Bonds & Loans: Updated Sustainability-linked Loan Principles require external verification

A weekly overview of ESG developments for fixed income

The Asia Pacific Loan Market Association, Loan Market Association and Loan Syndications and Trading Association have published an updated version of the Sustainability-linked Loan Principles. Firms taking out a sustainability-linked loan are now required to seek external verification of their performance against each KPI.

Almost 90% of green bond issuance was covered by post-issuance reporting, with three quarters covered by environmental impact reporting, according to research by the Climate Bonds Initiative. While the CBI estimates that most non-reporters at the time the report was researched have now issued a report, it says there was still significant variance in the quality and consistency of reporting. 

EDF has issued a €1.25bn social bond. The 7-year bond launched with a coupon of 2.625%, and proceeds will be spent on eligible projects under six SDGs including decent work and economic growth and reduced inequalities.

Ghana has announced plans to issue Africa’s first sovereign social bond as part of a mixed green-social issuance of up to $1bn.

Dutch grid operator TenneT has raised €1.8bn from a triple tranche green bond. Total demand for the €650m 6.5-year bond, the €500m 10-year bond and the €650m 20-year bond reached €4bn with orders from 20 European countries. The three tranches priced with coupons of 0.125%, 0.5% and 1.125% respectively. Proceeds will be used to invest in projects in Germany and the Netherlands focused on connecting offshore wind to the onshore grid and increasing transmission capacity for renewable energy.

Kathmandu Holdings has signed New Zealand’s largest sustainability-linked loan with a consortium of international and domestic banks. The outdoor clothing and equipment retailer signed the AUD$100m (€64.3m) loan alongside an AUD$200m non-linked loan to refinance its debt facility. The costs on the loan are linked to group targets on GHG emissions, certification as a B Corp and supply chain issues.

Assets in green bond funds reached €22bn at the end of Q1 2021, up 80% on 2020, according to analysis from Fitch. Growth far outstripped non-labelled bond funds, which grew by just 4%, but green bond funds still only account for 0.2% of global bond fund assets under management. Fitch also found that some funds have begun to take on more credit risk, with exposure to BBB issuances rising from 32% to 37% in Q1 2021.

NN Investment Partners’ green bond fund has reached €500m in AUM. The SFDR article 9 classified fund invests in high quality corporate green bonds from across the globe, mainly denominated in euros.

Vattenfall has issued SEK3.5bn (€347m) in two green bond tranches. The first SEK3bn tranche priced with a coupon of three month Stibor plus 180bps and the second SEK500m priced with a coupon of 2.4%. Proceeds will be spent by the offshore wind company on renewables projects as well as energy efficiency and transport electrification.

Cape Verde savings cooperative MORABI has announced plans to become the nation’s first social bond issuer. The firm plans to issue in June, raising proceeds for social inclusion, job creation and promoting sustainability and development. 

Electronics manufacturer Arçelik has issued a €350m green bond. The bond, which Arçelik claims is Turkey’s first ever corporate green bond in the international markets, has a five year maturity and priced with a coupon of 3%. Proceeds will be used to finance eligible green projects including wastewater management and energy efficiency.

Georgian Railway’s green bond framework is fully aligned with the Green Bond Principles, according to a second party opinion issued by S&P Global. The planned issuance by Georgia’s only rail operator will be used to pay for zero direct emission electric rail lines and associated infrastructure.

Pakistan’s Water and Power Development Authority has raised $500m from a green bond issue. The 10-year bond was six times oversubscribed, receiving orders from Goldman Sachs, BlackRock, Amundi and UBS, among others. It launched with an interest rate of 7.5%, just 0.125% higher than Pakistan’s sovereign 10-year bond. Proceeds will go towards the construction of the Diamer-Bhasha and Mohmand hydroelectric dams.

Residential development business Wilmott Dixon has signed a £50m sustainability-linked loan with HSBC. Interest rates on the loan are linked to the firm’s sustainability targets.

Astorg has completed a €1bn sustainability-linked loan to finance its acquisition of aluminium giant Corialis. Astorg will be entitled to a discount or premium on the debt depending on Corialis’ ESG rating by an unnamed third party.

APAC green debt issuance in Q1 2021 was three times higher than in Q1 2020, according to a report by S&P Global. Issuance in Europe doubled over the same period, with $53.57bn in Q1 2021 versus $23.41bn in the same period last year. The report also assembles estimates for total issuance this year, ranging from $310bn from HSBC to $500bn from SEB.

Vena Energy has signed a JPY52.8bn (€394m) sustainability-linked revolving credit facility with a consortium of eight lenders including BNP Paribas and ING. The Singapore-based renewables firm restructured its three-year RCF to include KPIs relating to SDG 13 (Climate Action), workplace diversity and health and safety.

Retail operator Hammerson has issued a €700m sustainability-linked bond. The adjustment on the bond is tied to a 60% decrease in Scope 1 and 2 emissions by the 31st of December 2025 and a 50% decrease in Scope 3 emissions by the same date. The bond has a six-year maturity and a coupon of 1.75%.

Aeroflot has signed a $320m sustainability-linked revolving credit facility with Sovcombank. The financing costs are linked to Aeroflot’s MSCI ESG rating.

Tritax EuroBox has raised €500m from a five-year green bond issuance which priced with a coupon of 0.95%. Proceeds will be used to finance or refinance eligible assets within the real estate investor’s portfolio.