Bonds & Loans: Bank of China raises $2bn from green bond across three markets

A weekly overview of ESG developments for fixed income: Singtel issues SLB with a twist, Mexico eyes sustainable Samurai

Bank of China has raised $2.1 billion equivalent from green bonds issued in Macau, Singapore and Luxembourg, according to reports from the Xinhau News Agency, which quoted the bank as saying the issue was “favoured by high-quality investors at home and abroad”. According to documents on its website, the bank’s Macau branch was raising funds for just over $1 billion of sustainable projects in China and Macau, while its Singapore branch was financing $524 million of green projects in Singapore and China, and the Luxembourg branch was raising $512 million for projects in Luxembourg and China. The largest allocations for the Macau branch were to renewables, while clean transport is set to take the largest shares of the Luxembourg and Singapore raises.

Singapore telecoms firm Singtel has raised $100 million from its first sustainability-linked bond. The firm has committed to cutting its scope 1 and 2 emissions by 25 percent by 2025 against a 2015 baseline, and says it will make additional green investments of not less than 25 basis points of the SLB principal if it fails to hit its target, instead of stepping up coupon payments. The five-year note pays a coupon of 3.56 percent.

In other Singapore SLB news, Ascott Residence Trust has raised S$200 million ($145 million; €136 million) from its first bond in the format, which it claims is the first from a hospitality trust globally and the first from a listed REIT in Singapore. The trust upsized its issue by S$50 million after the orderbook reached 2.2x oversubscription, and said it achieved a greenium. The 3.63 percent coupon on the five-year bond is linked to the firm’s target of achieving green certification for half its portfolio by 2025.

Mexico has mandated Daiwa and Mizuho to begin investor calls for a Yen-denominated sustainability bond on 17 May. The deal would be the sovereign’s second visit to the sustainable debt market, having already issued a €750 million SDG bond in 2020.

Hong Kong has relaunched its delayed retail green bond, which was postponed in February due to rising Covid cases within the territory. The local government is looking to raise HK$15 billion ($1.9 billion; €1.8 billion) from the notes, with a maximum raise of HK$20 billion. The South China Morning Post said the city’s banks were reporting high interest, with Bank of China registering several thousand applications averaging HK$70,000 and broker Bright Smart Securities 8,500 applications.

The interest rate on the notes is linked to inflation, with a minimum rate of 2.5 percent, which may drive higher interest than their UK equivalents have seen. The Times reported last week that the UK’s state-owned savings bank NS&I had only raised £102 million ($128 million; €121 million) from its first tranche of retail green bonds, which launched in October with a coupon of 0.65 percent – well below the market rate for the three-year tenor. NS&I relaunched the bonds with a 1.3 percent rate in February, and has since seen £173 million invested. The bank holds £206 billion of savers’ money and is traditionally viewed as a safe haven for retail investors because deposits up to £85,000 are protected through the Financial Services Compensation Scheme.

Investment grade ESG bonds outperformed their conventional peers in Q1, according to the Institute of International Finance. However, this trend was reversed in high-yield ESG bonds, which underperformed as conventional counterparts were buoyed by energy sector bonds, the IIF said in its quarterly Sustainable Finance Monitor report.

OneMain Financial has raised $600 million from a social ABS backed by personal loans. The proceeds of the deal will be used to fund loans to low-income borrowers in rural areas.

The New York Power Authority has raised $608 million from a green bond sale to finance two transmission projects. Half of the bonds were sold to retail investors, and the authority said the coupon of 3.62 percent was the lowest of any bond it had ever issued.

Fast food franchisee Arcos Dorados has raised $350 million from a sustainability-linked bond off the back of a $1.7 billion orderbook. The McDonald’s franchisee, which runs around 2,200 outlets across 20 Latin American and Caribbean countries, will pay 6.125 percent on the seven-year notes, which will be used to repurchase existing debt. The coupon will rise by 12.5bps per target if the firm fails to cut scope 1 and 2 emissions by 15 percent by 2026 and 20 percent by 2026, and scope 3 emissions by 10 percent by 2025 and 12 percent by 2026.

LGIM’s real assets wing has borrowed £270 million in green development financing from HSBC, NatWest and Standard Chartered to fund the development of a £500 million build-to-rent scheme in Wandsworth, London.

Multinational manufacturing services firm Jabil has raised $500 million from its inaugural green bond. Proceeds from the five-year note, which pays a coupon of 4.25 percent, will be allocated to eligible expenditures, which include eco-efficient products, renewables and waste and water diversion, the firm said.

Danish paint firm Hempel has added sustainability targets to its €1 billion revolver and €500 million term loan. The interest rate on the two facilities, signed with a group of banks including Nordea and Danske Bank as lead arrangers, is linked to four targets, all of which must be achieved by 2025: a cut in scope 1 and 3 emissions by 90 percent against 2019 levels, sending no waste to landfill from production sites, cutting hazardous raw materials in its paint by 25 percent, and screening suppliers worth 70 percent of spending against sustainability metrics.

Spanish fashion group Mango has added sustainability targets to a renewed €200 million loan. The firm will see a discounted interest rate on the loan, signed with a group of banks including CaixaBank, BBVA, Santander and Deutsche Bank, if it hits targets relating to use of sustainable cotton, recycled polyester and cellulose fibres, as well as a 10 percent cut in scope 1 and 2 emissions by 2025.