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Bonds & Loans: AFME and ICMA oppose mandatory EU green bond standard

A weekly overview of ESG developments for fixed income

The International Capital Markets Association (ICMA) and Association for Financial Markets in Europe (AFME) have written to the European Commission to oppose proposals that the planned EU green bond standard be made mandatory. The Commission is planning to make the proposed standard make voluntary, but there have been various calls for them to be mandatory, most recently by the regulation's rapporteur, MEP Paul Tang, who proposed a range of amendments to the Commission's proposals in December, for example that it should be considered to make the label mandatory for bonds marketed as environmentally sustainable between 2025 and 2028. Mandatory standards “would lead to an unsustainable level of additional cost and liability for issuers, which would hinder the uptake of the label”, ICMA said. “They would also undermine the inclusive, voluntary and aspirational nature of the European sustainable bond market replacing it with a mandatory framework lacking any form of incentive to counterbalance the additional cost and liability being required from issuers”. The AFME said that making the standard mandatory “would be likely to overly constrain issuance in the EU, given the limited availability of taxonomy-aligned investments, in particular in the short term”.  

The World Bank has published a report setting out a draft framework for designing and assessing sovereign sustainability-linked bonds. The report identifies 50 potential sovereign KPIs across five categories including biodiversity, energy and natural capital, and says that sovereign SLBs are likely to include a step-down rather than a step-up mechanism. The report also suggests establishing an independent body to support the assessment of sovereign SLBs. 

Also this week, the World Bank raised around €2.8bn from two sustainable development bonds. The first, a 5-year C$1.5bn note, launched with a yield of 1.836%, with 47% allocation to the Americas and 44% to central banks. The second, a 7-year £1.5bn deal, launched at 1.282%, 32 basis points over the reference gilt. More than three quarters of allocation from the sterling deal went to UK investors, with banks and corporates taking 64% and asset managers, insurers, and pensions funds 25%. 

Hong Kong Airport raised $1bn from a green bond as part of a multiple times oversubscribed $4bn raise, the vanilla portions of which will fund the construction of a third runway. Just under 60% of the 5-year tranche, which pays 1.75%, was allocated to green investors, with more than 200 investors participating in the wider raise. Lara Cuvelier, Sustainable Investment Campaigner at Reclaim Finance – which had warned that the deal was “high-flying greenwashing” pre-issuance – said: "sadly, this sale encapsulates the failures of so-called 'green finance'”. There is no suggestion that the proceeds from the green tranche will directly finance the construction of a third runway. 

Enel covered its books more than twice over for a triple-tranche sustainability-linked bond at the start of the week, raising €2.75bn. The deal was split between a 4-year €1.25bn tranche paying 0.25%, and two €750m tranches maturing 2031 and 2035 and paying 0.875% and 1.25% respectively. All three tranches will see a 25bp step up should Enel fail to achieve its carbon intensity targets.  

French grid operator RTE saw orders of €4.3bn for its €850m green bond last week, leading to as much as a 7bp greenium. The 0.75% notes mature in 2034, with proceeds spent on renewables connections and network optimisation under RTE’s framework, which it says is fully aligned with the EU Taxonomy. Also in France, private healthcare provider Ramsay Sante raised €100m from a private placement of sustainability-linked bonds. Natixis and La Banque Postale arranged the deal, which was heavily oversubscribed, with the interest rate linked to increased patient satisfaction, development of local health centres, prevention programmes for high-risk groups and reducing the firm’s environmental footprint. France’s BPCE Group has also raised €750m from a 6-year green bond, with Natixis acting as sole bookrunner. The bond will refinance sustainable assets in the agriculture sector. 

Belgian real estate and logistics firm VGP has raised €1bn from a dual-tranche green bond. The bond, composed of a €500m 5-year bond paying 1.625% and a €500m 8-year bond paying 2.25%, was 2.5x oversubscribed, making VGP the first Belgian real estate firm to print €1bn in a single deal. In other real estate news, US-based REIT Starwood Property Trust has raised $500m from a sustainability bond offering. The proceeds of the 5-year notes, which pay 4.375%, will be allocated to renewables, green buildings and affordable housing. Central and Eastern Europe real estate firm NEPI Rockcastle is also due to launch a green bond from its medium term note programme this week. 

Indian renewables firm ReNew Energy has raised €400m from a 5.25-year green bond. The notes, which saw interest from US, Asian and EMEA investors, pay 4.5%. Abu Dhabi solar firm Sweihan PV will also seek to raise $728m this week from a green bond, according to documents seen by Reuters. The majority of the proceeds will be used to repay bank loans. 

Norway’s DNB Bank has raised €1bn from a green bond. The 6-year note saw €1.7bn of orders at its peak. In other banking news, Germany’s Aareal bank raised €500m from a 6-year green bond which saw a peak order book of €700m and Brazilian bank Bradesco raised $500m from a 4.375% sustainable bond which attracted $1.2bn of orders. Italian lender Credito Emiliano finished investor calls yesterday for a debut green bond. 

Dutch tech firm VodafoneZiggo has raised €2.1bn from its inaugural sustainability-linked bond. The deal was split into a €750m and $1.525bn tranche, both with a 10-year maturity, paying 3.5% and 5% respectively. The coupons are tied to 50% cuts in Scope 3 and Scope 1 and 2 emissions by 2025, with a 12.5bp increase per target in the event of failure. 

French online retailer Veepee has signed a €232.5m revolving credit facility and term loan, linked to avoided emissions from recycling, employee satisfaction and the number of women in tech roles. Credit Agricole acted as ESG coordinator on the deal, and was joined by BNP Paribas and Societe Generale as bookrunner. 

India’s Shriram Transport Finance Company has raised $475m from a social bond. The firm will pay 4.15% on the 3.5-year bond after orders peaked at $1.3bn. 

Mexican Cement Company GCC raised $500m from a sustainability-linked bond deal. The bond, maturing 2032, was around 2x oversubscribed, launching with a coupon of 3.614%, linked to reductions in carbon intensity from cement production. 

South African logistics company Imperial Logistics has signed a R1bn (€56m) sustainability-linked revolver with Nedbank. Further terms of the deal were not disclosed. 

SME investor INDUS Holding has raised €56m from its second sustainability-linked loan. The loan, arranged by LBBW, was increased by €6m due to strong demand and is linked to INDUS’ sustainability rating from ISS ESG.  

HSBC has made its first sustainability-linked trade finance transaction in Hong Kong, signing a trade facility with sustainable fashion manufacturer Epic Group, with pricing tied to emissions intensity, freshwater use and a supplier sustainability metric. In other Hong Kong news, DBS Hong Kong has signed a $400m ESG-linked term loan with consumer electronics firm Haier Group. The one-year term loan is linked to reductions in energy consumption per business unit.