Climate Bonds Blog

Books have just opened. Joint lead managers are SEB and Bank of America Merrill Lynch.

This will mark the first climate bond out of Korea, coming out at a solid size and rating. The Korean Import-Export Bank has an AA3/A+ investment grade rating. We understand the bond is benchmark size (USD$500 million or larger) but we won't have details about actual issuance or pricing until books close.

The IFC has just issued (books closed a couple of hours ago) a USD1 billion, 3 year, AAA "Green Bond" tied to climate investments - yes, that's a climate bond in our parlance. Interest rate set at 3 year US Treasuries +15 basis points. If you want to see just how low interest rates are for US Treasury bonds see this Wall Street Journal story. Low low low.

“There is more liquidity than ever being put into the system, but funds are still not being allocated to renewable energy projects”

“The bottleneck for renewable energy is not in construction financing but a year or two after construction [re-financing].”

“[Renewable Energy] is not an asset class where risk changes over time – it changes [only] between pre-completion to post-completion stages… it is incorrect to think that offloading an asset post-completion dumps risk onto others because the riskier part of the project is past.”

“Alignment of interest with investors is strong as the issuing bank retains the credit risk in Covered Bonds.”

Governor Andrew Cuomo announced a new Green bank in his annual 'State of the State' address yesterday. He said the bank would focus on leveraging private sector capital for clean energy.

This is an excellent development. As we've argued since our inception, special purpose State financial institutions will play important enabling roles in leveraging private investment for public policy purposes.