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Bonds & Loans: US gets first junk-rated social bond

A weekly overview of ESG developments for fixed income

OneMain Financial has become the first junk-rated social bond issuer in the US. The Bb3/BB–rated lender raised $750m after upsizing the six-year offering from $500m on the back of investor demand – the orderbook hit $2.8bn and the deal priced with a coupon of 3.5%. Proceeds will be used to finance loans to individuals with poor or no credit history, with at least 75% going to racial minorities or women. Four of the transaction’s lead managers were ‘diversity and inclusion broker dealers’, according to a statement. 

HSBC USA has announced that it will offer sustainability-linked loans and credit facilities to its corporate clients, aligned with the Sustainability-linked Loan Principles. It comes as HSBC Taiwan agrees a $70m sustainability-linked loan with food and beverage conglomerate Uni-President Enterprises Corp, with an interest rate linked to emission reductions, energy efficiency, wastewater management and food waste energy generation targets.

AXA IM Alts’ European real estate fund has raised €500m from a green bond offering to consolidate previous debt facilities. The seven-year bond attracted orders of €1.8bn and priced with a coupon of 0.75%.

There was €5bn of investor demand for a €2bn social bond from Unédic, the French agency in charge of managing unemployment insurance, this week. Proceeds from the 15-year deal, which priced at 0.524%, will be used to strengthen unemployment insurance schemes.

Renewables firm Latin America Power has issued $403.9m in 12-year green bonds (5.125%) to refinance two Chilean wind farms. 

IT firm HP has raised $1bn from its inaugural sustainability bond to finance electric vehicles, renewables and recycling programmes for old devices. 

ICG Real Estate has provided an £86.8m sustainability-linked loan to the UK’s Reading International Business Park, owned by an investment fund from Tristan Capital Partners. The loan is linked to meeting sustainability targets including energy performance and enhancements to social infrastructure. 

Communications firm TELUS has issued what it claims is Canada’s first sustainability-linked bond. The ten-year, $750m bond will be used to repay existing debt. The interest rate on the bond will be increased by 1% in 2030 should TELUS fail to reduce Scope 1 and 2 emissions by 46% against the 2019 baseline.

Mighty Earth has made a spoof application to the Climate Bonds Initiative (CBI) for a $1bn green bond to raze and reforest London’s Hyde Park and New York’s Central Park with rubber plantations, in protest at what it claims is CBI’s failure to investigate alleged deforestation linked to Michelin’s green bond-financed eco-rubber project in Sumatra. The NGO claims that a subsidiary of Michelin’s local partner “industrially deforested” more than five thousand hectares of rainforest home to endangered wildlife and two forest-dependent indigenous communities. The bond is not certified but CBI, but is included in its universe of labelled green bonds for data purposes. 

Three US lawmakers have introduced a bill allowing Americans to buy Clean Energy Victory Bonds to finance the expansion of renewables and battery infrastructure. The bill, introduced by Californian Representatives Zoe Lofgren and Doris Matsui and Senator Jeff Merkley, calls on the federal government to issue at least $50bn a year of the bonds, which should be available to retail investors for as little as $25.

Dutch bank De Volksbank has issued a €500m, 7-year green bond with a coupon of 0.25% to finance loans for green homes, renewables and energy efficiency.

Australia’s Ramsay Healthcare has signed a A$1.5bn (€965m) sustainability-linked loan in three A$500m tranches, maturing in three, four and five years. The loan is linked to a number of sustainability targets including energy efficiency, staff mental health and responsible supply chains.

Australian firm Wesfarmers has sold A$650m of 7-year notes (1.94%) and A$350m of 10-year notes (2.55%) with coupons linked to sustainability targets. Specifically, the chemical and fertiliser specialist must limit the average emissions intensity of its ammonium nitrate production plant to 0.25 tonnes CO2 per tonne of ammonium nitrate, and obtain all of the electricity for three of its retail businesses from renewable sources by 2025 – otherwise the bonds’ coupons could increase by a maximum of 25bp.

The Climate Bonds Standard has updated its agriculture criteria for green bonds to include the production systems for cattle, buffalo, sheep, goats, dairy, pigs and poultry, their waste and related grassland or pasture. A number of major firms involved in the meat industry, such as Marfrig and JBS, have issued bonds linked to sustainability goals or claims in recent years, sparking debate about how the sector can credibly contribute to climate goals. 

Vegetable oil firm AAK has added sustainability criteria to its renewed five-year, €400m revolving credit facility, making its rate of borrowing dependent on targets including creating a deforestation and conversion-free supply chain for its palm oil by 2025.