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Bonds & Loans: Austria raises €4bn from green debut, Indonesia goes green for annual Sukuk

New look sustainable debt roundup: Barrick Gold adds sustainability targets to $3bn revolver.

Austria has raised €4 billion from its green debut, one of the first sovereign bonds to be partially aligned with the EU’s green taxonomy. Deutsche Bank estimated that Austria saw a ‘greenium’ of 2.5 basis points for the deal, which matures in 2049, and is set to fund 80 percent of the country’s green expenditures for this year. Around three-quarters of Austria’s green spending, in areas including renewables and clean transportation, is aligned with the taxonomy.

Trisha Taneja, global head ESG for origination and advisory at Deutsche Bank, which was a bookrunner on the deal, said that taxonomy alignment was coming up in every investor conversation as investors begin to report against the EU SFDR. Investors are not looking for full taxonomy compliance at the moment but for the degree of alignment, she added, so the Austrian approach of demonstrating partial taxonomy alignment “made sense”.

In other sovereign news, Indonesia went green for its annual Sukuk issuance, raising $3.25 billion from a dual-tranche deal which was also its largest ever Sukuk. The deal was roughly three times oversubscribed, with both the five and 10-year tranches pricing inside initial price guidance. Staying in APAC, Japan’s prime minister Fumio Kishida announced that the country plans to issue ¥20 trillion (€147 billion; $158 billion) of “green transition” bonds to finance its net-zero transition. Further details will be announced later this year.

Meanwhile the UK’s Debt Management Office has announced plans to hold a syndicated reopening of its 2053 green gilt in either July or September, while New Zealand’s treasury said last week that it was still on track to come to the market with an inaugural green deal in late 2022.

The past week has seen good supply from financials, with Munich Re raising $1.25 billion from its third visit to the green market in a 20-year deal and ING selling a €1.5 billion four-year green holdco. Orders reached around €3 billion for ING’s deal. Proceeds will be allocated to loans for green buildings or renewable energy projects which comply with the climate change mitigation, do no significant harm and minimum social safeguard requirements of the EU taxonomy.

In the corporate space, Volvo raised €500 million from a six-year green bond, while Japan’s largest power generator JERA has announced plans to raise ¥20 billion from a dual-tranche transition bond.

An interesting sustainability-linked loan comes from Barrick Gold, which has extended its $3 billion revolver by one year and added sustainability targets. The interest rate on the revolver will rise or fall depending on the gold giant’s progress against targets relating to Scope 1 and 2 intensity, water use efficiency and total recordable injury frequency rate.

Deutsche Bank’s Taneja noted that, despite a difficult macro environment and uncertainty over the past few months, ESG debt had “shown its resilience”, adding that there was a “consistent pipeline” of ESG-labelled deals to come. The sovereign deals, she said, reiterated the issuers’ long-term commitments to sustainability despite possible short term needs to manage increases in fossil fuel usage in light of the energy security debate.

In non-market news, the Anthropocene Fixed Income Institute has partnered with the Net Zero Asset Owner Alliance to promote net-zero alignment in global fixed income markets. The AFII said that its “market practitioner’s approach to embedding positive climate impact across credit portfolios, along with NZAOA members’ demonstrated leadership to achieve alignment with the Paris Agreement in their investment portfolios, makes this collaboration a timely step in addressing blind spots in fixed-income markets”.

Last but not least, the Climate Bonds Initiative has put out a new report examining policies needed to accelerate the EU’s transition away from fossil gas, while its Q1 sustainable debt roundup estimates that cumulative issuance for green, social, sustainability and sustainability-linked bonds reached $3 trillion this quarter. Total transition bond issuance also crossed the $10 billion mark.

Find out more about this topic from industry leaders at the RI Europe 2022 conference, taking place in person in London on 14-15 June.