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Bonds and Loans: Eight investors back EM green bond fund from HSBC and IFC

A weekly overview of ESG developments for fixed income

HSBC Asset Management and the IFC have raised $528m at final close for their emerging markets green bond fund. On top of the $75m invested each by HSBC and the IFC, the pair received backing from eight investors including Aviva France, Cardif Assurance Vie, Gothaer Asset Management, Lærernes Pension, Verka VK Kirchliche Vorsorge, and Versorgungswerk der Apothekerkammer Westfalen-Lippe.

The International Capital Markets Association (ICMA) is calling on local regulators to help improve ESG data for Asset-Backed Securities in order to bolster green securitisations. ICMA, the host of the Green Bond Principles, made the call via its Asset Management and Investors Council, which cited a lack of third-party sources for ESG data in the ABS investment universe. The council encouraged regulators to give support to market participants to report on ESG metrics, and introduce specific ‘green’ securitisation metrics and standards.

The Climate Bonds Initiative (CBI) is reviewing a sustainability bond issued by Indonesia’s Tropical Landscapes Finance Facility (TLFF) in 2018, following a complaint from campaign group Mighty Earth. The NGO said the proceeds supported a sustainable rubber project tied to Michelin – a company it alleges has links to deforestation in Indonesia through its partners in the country. TLFF has previously dismissed the claims of illegal deforestation, saying they “are without basis in fact”. Mighty Earth claims the bond’s second-party opinion from Vigeo Eiris “failed to conduct appropriate due diligence and as such was a wholly inadequate GBP-required assessment,” referring to the rules laid out by the Green Bond Principles. CBI told RI it was “examining the [Might Earth] submission, and will seek information in response from TLFF”. CBI has not endorsed the bond, but includes it in its list of issuance, which forms the basis of some investment universes in the space. “If we were to decide a bond no longer met our own guidelines we would simply remove it from our lists,” it said. Moody’s, which bought Vigeo Eiris in 2019, said its second-party opinions “provide a point in time assessment based on publicly available information as well as information disclosed by issuers”. BNP Paribas, which was lead manager on the deal, declined to comment. 

Deutsche Bank has issued a five year, $800m green bond with a coupon of 1.686%. It's the bank’s first senior-preferred green bond for the US market and demand hit $2.9bn, falling to $2.1bn after a price tightening of 20bp. 

HSBC has traded a $100m, two-year ESG-linked cross currency swap in Korea. The deal, which the bank claims is the first sustainability-linked derivative product in Asia, was with Hana Financial Investment. Hana will receive a premium payment or discount based on whether its parent company, Hana Financial Group, can improve its Sustainalytics ESG risk rating. Eunyoung Jung, President and CEO of HSBC Korea, said the deal opened the door to “a much wider and flexible range of sustainable finance products” for market participants.

Standard Chartered has issued a $500m sustainability bond to finance support for sectors including renewables and healthcare. The 2025 notes have a 1.214% coupon and were seven times oversubscribed. The bank has also launched a Sustainable Trade Finance Proposition, which builds the Loan Market Association’s Green and Sustainability-linked Loan Principles into its trade financing framework – a move the banks says will help it support sustainable goods, suppliers and end users as well as offering trade financing to industries seeking to reduce their emissions.

Schroders Investment Management, Plenum Investments and Solidum Partners are among investors in a first-of-a-kind catastrophe bonds from the Danish Red Cross. The $3m volcanic eruption cat bond has a three year tenor and proceeds will be used to support humanitarian aid in the event of eruptions from 10 volcanoes.  

Two residential real estate companies have sold notes this week. Vonovia issued its inaugural green bond, raising €600m in a 10-year deal that will be used to refinance green properties. Investor demand was double the amount being offered and the bond has a coupon of 0.625%. Meanwhile, Vía Célere issued a €300m, 5-year deal to refinance energy efficient buildings in Spain and Portugal. That deal has a 5.25% coupon. 

Virgin Money has said it will offer sustainability-linked loans to UK companies and waive the arrangement fee for any business with a sufficiently strong ESG score based on an assessment it has created with the Future Fit Foundation.

Dai-ichi Frontier Life Insurance has bought a $40m, 3-year green bond from Hitachi Capital in a private placement that offered a 1.07% coupon. Eligible projects for financing include leases for electric vehicles and charging points, and hybrid solar farms. NatWest and Nomura acted as joint-Green Structuring Banks and a second party opinion was provided on the framework by Sustainalytics.

Bedford Row Capital has been mandated by Morteza Hospitality Bonds for a $38.5m ESG bond, the proceeds of which will be used to finance construction of an environmentally friendly resort in the Maldives by Keredhdhoo Investment. The planned 3-year bonds will be listed on the Frankfurt Stock Exchange.

The Inter American Development Bank, IDB, has confirmed that it will “support” a sustainability bond offering from Brazil’s central bank. Banco do Brasil is Latin America’s largest financial institution, and will use proceeds from the upcoming deal – due later this year – to finance projects including low-carbon agriculture, health and renewables. IDB said the inclusion of sustainable farming was “an approach still little seen nationally and globally”. Brazilian ESG researcher Sitawi also assisted with the framework and its assessment.