Bonds and Loans: Nearly €2bn in loans agreed based on renewables targets

A weekly overview of ESG developments for fixed income

BBVA has signed a €1.35bn sustainability-linked guarantee facility with Italian power provider Enel, based on its shift to renewable energy. “If Enel reaches a level of achievement of 55% of the indicator or more in fiscal year 2021, and 60% or more in 2022, the bank will reward Enel with a bonus,” said BBVA. “Otherwise, the utility has agreed to pay the bank a penalty.”

Austrian electricity company Verbund has issued a €500m green and sustainability-linked bond. The 20-year bond will be used to finance or refinance hydropower, solar or wind power projects. It has a coupon of 0.9%, which will be increased by 25 basis points if the company has not installed 2000MW of renewables capacity by the end of December 2032, or an additional 12,000MVA of transformer capacity by the same date. The order book was four times oversubscribed, and 90% of issuance went to PRI signatories.

The World Bank is to issue a $45m Wildlife Conservation Bond this year, to fund the protection of black rhinos in South Africa. Credit Suisse is advising on the five-year deal, which will pay investors a return based on the growth of the Rhino population on maturity, instead of an annual coupon. It is the second time a bond has been developed to support rhino conservation – Social Finance and the Zoological Society of London have previously partnered on a similar initiative

Energy firm E.ON has issued a €750m, 11.5-year green deal. The bond, which has a 0.6% coupon, will be used to finance or refinance projects within renewables, energy efficiency, clean transport and electricity networks. E.ON’s framework aligns with the EU’s draft green taxonomy, according to a second party opinion provided by Sustainalytics.

The Nordic Investment Bank has issued a €500m, six-year Environmental Bond with a coupon of 0%. Proceeds will be used to finance green loans in Denmark, the Faroe Islands, Greenland, Finland, Åland Islands, Iceland, Norway, Sweden, Estonia, Latvia and Lithuania.

Australian construction and property firm Lendlease has sold A$300m (€194.5m) of green paper to finance low-carbon buildings. The 10-year, 3.7% offering is the second from the issuer, which entered the market with a A$500m deal in October. 

The New Development Bank has successfully priced an RMB5bn (€656m) SDG Bond in a deal that was twice oversubscribed when the order book closed. The three-year 3.22% bond is aligned with China’s 2020 SDG Finance Taxonomy and will be used to finance a RMB7bn emergency loan to China to support its economic recovery from Covid-19. 

Paragon has become the first UK bank to issue a subordinated green bond, selling £150m of 10-year bonds to finance loans to landlords seeking to mitigate the impacts of climate change. The coupon is 4.375%.

Kommunivest will start offering social loans to municipalities in Sweden, financed by proceeds from its social bonds. Eligible projects including housing and residential environments; safety, security and accessibility; and health, education, sports and culture. Kommunivest has already granted SEK525m (€51.1m) in loans to five customers including the Uppsala and Ånge municipalities during a trial period.

The Japanese green bond market grew by a third in 2020, taking the country to 7th in the global rankings, according to a new report from the Climate Bonds Initiative. In its Japanese State of the Market overview, CBI found that the Japanese Housing Finance Agency was the top issuer, with $1.8bn of the $10.6bn total issuance. The Japanese labelled bond universe amounts to $64.8bn in total.

NN Investment Partners predicts 2021 green bond issuance will hit €400bn, almost twice the total for 2020 (€230bn). Issuance in March has already been the highest ever monthly total at €48bn, and projected issuance could take the global green bond market over €1tn by the end of the year, it said. 

The Climate Bonds Initiative’s Standards Board has approved new hydropower criteria, providing screening criteria for investments in sustainable hydropower projects. 

The EU has issued a €13bn social bond across two tranches. Proceeds from the €8bn five-year bond and the €5bn 25-year bond will be loaned to EU member states to finance job creation, unemployment programmes and access to healthcare. The five-year bond, which has a coupon of 0%, attracted interest of €41bn while the 25-year bond, which has a coupon of 0.45%, attracted interest of €40bn.

Tikehau Capital has issued a €500m sustainable bond maturing in March 2029. Proceeds of the bond, which has a coupon of 1.625% will be invested into green and social assets and ESG funds eligible under Tikehau’s sustainable bond framework, on which a Second Party Opinion was provided by ISS ESG.