Stop Press! Moody’s joins our Partners Program

International ratings & research agency Moody’s Investors Service (Moody’s) announced they have joined the Climate Bonds Initiative Partner Program.

Henry Shilling, Senior Vice President with Moody’s Investors Service:

“Our partnership with Climate Bonds Initiative allows us to boost their efforts to advance the development of international definitions and standards for green bonds, conduct research and educate issuers, investors, and other market practitioners.”

Read the full announcement from Moody’s here.

 

Momentum since Mid-March

Green Bond issuance has remained steady since our last Market Blog in Mid-March.

Here’s our ‘at a glance’ summary of bonds issued since the last time we reported to you. You can also skip straight to news and gossip by clicking here.

Issuer	Size	CBI Certified	Verifier/Reviewer	1st green bond?	CBI Analysis
SNCF	EUR1bn	Yes	Oekom	No	Link to analysis
Commonwealth Bank of Australia	AUD650m	Yes	EY	Yes	Link tp analysis
Investa	AUD150m	Yes	EY	Yes	Link to analysis
Investa	AUD100m	Yes	EY	No	Link to analysis
City Developments Ltd Properties	SGD100m	Yes	KPMG	Yes	Link to analysis
QTC	AUD750m	Yes	DNV GL	Yes	Link to analysis
Engie	EUR1.5bn	No	Vigeo EIRIS	No	Link to analysis
Entra	NOK750m	No	CICERO	No	Link to analysis
Nantong Economic & Tech Dev Zone Corporation	RMB300m	No	No review	Yes	Link to analysis
TenneT	EUR1bn	No	Oekom	No	Link to analysis
Atrium Ljungberg	SEK1.3bn	No	CICERO	Yes	Link to analysis
Paprec	EUR225m	No	Vigeo EIRIS	No	Link to analysis
Inversiones CMPC	USD500m	No	Sustainalytics	Yes	Link to analysis
Lyse AS	NOK500m	No	CICERO	Yes	Link to analysis
National Bank of Abu Dhabi	USD587m	No	Vigeo EIRIS	Yes	Link to analysis
Harbin Bank	RMB2bn	No	EY	Yes	Link to analysis
NWB Bank	SEK1.25bn	No	CICERO	No	Link to analysis
New York MTA	USD325.6m	Yes	Sustainalytics	No	Link to analysis
NY State Housing Finance Agency	USD56.3m	Yes	Sustainalytics	No	Link to analysis
Vermont Municipal Bond Bank	USD6.1m	No	No review	Yes	Link to analysis
City of Saint Paul, Minnesota	USD8m	No	No review	No	Link to analysis
Massachusetts Clean Water Trust	USD 207.4m	No	No review	No	Link to analysis
Rhode Island Infrastructure Bank	USD28.1m	No	No review	No	Link to analysis
California Infra and Economic Development Bank	USD450m	No	No review	No	Link to analysis
Commonwealth of Massachusetts	USD100m	No	No review	No	Link to analysis
Nordic Investment Bank	BRL5.5m	No	CICERO	No	Link to analysis
World Bank	USD350m	No	CICERO	No	Link to analysis
Hannon Armstrong	USD84m	No	No review	No	Link to analysis
Bank of Beijing	RMB15bn	No	EY	Yes	Link to analysis
QBE Insurance	USD300m	No	Sustainalytics	Yes	Link to analysis

 

Climate Bonds Certified Bonds

SNCF's second Certified Climate Bond - EUR 1bn (USD 1.1bn)

As with the previous issuance, proceeds will finance new and existing rail projects and upgrades. A small amount may also be directed towards the protection of biodiversity and natural resources.

A small percentage of the proceeds could be allocated to refinance existing projects.

Programmatic Certification in Practice 

SNCF Réseau is one of the first issuers to adopt our streamlined Programmatic Certification process for multiple issuers, this bond is part of that series.

The bond was verified by Oekom and certified against the Climate Bonds Low Carbon Transport Sector criteria. All investors came from Europe, with half from France and 70% were SRI investors.

In their investor presentation, SNCF mentions their aim to issue at least one green bond benchmark every year – great stuff!

Underwriters: BNP Paribas, Crédit Agricole CIB, Goldman Sachs, JP Morgan, NATIXIS.

 

Commonwealth Bank of Australia (CBA) Certified Climate Bond - AUD 650m (USD 496m)

CBA issued their first Certified Climate Bond making it a clean sweep with all four of the large Australian banks now having issued Certified Climate Bonds. Great news!!

Proceeds will go to 12 eligible Australian projects in wind energy (28%), energy efficient buildings (28%) and low-carbon transport projects (43%). See more in the investor presentation.

The Clean Energy Finance Corporation (CEFC) was a cornerstone investor, with a AUD 100m pledge in line with its wider commitment to support Australia’s green bond market and domestic clean energy development.

EY conducted the assurance process and will provide independent reviews until the bond matures in February 2022.

Underwriter: CBA.

P.S: Australia is becoming a best practice example for nascent green bond market development. We discussed this in a recent blog and you can also find some local media comment here. 

 

Investa two Certified Climate Bonds (!) - AUD 150m (USD 114m) and AUD 100m (USD 75m)

Australian REIT Investa Office Fund (IOF) have issued their first green bond and second green bond in just 3 weeks! The bonds were issued by two different entities within Investa, and certified under the Climate Bonds Low Carbon Buildings criteria.

For both bonds, proceeds will finance a portfolio of five low carbon buildings. Complying with the Climate Bonds Standard, the five buildings are in the top 15% of emissions intensity performance in their respective cities.

The first bond was for AUD 150m. A verification report was provided by EY. Demand was strong with the order book reaching AUD 350m. The transaction was capped at AUD 150m and price guidance revised 7 bps tighter due to strong demand.

Over 50% of demand was from green investors. 81% of demand came from domestic investors in Australia. Underwriter: ANZ

The second bond was for AUD 100m and was issued by the Investa Commercial Property Fund (ICPF) an arm of the Australian property group. There were two cornerstone investors on the deal - Australian Ethical Super and again, Clean Energy Finance Corporation (CEFC). Underwriters: ANZ, CBA.

Investa has made a Zero Carbon by 2040 commitment across their entire property portfolio.

With the 2016 release of emissions performance trajectories for major Australian cities, the way is now open for other commercial property companies to issue certified green property bonds.

 

Singapore’s First Certified Green Bond! City Developments Ltd Properties (CDLP) - SGD 100m (USD 71.4m)

CDL Properties (CDLP), wholly-owned subsidiary of CDL, issued Singapore’s first green bond as well as the first Certified Climate Bond by a Singaporean entity. It was certified under the Low Carbon Buildings criteria.

The 2-year senior secured green bond was issued under the CDLP’s SGD 700 million secured Medium Term Note programme first established in 2001.

KPMG provided the verification report while Sustainalytics undertook the review of the issuer’s Green Bond Framework.

Proceeds will be allocated towards the repayment of SGD 100m loan extended by CDL to its subsidiary, which financed 12 retrofit and upgrading projects for the iconic Republic Plaza building achieving energy and water savings. For future issuances, proceeds will be funding projects for new retrofits of Republic Plaza. 

Republic Plaza is one of Singapore’s tallest towers. In 2012, the 66-storey building was awarded the highest Green Mark Platinum rating by the Building and Construction Authority (BCA).  

Underwriter: DBS Bank

P.S: Singapore is one of the cities where Climate Bonds has established emissions performance baselines for commercial property.

Using data supplied by Singapore’s BCA the Climate Bonds Standard established the emissions performance figure for the top 15% of commercial offices buildings in Singapore which sits at 26.4kgCO2/sqm. This figure forms the baseline for assessing property bonds against the Climate Bonds Low Carbon Buildings Standard. 15% of commercial office buildings comply initially, with the hurdle rate getting a little tougher every year towards the objective of achieving zero carbon emissions by 2050.

 

Queensland Treasury Corporation (QTC) - AUD 750m (USD 576m)

Yup… another certified issuance from Australia!! QTC issued their debut green Certified Climate Bond (7 years, 3%), the largest green bond issued in Australia to date!

Proceeds will be directed to transport and energy projects with the four nominated projects all falling under low carbon transport and renewable energy:

• Gold Coast Light Rail Stages 1 and 2
• Moreton Bay Rail Link – Redcliffe Peninsula Line
• New Generation Rolling Stock
• Sunshine Coast Solar Farm development

Strong demand saw the initial offering on AUD 500m upsized to AUD 750m. 77% of the investors were asset managers, 13% insurers/pension funds, and the rest split. 76% of the bond holders are from Australasia, 11% from Asia, 9% from EMEA and the rest from the Americas.

DNV GL provided the third-party assessment on the certification. QTC will provide annual updates on the projects status, funding allocation as well as impact reporting.

Underwriters: ANZ, Merrill Lynch International Australia, NAB.

 

New York MTA, Certified Climate Bond – USD 325.6m

Hooray – another one from New York MTA! The latest Certified Climate Bond bring total issuance from NY MTA now amounts to over USD 2bn.

Verification document from Sustainalytics.

Proceeds are used to finance capital investment in MTA’s electrified rail assets and supporting infrastructure. 

MTA is another large issuer who has taken up the new Programmatic Certification process, streamlining the certification against the Climate Bonds Standard.

More info: prospectus; certification documents, analysis on previous bonds here and here, Climate Bonds Low Carbon Transport criteria.

Underwriter: Jefferies.

 

NY State Housing Finance Agency, certified climate bond – USD 56.3m

New York HFA’s came to market for a 3^rd time this week with its latest Certified Climate Bond. As with previous bonds, it will finance new construction of energy efficient buildings in line with the Climate Bonds Standard.

NY HFA is another issuer who has adopted Programmatic Certification option available in Climate Bonds Standard V2.1 as their preferred method for issuing certified green bonds.

More info: prospectus, verification report from Sustainalytics, previous bonds here, Climate Bonds Low Carbon Buildings criteria

Underwriter: JP Morgan.

 

Corporate Green Bonds

Engie close second benchmark green bond: EUR 1.5bn (USD 1.6bn)

Following on from their debut green bond issuance in May 2014, French based energy utility Engie closed their second green offering in two tranches: 7-year EUR 700m and 11-year EUR 800m.

Proceeds will be used to finance and refinance Eligible Green Projects included in three categories:

1) Renewable energy: hydro, geothermal, wind, solar, biogas, biomass and any other renewable sources of energy. Two criteria have been added to their previous green bond framework:

• Biomass projects may be included, subject to local production and lack of conflicting utilization of the resources;
• Hydroelectricity production must comply with a recognized international standard for Green Bonds such as the Climate Bonds Initiative, UNFCCC Clean Development Mechanism (CDM) or the IFC Reference Standards for hydro projects or equivalent.

2) Energy efficiency including heating and cooling network, cogeneration, optimization of buildings or plant efficiency, systems for energy management such as smart grids, smart metering, and more generally energy and facility management solutions.

3) Natural resources preservation including water and/or waste management.

Engie (previously GDF Suez) faced some criticism after their first bond was issued, because of the initial inclusion of the 3,750MW Jirau Dam in Brazil. For this bond, Engie has taking steps to assure investors that such large hydro projects will not be included in this bond unless they comply with criteria from UNFCCC, IFC or [potentially] the Climate Bonds Standard.

There are no projects from Engie that have yet been identified. Secondly the Climate Bonds criteria on hydro is still in the process of being developed. So we don't have a clear view yet on which types of projects from Engie will be funded by the bond, nor is our criteria finalised.  For now, the adoption of UNFCCC and IFC guidelines is sufficient to give investors some level of comfort. 

For biomass projects, the criteria given above will certainly be useful but, given the potentially controversial nature of biomass projects, it would be useful if the hurdle they defined was more in line with an international standard or certification scheme.

Vigeo Eiris provided the second party opinion on Engie’s Green Bond Framework.

The company has mandated an external auditor to control the allocation of the bond’s proceeds.

Underwriters: BBVA, BNP Paribas, CITI, Credit Agricole CIB, Credit Mutuel, HSBC, ING, KBC, MIZUHO, NATIXIS, SMBC NSA, SG and Standard Chartered.

 

Entra’s second green bond – NOK 750m (USD 89m)

Norwegian real estate company Entra issued their second green bond, a 7-year, floating rate of NOK 750m after their green debut of NOK 1bn in September 2016. CICERO provided the second party opinion.

Proceeds from the issuance will finance new construction or major renovation of commercial and residential properties with a minimum BREEAM certification of "excellent.”

Well, that is indeed Excellent! Well, we have only one word to say here: “Utmerket!”

Underwriters: DNB, SEB, Swedbank.

 

TenneT's world first! green hybrid bond – EUR 1bn (USD 1.1bn)

This is TenneT’s fifth green bond, making a total of approximately USD 4.5bn of green debt raised by the Dutch firm since June 2015. After a Green Schuldschein issued in May 2016, the issuer keeps diversifying its green financing. We love seeing green bond market innovation!

This fifth green benchmark issuance is special its the first hybrid green, as the security is perpetual and has both fixed and floating coupon rates, providing a number of advantages for the issuer and investors.

As with previous green bonds, proceeds will finance projects relating to the transmission from offshore wind power plants into the onshore grid.

A second opinion was provided by Oekom. TenneT commits to a regular reporting on the bond.

Underwriters: Barclays, BNP Paribas, Deutsche Bank, HSBC, ING.

 

Atrium Ljungberg’s inaugural green bond – SEK 1.3bn (USD 148m)

Swedish real estate property manager Atrium Ljungberg has issued their debut green bond in late March. Composed of 2 tranches, this 5-year bond is part of the Nasdaq Stockholm Sustainable Bonds List.

20 out of the total 26 investors of the bonds were new, accounting for around three quarters of the issued volume. Among the new investors are Storebrand SPP, SEB IM, Första AP-fonden and UK-based dedicated green and impact bond manager Affirmative Investment Management (AIM).

Second opinion on Atrium Ljungberg’s Green Bond Framework was conducted by CICERO.

Eligible categories:

• New and existing commercial and residential properties with a minimum of BREEAM very good or Miljöbyggnad Silver
• Major renovation of residential and commercial properties with energy savings of at least 35%
• Energy efficiency projects with at least a 35% reduction of energy use
• Renewable energy (solar, geothermal and wind power) and
• Clean transportation infrastructure for electric cars.

We welcome this new issuer to the green bond market and particulary its approach to green buildings - a reduction target of 35% in building energy use over a 5 year bond is in line with the Climate Bonds Low Carbon Buildings criteria.

Other areas such as renewable energy and electric cars are all in line with our Taxonomy. Great ambition and leadership shown from Nordic issuers once again!

Underwriter: SEB.

 

QBE Insurance Group (QBE) –  USD 300m

Now here is an interesting one. QBE Insurance is just about to issue Australia’s first bond from the insurance sector.

Proceeds will be allocated towards financing or refinancing the group’s green bond portfolio. Green bonds are eligible by either being certified by Climate Bonds or Green Bond Principles OR the green bond finances activities that meet a set of eligibility criteria.

It’s slightly confusing – a green bond to buy green bonds. It has left a few of us with the question – is this a good thing?

Our initial view was, well, not really – it is increasing the volume of the green bond market but not the amount of money that is going to actual green projects – so the market grows but projects stay the same. Technically, this could go on forever – green bonds to buy green bonds that buy green bonds? Basically, double counting.

However...  increasing the overall size of the green bond market has some advantages – especially in increasing the overall flow of money into the market and creating liquidity. In this way, we are looking at the bond more like we might analyse a passive product like an ETF – i.e. useful market infrastructure.

Further, reporting is very transparent, primarily through the opinion from Sustainalytics. There is also a useful set of exclusion criteria as well as eligibility criteria outlined.

Another question we asked ourselves is, what else can insurance companies do in this market given the assets that they hold?

QBE holds approximately 69% of its investments in corporate and government bonds, 3.4% in cash and 15% in short term money – basically not great assets for issuing green bonds. This leaves only a small proportion of investments to assets which could be linked to low carbon investment such as property trusts (4.1%) and infrastructure debt (1.8%). So, as bonds are the majority of their asset base, it's the obvious place to start in the green bond market.

Overall… the bond will be included in our list of bonds that meet our Taxonomy as its framework in in line with the GBP and our broad taxonomy. However, we will not be including it on our overall market figures due to the problems of double counting.

Underwriters:Credit Agricol CIB, HSBC, Lloyds, Morgan Stanley.

 

Paprec’s second green bond – EUR 225m (USD 243m) 

This is the second self-labelled green bond from the French based Paprec Group, a major materials recycler.

According to the second opinion provided by Vigeo EIRIS, the net proceeds of the bond will be used to “finance in whole a Recycling Project, consisting in the acquisition of Coved, a French company specialized in waste collection and recycling activities”.

This is a difficult one – the bond will be used to purchase a subsidiary which operates within the recycling sector. So far so good. But under closer inspection, Coved’s activities also include (listed on Coved’s website) the rental of tippers and mobile toilets, the unblocking of pipes, and archives management activities which are not an easy fit within our Taxonomy.

What we’re uncertain of at the moment is how much of the business is linked to recycling vs other areas. We’re going to do a bit more research and get back to you for the next blog…

Underwriters: Credit Agricole CIB, Credit Suisse.

 

Chile’s first ever green bond from Inversiones CMPC – USD 500m

Empresas CMPC subsidiary, Inversiones, issued its first green bond of USD 500m, first ever from the Chilean market! The Chilean forestry, pulp and paper company received a second opinion on its Green Bond Framework from Sustainalytics.

The 10-year bond will fund projects in the following five eligible categories:

1. Sustainable forestry: sustainable forest management for plantations certified by FSC, CERTFOR (PEFC) or equivalent, including the development of hybrids without genetic manipulation to contribute to water consumption reduction and increased CO2 capture
2. Biodiversity preservation and restoration of High Conservation Value Forests (HCVF): conservation of forests, protection of endangered flora and fauna
3. Sustainable water management: reduction of consumption in industry, reuse as well as systems improving the quality of treated water; reduction of organic content and volume of effluent
4. Pollution prevention and control: liquid and solid waste prevention and control projects; gas capture and incineration in production facilities
5. Energy efficiency: for instance, projects replacing pulpwood truck transportation with more energy efficient barges.

Forestry is a difficult area when it comes to defining ‘green’ so certifications systems such as FSC are a useful proxy and one we would expect all issuers of green bonds to be in line with, which Inversiones is, so good practice from them.

For the other categories, hurdles are not as easy to establish but we recognise the broadly positive impact that each of these may have, particularly the preservation of biodiversity and reduction of waste production and water use.

Within energy efficiency, the replacement of trucks with barges, sounds, logically, to be less emissions-intensive. There is insufficient information available to properly assess this (not being a comparison we often have to make!) but we’ll give them the benefit of the doubt!

For next time… to really promote best practice, the issuer should consider adding hurdle rates for the other projects too – e.g. % water reduction targeted etc. Further, additional information about barges vs trucks etc. could be provided to give investors additional assurance about technologies that they aren’t used to assessing.

The issuer has committed to publish annual updates assessed by an external auditor, which we will read with anticipation, to note the ambition level of financed projects.

Underwriters: BAML, JP Morgan, Santander.

 

Lyse AS’s inaugural green bond – NOK 500m (USD 59m)

This Norwegian power company owned by 16 municipalities has just issued a 5-year green bond. The transaction was close to 3x oversubscribed. 

The firm’s Green Bond Framework received a second opinion from CICERO. The framework lists the following eligible projects: renewable energy category, including hydro, solar, wind and related infrastructure activities.

Lyse will not finance nuclear or fossil fuel projects through its Green Bonds. The ambition is to use the majority of the green bond proceeds to finance new projects.

Selection of projects will be done via the Treasury Department and the relevant production unit at Lyse and will need to be approved in consensus.

Regular readers of this blog will know that hydro is a bit of a tricky matter from a climate perspective as flooding reservoirs causes huge methane releases. As such, we would appreciate further disclosure of any additional hurdles or criteria that hydro projects must meet in order to be included.

From the Norwegian press release, it seems that this specific issuance will primarily finance the construction of a new hydroelectric power plant in Lysebotn to replace the current power plant operational since 1953. The new power plant uses existing reservoirs and dams but will provide 15% more electricity and will be completed in 2018. The project has also previously benefitted from the proceeds raised by NIB’s environmental bond issued in May 2015.

Given that the aim of the project is to increase electricity production of an existing facility without increasing flooding new reservoirs, the primary climate concern (new reservoirs) is low and our view is that the project will have broadly positive climate outcomes. Great stuff!

Underwriter: SEB.

 

Commercial Banks 

A first from the Gulf region! National Bank of Abu Dhabi inaugural green bond – USD 587m

This green debut bond from the National Bank of Abu Dhabi (NBAD) has a 5-year maturity and pays an annual 3%.

Vigeo EIRIS provided an opinion on the issuer’s Green Bond Framework which lists the following eligible categories:

• renewable energy
• energy efficiency and low carbon buildings
• pollution prevention and control
• sustainable management of living natural resources
• terrestrial and aquatic biodiversity conservation
• clean transportation
• sustainable water management
• adaptation
• decarbonizing technologies.

Eligible Projects may include existing, on-going or future projects located worldwide, especially within the Middle East region. Proceeds can finance projects or corporate loans to pure players where pure players are defined as legal entities with 90% or more of activities within eligible categories.

NBAD aims to have the full deployment of the Green Bond proceeds within 12 months of the issuance and will deliver an annual Green Bond Report until the bond’s maturity.

Three projects have already been selected by NBAD:

• a solar concentration heat plant of 100MW of installed capacity, located in the UAE
• energy efficient buildings with LEED Silver certification, located in the USA
• a heavy rail network project located in UAE.

While the eligible project category list is fairly broad, the project list as defined above does not contain anything unusual. Energy efficient buildings are also an essential part of low carbon infrastructure but we note that LEED Silver buildings wouldn’t necessarily qualify under the Climate Bonds Standard which requires buildings to be certified to LEED Gold or meet other criteria. Rail and solar thermal projects are very much part of a low carbon economy and we hope to see more of these projects.

Well done to NBAD – a new participant from a new region of the green bond market, we hope to see more!  

Underwriters: BAML, CITI, Credit Agricole CIB, HSBC, MUFG, NBAD.

 

Harbin Bank’s debut green bond - RMB 2bn (USD 289m)

Harbin Bank is headquartered in China’s northeast Harbin city, part of Heilongjiang province.

Proceeds will finance or refinance projects under PBoC’s Catalogue, including Energy Saving, Clean Transportation, Clean Energy, Pollution Prevention, Ecological Protection and Adaptation, and Resources Conservation and Recycling.

Issued on China interbank market, this bond was 2.6 x oversubscribed.

EY provided a second opinion.

At this stage, there is very limited information to make an assessment of this bond. While most projects that are in line with the PBoC catalogue would also qualify under the GBP or Climate Bond Standard, there are a few, such as fossil fuel efficiency upgrades or clean coal that would not.

Accordingly, we will continue to keep this bond under review for evidence of any such projects in quarterly reporting.

Underwriters: Haitong Securities, Bank of China International, Hengtai Changcai, and Bank of Communications.

 

Bank of Beijing’s first green bond - RMB 15bn (USD 2.2bn)

The issuance is a typical green financial bond that proceeds will be used to finance/refinance projects outlined by PBoC’s green bond projects catalogue. Bank of Beijing provides three examples of eligible projects including:

• efficiency upgrading and reconstruction of a sewage plant
• construction of a municipal solid waste incineration power plant and
• construction of a wind farm.

EY provided a second opinion.

From the examples given thus far, wind farms are an easy one – definitely green. For waste, our criteria are not yet complete but it is likely that incineration for energy will be included – possibly subject to additional criteria not yet defined. For efficiency upgrades of sewage plants, investors would need more information to make a proper assessment as to the environmental benefit of this project but, in general efficiency, upgrades are positive.

Underwriter: CITIC Securities, Industrial and Commercial Bank of China, China Securities, Agricultural Bank of China, Morgan Stanley, Huaxin Securities.

 

 Dutch Nederlandse Waterschapsbank N.V.’s new green bond out – SEK 1.25bn (USD 138m) 

This is NWB Bank’s fifth green bond (the second issued in 2017), making a total of USD 3.5bn green bonds issued by the bank since 2014!!

As per previous bonds, the proceeds will be allowed to pre-finance or re-finance water management through mitigation, adaptation and biodiversity projects inside following areas:

• Energy reduction and biogas production
• Reuse of nutrients and other substances
• Transport and treatment of wastewater
• Flood protection infrastructure
• Irrigation and drainage, pumping stations
• (Re)design of watercourses and wetlands for water storage and discharge
• Sanitation and dredging and waterbeds
• Improving water quality.

An external audit and reporting will be provided annually.

CICERO was the second opinion provider.

Underwriters: DNB, SEB.

 

Municipal Green Bonds

Vermont Municipal Bond Bank, first green bond – USD 6.1m

It may be small but it’s the first green bond from Vermont Municipal Bank (VMB). Vermont Municipal Bond Bank operates in a similar manner to Nordic municipality aggregators like MuniFin and Kommuninvest - it assists Vermont’s municipalities (school districts etc.) to gain access to long-term bond financing at low borrowing costs.

Proceeds will go to:

1. Energy efficient equipment (76%) in a school district. Equipment includes: boilers, heating control systems energy recovery ventilators, windows, insulation, and LED lighting. It also plans to install solar power.
2. A new energy efficient building (24%) for the policy and fire department that meets the 2015 Vermont Commercial Building Energy Standards. The town has determined that the building has a design target of net zero emissions.

How does this rank in terms of ‘greenness’? Energy efficient equipment falls into the Industrial Energy efficiency stream of the Climate Bonds Standard which is not yet complete so it is hard to say but LED lighting is likely to be included as definitely green when the criteria are developed. Other equipment such as boilers may have to meet certain efficiency hurdles or star ratings to be included.

It is not clear what hurdles/criteria VMB are using to define energy efficiency of the products/technologies which makes assessing the ‘greenness’ of this part of the bond tricky. However, we do note that an initial audit indicates that the equipment will save $105,000 per year in energy savings which is about 2% of the value of the total investment.

Net zero design for the energy efficient building shows great ambition going beyond regulatory requirements! While there is no one definition of what ‘net zero’ means or how it compares to known standards such as LEED and BREEAM, there is some additional information on the technologies that will be included in this design here.

More info: prospectus.

Underwriter: Morgan Stanley.

 

City of Saint Paul, Minnesota – USD 8m

Another green bond from St Paul, bringing total issuance from this Minnesota city to USD 24m.

As with previous bonds, proceeds are directed to clean water and sustainable water management through improving the City’s Sewer System.

More info: prospectus, analysis on previous bonds.

Underwriter: Piper Jaffray.

 

Massachusetts Clean Water Trust – USD 207.4m

As with previous bonds, proceeds will finance water and waste water treatment plant upgrades, restoration of an aqueduct and construction of a wind turbine to power a water pollution facility

More info: prospectus, past bond analysis.

Underwriter: BAML.

 

Rhode Island Infrastructure Bank – USD 28.1m

This is the 3rd bond from the Infrastructure Bank and proceeds will finance three projects, all of which relate to sewage upgrades and improvements. The largest of these is the City of Newport which includes both upgrades to the wastewater pollution control facility as well as the installation of solar panels at the facility.

The two other projects are a combination of sewage upgrades, flood protection and treatment facilities.

Sewage falls under the Water criteria of the Climate Bonds Standard which covers built infrastructure assets such as these. One of the important requirements of the standard is that water infrastructure improvements have sufficient climate adaptation and resilience planning in place.

The reporting on this bond does not indicate that there is planning in place specifically on adaptation. However, we note that numerous capital investment plans are detailed in the prospectus all with the overarching goal of reducing sewage overflows and water pollution which are positive outcomes.

The Bank has committed to annual reporting on allocation and the prospectus includes information on how the bond proceeds will be tracked and allocated.

More info: prospectus; analysis on previous bonds.

Underwriter: Morgan Stanley.

 

California Infrastructure and Economic Development Bank – USD 450m

This is the 3^rd green bond from the California Infrastructure & Economic Development Bank (IBank). Proceeds will go to 34 separate water-related projects all listed in the prospectus. Projects are eligible if they adhere to the standards of the Federal and State Clean Water Acts.

Compliance with clean water legislation alone is not sufficient to guarantee ‘greenness’ but the projects have generally positive environmental impacts by reducing water pollution and reducing impact on local ecosystems.

As with all water projects, the difficult aspect in assessing them is understanding whether they are as ambitious as they could be – the logic being that if there is investment happening now, that it is both ‘future-proofed’ for possible climatic changes and population growth and, uses best available technology to ensure that the investment has a high impact. 

There are too many projects to assess this and of course, it's very complex!

We do applaud IBank's continuing efforts to provide finance for these types of projects across California.

Underwriter: Morgan Stanley.

 

Commonwealth of Massachusetts – USD 100m

This is the third green bond from Massachusetts. As with previous bonds, proceeds will finance clean water, energy efficiency, open space and river revitalisation projects.

See analysis on previous bonds here.

More info: 2014 green bond reporting and prospectus.

Underwriter: CITI.

 

Muni Gossip Alert… Cape Town is planning to launch its first green bond (and potentially Certified Climate bond), a ZAR1bn (USD 79.2 million) issue, on the Johannesburg Stock Exchange in July. Much of the capital will be used for water demand management. The city is currently experiencing a severe drought.

 

Development Banks

Nordic Investment Bank’s 13^th green bond is out – BRL 5.5m (USD 1.8m)

This is the 11^th bond from NIB, its second in BRL. Proceeds of previous bonds have been directed to renewable energy, wastewater treatment, public transport, green buildings, energy efficiency and waste management. Financed projects in 2017 included 3 projects in Sweden in wastewater treatment, energy efficiency, and renewable energy.

More information: green bond framework, CICERO opinion, projects financed here.

Underwriters: Credit Agricole CIB, SBI.

 

World Bank’s new green bond – USD 350m

This bond is the first WB’s green issuance for 2017. The total green bonds raised by the WB now amounts to over USD 10bn, with more than 130 bonds issued!

As per previous bonds, eligible categories were reviewed by CICERO.

We are very happy about reaching this new milestone for the green bond market!

Underwriter: SEB.

 

Green ABS

Hannon Armstrong’s third green ABS - USD 84m

Hannon Armstrong have completed the issuance of their third “Sustainable Yield Bonds”.

It has received the highest Green Bond Assessment grade of GB1 by Moody’s, has a foxed 4.35% coupon and matures in 2037.

The capital raised will finance efficiency upgrades and solar projects in “over 90 public schools and over 20 government properties across 4 US states”.

 

 

Bonds that do not meet international definitions of green

Nantong Economic and Technological Development Zone Co. RMB 300m (USD 43m) Green PPN

100% owned by the municipal government of Nantong city in the province of Jiangsu, the company develops and constructs projects in the city’s Economic and Technological Development zone.

There is no detailed information available on the use of proceeds due to it being a private placement so it will not be included in our data.

A principal-protected note (PPN) typically contains two parts, one part is the investment guarantees a minimum return equal to the investor's initial investment (the principal amount), while the other is the investment offers the potential, but doesn’t guarantee profits.

Underwriter: Industrial Bank.

 

Green Bonds Gossip and News Bites

On the Green Horizon:

• Just out... Comunidad de Madrid has issued a Sustainability Bond - the first green bond to list on the Borsa Italiana (more in next blog).
• Polish Tauron power may issue green bonds.
• More green bonds for Mexico City and Mexico airport.
• Mexican Agricultural Trust Funds (FIRA) to issue green bonds.
• IFC considers green Kangaroo bond.
• ADB to bring green bonds to Uridashi market.
• Eurofima announces it is keen to issue a green bond.
• Bank of Jinzhou is planning to issue RMB 2bn green bond in China’s interbank market.
• Seychelles to issue blue bonds worth $15 million to benefit fisheries industry.
• City of Gothenburg will be issuing its fifth green bond in June.
• Kaiser Foundation Hospitals in California are on track to issue their inaugural green bond. Second review from Sustainalytics. 

 

Sovereign and Policy News:

• Japan’s Ministry of Environment issues first green bond guidelines.
• Singapore Monetary Authority (MAS) to offset cost of issuing green bonds with new grant scheme.
• Two Colombian banks are planning green bond issuances later this year, following the country’s first green bond by Bancolombia in December. The country’s first Sustainable Banking Congress was held in Bogota a few weeks ago.

       (P.S: As we were writing this post, Davivienda bank issued a COP 433bn (USD 150m) green bond. We will go into further detail on our next blog).

 

Reading & Reports: 

• The OECD has just released Mobilising Markets for a Low Carbon Transition, 100+ pages on green bond markets. A blog post with some more details is here.
• Novethic and ADEME's new collaborative study about the European green funds market is available here with a focus on Germany, France, the Netherlands and Sweden.
• Green Securitisation: unlocking finance for small scale projects: A 2-page policy brief prepared for Climate Bonds Annual Conference. Download here.
• Growing the green securitisation market in Europe. This is a report we released earlier in the year with the Centre for Climate Change Economics and Policy at the LSE. Summary here.
• The changing role of Sovereign Wealth Funds and green finance. This World Bank blog post picks up on the theme.

​

​Moving Pictures:

• ABN AMRO have just released a lovely new green bonds video. Dutch with English sub-titles. 1m.24secs duration. Have a look.
• The California State Treasurers Office took the opportunity of Earth Day  to give green bond investment a push in this video, part of their ongoing efforts around climate finance. Great artwork, 3m58secs.

 

Green Bond Funds and Investors:

• Specialised green bond manager Affirmative Investment Management (AIM) have launched the LO Fund-Global Climate Bond Fund in partnership with Lombard Odier.
• LuxSE and SZSE have partnered to display three new Green indices that reflect the value of green bonds issued in China.
• BlackRock launches green bond Ucits fund. The fund will reflect the performance of the Bloomberg Barclays MSCI Global Green Bond Index.
• Canadian Solar Raises JPY 5.4bn with Inaugural Dual-Tenor Green Project Bond in Japan.
• IFC and Amundi to set up USD 2bn emerging markets-focused green bond fund.
• Mexico's CCFC is preparing it's green bonds guidelines.

 

Sovereign Wealth Funds and Green Finance

• Jean-Marc Mercier (HSBC): «Les obligations vertes peuvent changer la culture d’entreprise».
• Philips agrees €1bn loan with interest rate linked to sustainability performance.

 

That's all for the moment! 

We hope you've enjoyed this post, its length is in part a reflection of a growing market.

 

Till next time, 

The Markets Team

 

Disclosure: A number of the organisations identified in this communication are members of the Climate Bonds Partner Programme. A list of Partner organisations can be found here. 

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