renewable and green energy from the mills.”
That’s all we have at the moment – we also know that CICERO has given Södra’s Green Bond framework its highest ‘Shades of Green’ rating.
Södra is a forest-owner association with over 50,000 members. The group’s three business areas are production of sawn and planed timber goods, interior products, paper pulp and biofuel. In recent years Södra has also become a large producer of electricity.
Once we’ve found out some more on what looks like a fascinating little green success story, we’ll post further.
US power company Westar energy issues debut USD 350m green bond to finance Kansas wind farm
The 10-year bond received an A rating from S&P. Proceeds will be used to finance or refinance wind energy projects according to company filings. Lead underwriters were BNP Paribas, JP Morgan and Mitsubishi UFJ Securities.
There’s nothing complicated about this bond - the full proceeds will go to one wind farm (clearly part of the low carbon economy), Western Plains Wind Farm; a 280 MW wind farm located in Kansas. The farm is currently at the preliminary stages of construction and is expected to be operational by 2017.
As it is still in the construction phase, not all proceeds can be allocated immediately – the company has committed to reporting annually on: amounts disbursed, relevant impact metrics of projects and an annual attestation report from an accountant.
Nordic Investment Bank issues EUR 500m (USD 563m) Environmental bond (AAA)
Continuing the Scandinavian theme of this blog, The Nordic Investment Bank (NIB) has just issued a EUR 500m Environmental bond under its environmental bond program. This is its second Environmental bond benchmarked in euros.
The NIB issued its first Environmental Bond in 2011 and to date, the proceeds from the programme have been allocated to:
- Renewable energy (44%)
- Green buildings (19%)
- Public transport (16%)
- Energy efficiency (9%)
- Waste management (8%)
- Waste water treatment (3%)
Reports indicate that the bond attracted strong interest from investors including Dutch development bank FMO, Dutch pension fund APG and the Fourth Swedish National Pension Fund (AP4).
City of Gothenburg issues 4th green bond in four years – SEK 1bn (USD 120m)
Winner of a Green Bond National Pioneer Award, Swedish city Gothenburg’s latest 6-year bond has an AA+ rating from S&P and received plenty of demand; the issuer reported that “the order book grew rapidly and reached approximately SEK 3bn after only 30 minutes.”
The proceeds will be allocated to finance projects that target:
- mitigation projects, including investments in low-carbon and clean technologies, such as energy efficiency and renewable energy
- adaptation including investments in climate-resilient growth
- to a smaller extend (max 20%) projects which are related to a sustainable environment rather than directly climate-related.
French region Ile de France issues new EUR 650m Sustainability Bond
The bond will finance projects in seven categories: buildings and equipment for education and leisure, public transportation and sustainable mobility, renewable energy and energy efficiency, biodiversity, social initiatives aimed at helping vulnerable population groups, social housing and economic and socially inclusive development.
According to reports, Il de France was able to tighten pricing by 5bp from initial levels. This was its fourth foray into the Green bond market and strong demand saw the deal move from its initial target size of EUR 500M to EUR 650M. Just 26% of the bond was bought by French investors – highlighting the wider demand for sustainably themed debt. A second opinion was provided by Vigeo Eiris.
New York Metropolitan Transportation Authority goes big again: issues 2nd Climate Bonds certified green bond in 6 months (USD 588m)
MTA New York has just issued its second Climate Bonds certified bond in 2016. The USD 588m bond will finance transport projects that comply with the Climate Bonds Standard.
Sustainalytics provided the verification against the Low Carbon Transport Standard. They found that USD 11.3b worth of projects included in MTA’s 2010-2014 transit and commuter capital program, conform to the Low Carbon Transport criteria of the Climate Bonds Standard.
MTA expects to issue additional green bonds from time to time to reimburse further portions of the 2010-2014 transit and commuter capital program.
Massachusetts Development Finance Agency busy again with a USD 50.2m bond
The bond will finance the Julie Hall project, which is expecting to include a variety of sustainable design features (energy saving heating and cooling equipment). The building aims at obtaining the Silver LEED-certification status.
Massachusetts has committed to reporting quarterly reporting regarding the amount of the proceeds that have been allocated to the project. Once the building receives LEED status, this will be reported on EMMA. See the prospectus here.
Rhode Island Infrastructure Bank issues USD 18.8m green bond
The bond will finance projects that are designed to reduce water pollution in the state, including upgrades to wastewater treatment facilities. The projects to be financed are listed in the prospectus and include: Town of Bristol upgrades to wastewater treatment facility, Town of Barrington closings and capping of two abandoned landfills and City of Newport design and construction of upgrades at the wastewater treatment facility. Prospectus here.
New Jersey Environmental Infrastructure Trust issues USD 29m green bond
The bond will finance eligible ‘smart growth’ wastewater treatment projects. These are projects undertaken:
- within a designated urban area
- as a combined sewer overflow project
- within an approved proximity to a designated transportation centre
- as the remediation of an approved Brownfield Development Area
- within a State-approved Transfer of Development Rights receiving area in accordance with applicable State law
- as a septic management project
Swedish Hemsö Fastighets issues SEK1bn (USD120m) Sustainability Bond
The five-year bond received strong investor demand and was two times oversubscribed. Proceeds will finance three projects: a renovated nursing home property, an environment that will improve the learning abilities of students and other visitors and a Transition project where existing properties have been converted to refugee housing.
USD 613m solar bond issued by Canadian consortium Connor, Clark & Lunn Infrastructure, Samsung and the six nations of the Grand River Development. It will fund a solar park in Ontario.
Kenya plans debut in Green bond – Bloomberg reports that the CEO of the Nairobi Securities Exchange has said they are currently in talks with international investors to discuss green bonds, with the energy sector seen as the immediate potential, geothermal in particular.
The Last Word…
Citi’s Mike Eckhart says that green bonds could be a trillion-dollar market by 2020! Now that is some growth - we like your optimism Mike!
Till next time,
The Markets Team
PS - Don’t forget the London launch of our State of the Market 2016 Report. In partnership with HSBC, Tate Modern, July 1st. Register here.