Bonds and Loans: €18.5bn demand for KfW’s biggest ever green bond

A weekly overview of ESG developments for fixed income

PGGM, AP3, Danske Bank Asset Management and ATP were among the asset owners to pile in on a €4bn green bond from German development bank KfW – its biggest offering to date. The eight-year bond has a coupon of 0% and received orders in excess of €18.5bn, KfW’s largest ever orderbook. 80% of issuance went to ‘green investors’, it said. €3.16bn of the proceeds will be allocated to green buildings in Germany, with the remainder allocated to green energy projects across a number of European countries and Japan.

Berlin Hyp claims it has become the first bank to issue a sustainability-linked bond. The €500m, 10-year deal has a coupon of 0.375%, which will be raised by 0.25% in the final year if the bank has failed to reduce the carbon footprint of its credit portfolio by 40% against 2020 levels. The orderbook was twice oversubscribed, with 71% of issuance to German investors and 10% to Asian investors.

United Overseas Bank has issued Singapore’s first sustainability bonds, selling $1.5bn in senior and Tier 2 notes in a dual tranche deal. The bonds, which have coupons of 1.25% and 2% respectively, were 1.8 times oversubscribed, with 60% of issuance going to ‘sustainability-focused’ investors.

Sustainable bond issuance is expected to reach $1tn in 2021, according to SEB’s latest green bond report. A significant increase in green and social bonds and a breakthrough for sustainability-linked debt has driven the rise, which saw $378bn of issuance in Q1 of this year. Sustainability-linked bond issuance was 10 times higher than Q1 2020, and has already surpassed the 2020 total.

Shipping firm Euronav has signed a 3-year sustainability linked loan worth €80m, where the interest rate is based on sustainability metrics including annual carbon emissions reductions. The revolving credit facility was signed with a lending consortium including BNP Paribas, ING and SEB, and brings the proportion of Euronav’s total financing with a sustainability component to 31.5%. 

Car company Kia has raised $700m from two green bond issuances. Strong investor demand for the $300m 3-year and $400m 5.5-year notes resulted in pricing tightening by 35bp on each offering, with final pricing at 75bp and 90bp over US Treasuries, respectively. Proceeds will be spent on projects including the development of zero-emission electric vehicles and improvement in electric charging infrastructure. 

The Hungarian Central Bank will buy green sovereign bonds as part of its asset purchase programme, it has said. Hungary issued its own debut green govvie last year, and plans to return to market this month with a 30-year forint-denominated offering. The bank told Reuters that “the NBH is committed to buy green government bonds as part of its asset purchase programme under similar conditions to any other government bond”.

Aviva Investors has announced the completion of a £72.9m ‘sustainable transition’ loan agreement with the London-based Commercial Estates Group. The facility, provided over seven-year fixed and floating-rate tranches, will see the borrower’s interest rate fall if it meets sustainability goals for its assets. 

Indonesian bank Mandiri has raised $300m from its green bond debut, in a deal that saw demand at more than eight times supply. The notes have a tenor of five years and a 2% coupon. Proceeds will be used to finance environmental and social projects, especially among micro, small and medium enterprises. Deutsche Bank, HSBC and Mandiri Securities acted as joint lead managers.

Investor demand saw salmon farming company SalMar raise more than a third more than originally planned with its NOK3.5bn (£300m) green bond. The six-year bond has a coupon of three-month Nibor plus 1.35% and proceeds will be spent on sustainable fish farms, environmental management and research and sustainable salmon nurseries.

Railroad financing company EUROFIMA has issued a €250m green bond, due 2041. The bond, which has a coupon of 0.5%, was almost six times oversubscribed. Proceeds will be spent on financing or refinancing rolling stock powered by electrical, battery or hybrid systems.

Canada’s Summit Industrial Income REIT has issued a $250m, unlabelled bond to finance green properties and repay existing non-green debt. The bond, which matures in 2027, has a coupon of 2.25%. 

The World Bank has issued Sustainable Development Bonds in two tranches – a $3bn 2-year bond and a $5bn 7-year bond. The 2-year tranche has a coupon of 0.125% while the 7-year tranche has a coupon of 1.375%. The total order book was $14bn across both tranches, and proceeds are used to support programmes which further the Sustainable Development Goals.