Climate Bonds Blog

Posted: Dec 9, 2013

Bank of America Merrill Lynch (BAML) joined the list of first corporate entities to issue a labelled green bond, and set a new model for commercial banks. We're expecting this to be the beginning of a long line of commercial bank green and climate bonds.

 

The detail:

Nov review 5/7: Bank of America ML blasts off with a $500m first commercial bank green bond
Posted: Dec 9, 2013

Swedish property company Vasakronan was the first of the three corporate green bonds issued in November. This bond was linked primarily to housing assets with LEED gold status or BREEAM ‘very good’.

 

Nov review 4/7: Vasakronan corporate green bond tackles energy efficiency
Posted: Dec 9, 2013

The Norwegian development bank Kommunalbanken (KBN) followed swiftly behind the heels of the IFC with a $500mn bond to finance ‘climate friendly’ projects. KBN provides low cost finance to the local government sector in Norway. The eligibility criteria are determined internally, but the bond was reviewed by Oslo climate science research centre, CICERO.

 

Nov review 3/7: Kommunalbanken's $500bn green bond funnels proceeds to Norwegian Govt-mandated local govt climate projects
Posted: Dec 9, 2013

From new issuer to an old faithful, the IFC issued the second bond of the month, which was also their second USD1bn bond in 2013. The first USD1bn bond was a watershed moment in the green bonds market as its size stirred a great deal of interest from both investors and underwriters. This second bond was apparently priced and sized in response to market demand – which is a great signal of market demand for this type of product. Rumour has it that they’re planning a further few billion per year in the future.

 

Nov review 2/7: benchmark-issuing pathbreaker IFC does 2nd $1bn in a year
Posted: Dec 9, 2013

The month was kicked off with a bond from a new issuer to this space - the Dutch development bank FMO (Financierings-Maatschappij voor Ontwikkelingslanden). They issued a EUR500m “Sustainability” Bond to support the financing of ‘green and inclusive finance projects’. This includes renewable energy, energy efficiency, responsible agriculture, food production, transport, waste supply and access as well as microfinance. So pretty broad then.

 

Nov review 1/7: newbie FMO tries a EUR500m Sustainability Bond
Posted: Dec 9, 2013

It’s been a crazy month for “labelled”* green bonds. At the beginning of the month, there was approximately $10bn outstanding (just under $13bn has been issued but some matured) consisting of mostly of AAA multi-lateral development banks and (depending on how you count) a few municipalities.

Now, as November closes, we’re looking at approximately $15bn outstanding with the first few corporate issuances released! One month on and it’s a different world. Here is a brief summary:

  • Labelled green/climate bonds market grows by 50%
  • 8 bonds issued in November– 7 over the magic $300m mark
  • First corporate green bonds issued: 3 in one week!
  • Demand is HUGE – most bonds were oversubscribed.
A review of November's $5bn Green Bonds craze – when it rains it pours. Standards will now be the key to avoid greenwash
Posted: Nov 27, 2013

A successfully placed 19 year, £305.14 million ($496m) bond to fund the acquisition of a large offshore wind energy transmission connection shows how the EIB’s Project Bond Credit Enhancement Initiative can make a real difference.

 

UK Greater Gabbard wind-grid bond, 19yr £305m ($496m), is 3 x oversubscribed. Whacko! EIB Proj Bonds Initiative helps it get magic A3 rating; shows the way for future Proj Bonds credit enhancement
Posted: Nov 24, 2013

Climate Policy Initiative has launched a useful Climate Finance Landscape web site.

Key finding: climate investment plateaued at $359 billion in 2012, far short of the need. In contrast, the IEA projects that an additional investment of $5 trillion (above business as usual) is required between now and 2020 for clean energy alone, to limit warming to 2°C. Work to do.

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Some useful facts from a cracker of a presentation by IEA's Philippe Benoit:

  • The global solar PV capacity grew 42% last year and wind energy capacity by 19%.
COP19 snippets #2: new rpt shows climate finance flows flat @$359bn p.a. vs $1tn needed / IEA says we have to make EE 'cool' / OECD platform to support Green Banks / World Bank: could EM megacities issue green munis to fund green transition?
Posted: Nov 24, 2013

For most of the past fortnight I've been in Warsaw, more talking 'private sector climate finance' than UN climate agreement, despite the negotiations being the ostensible reason for the gathering of very many nations. From my perspective there are so many key people around that you can do a year's worth of meetings in one burst; very efficient. Of course negotiations were underway all over the place, if you can call arguing for days about a sentence a "negotiation" - all a damp squib really. Memories:

  • Japan bowed it's head and said "without nuclear - and renewables not scaling up as quickly as we had hoped - we have to rely on gas ... so our emissions targets are wrecked". Awkward.
COP19 snippets #1: UN climate negotiations a damp squib / HSBC's Robins "We need to integrate climate into financial policy" / GGGI CEO says investors should expect change in a rush, leaving assets stranded: "hedge your bets"!
Posted: Nov 22, 2013

NRW Bank, the development bank of the German State of North Rhine-Westphalia, has just issued  a EUR250 million, 4 year bond, the proceeds of which will go to refinancing environmentally friendly water and energy projects in the State.

 

Interest rate is 0.75%.  Bond ratings were: Moody's Aa1 (Neg) / S&P AA- (Stab) / Fitch AAA (Stab).  Joint bookrunners were Crédit Agricole CIB and DZ Bank.

Investor type:

  • Banks 40%
  • Funds managers 34%
  • Central banks / official institutions 24%
  • Pension & Insurance funds 2%
  •  

Regional spread:

 

Germany's NRW does a "water" bond EUR250m 4yr AAA