Bonds & Loans: Bank of China issues green bonds on three continents

A weekly overview of ESG developments for fixed income: Flurry of bank issuance; Barriers to Latin American sustainable debt issuance

Bank of China has raised just over $800m from green bonds issued by three different branches. The Hong Kong branch raised HK$2bn from its first Hong Kong dollar-denominated green bonds, attracting an order book of HK$6.25bn. The 2-year bond priced at 1.33%, with 15% allocation to sovereign and public institutions. Meanwhile, the bank’s South African branch raised $300m from a 3-year green bond which pays 1.875% off the back of a $650m orderbook including $455m lead manager interest and its Hungarian branch raised $300m from a 2-year bond paying 1.625%. A pre-issuance document identified $306m in eligible loans for the Hungarian bond, split across renewables, sustainable water and wastewater management and clean transport.

Sustainable debt issuance in Latin America is being hindered by limited sovereign issuance, according to a new report from Janus Henderson. Only 12 of 43 countries have issued sustainable debt, which the report says hinders the adoption of labels by corporate issuers. While direct investment from developed market corporates such as in the Atacama Desert solar farms in Chile has been a mitigating factor there are also relatively few investable projects compared to other regions. Janus Henderson calls for a coordinated green policy framework across Latin American governments to remove obstacles to international investment in sustainable debt issuances and improve the credibility of net zero targets.

Nordea has raised €1bn from a green bond off the back of a €3.1bn orderbook. The 5-year bond, which pays 1.125%, saw an estimated greenium of 3bp. Three quarters of allocation went to SRI investors, with Germany and Austria, Benelux and Iberia seeing the largest allotments. Meanwhile, Danske Bank raised €750m from a 5-year green bond from a €1.25bn orderbook.

Caja Rural de Navarra has raised €500m from its inaugural green bond. The Spanish bank saw €706m in orders for the 7-year deal, with proceeds spent under its green financing framework, one of the few to be updated to align with the EU green taxonomy.

The Mayor of London has announced the city will seek to raise at least £500m from a green bond programme to fund decarbonisation activities within the city. Sadiq Khan said that he had set aside £86m to cover interest and repayments on the bonds, or to subsidise interest rates on loans to eligible projects.

Riyad Bank has raised $750m from its inaugural sustainable sukuk. The order book for the 5.5-year sukuk reached $3.2bn leading it to price at 4%; 37.5bp under initial price thoughts.

The Inter-American Development Bank has privately placed two Australian dollar sustainable development bonds with Sumitomo Life and Taiju Life. Daiwa acted as arranger on the Sumitomo deal, a A$120m (€76m) 10-year bond which pays 2.49%, while Citi arranged the Taiju deal, a A$16m 15-year bond which pays 2.56%.

France’s social debt agency CADES has raised €2bn from its latest social bond. The final orderbook for the 7-year bond, which pays 0.6%, reached €2.4bn, with 54% allocated to ESG investors, 49% to banks and 33% to French investors.

Berlin Hyp raised Sfr100m (€95.4m) from a 3-year green bond. Asset managers took 77% of allocation, with the bond carrying a coupon of 0.375%. Meanwhile, DZ Hyp has mandated six banks to lead its first green Pfandbrief.

Hong Kong has announced plans to sell up to HK$6bn (€678m) of green bonds to retail investors in early March. The 3-year bonds will pay an interest rate tied to inflation or 2%, whichever is higher, with expectations of eight to 10 times oversubscription, according to Bank of China Hong Kong, which is organising the sale alongside HSBC. Meanwhile, the UK’s state-owned savings bank NS&I has announced it will double the interest rate on its own 3-year retail green bonds to 1.3%. The 0.65% interest rate was much lower than other fixed term savings products when the bonds were launched, and was widely regarded as unappealing for savers.

Eco Materials Technologies has raised $525m from a green bond which was four times oversubscribed. In other US news, affordable housing developer National CORE has raised $100m from its inaugural social bond, maturing 2032.

Tokyo Gas has announced plans to raise ¥20bn (€152m) in transition bonds in March this year. The 8-year bonds will be used to fund an LNG project, a hydrogen project and a ‘smart energy network’ project. Mizuho and Nomura have been appointed lead managers on the deal, while DNV provided a second party opinion on the firm’s transition finance framework.

Norwegian seafood firm Grieg has signed a NOK3.2bn (€317m) sustainability-linked financing package with DNB Bank and Nordea. The facility is composed of a NOK750m term loan, a €75m term loan and a NOK1.5bn revolving credit facility. Grieg did not respond to a request for detail on the sustainability targets attached to the facility.

Milestone Environmental Services has signed a $45m sustainability-linked loan with the Community Bank of Texas and Gulf Capital Bank. The targets attached to the deal, which will be used to acquire an energy waste disposal facility and two landfill permits, were not disclosed.

OCBC Bank has signed a $70 sustainability-linked loan to Taiwanese bulk shipper U-Ming Marine Transport Corporation. The loan will be used to fund the firm’s fleet renewal plan – including the construction of two new bulk carriers – with an interest rate reduction if U-Ming reduces its emissions intensity and increases the proportion of its fleet with an emissions certification from RightShip.