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Bonds & Loans: Chile to issue first sovereign sustainability-linked bond

A weekly overview of ESG developments for fixed income: Actis, IDB Invest, IBRD

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Chile is set to be the first sovereign issuer to issue a sustainability-linked bond, with its inaugural SLB coming as soon as next week. The country’s Ministry of Finance has mandated BNP Paribas, Crédit Agricole and Société Générale to hold investor meetings starting today. The two KPIs attached to the bond are annual greenhouse gas emissions and non-conventional renewable energy (wind, <20MW hydro, biomass, biogas, solar and ocean energy and green hydrogen) as a share of energy generation. For the first target, Chile must reduce its absolute emissions to 95m tonnes of CO2 by 2030 from 112.3 in 2018, and the country’s carbon budget from 2020 to 2030 must not exceed 1,100m tonnes, while for the second target half of electricity generation must come from renewables by 2028, and 60% by 2032. Chile’s sustainability-linked bond framework received a second party opinion from Sustainalytics, which rated the targets as very strong and strong, respectively.  

Hungary raised ¥59.3bn (€455m) from a triple-tranche green bond as part of a larger bond sale last week. The sovereign raised ¥46.8bn from a 5-year bond paying 0.73%, ¥4.7bn from a 7-year bond paying 0.91% and ¥7.8bn from a 10-year bond paying 1.15%, seeing cheaper pricing on all three tranches and a fourth ¥16bn vanilla tranche than its previous visit to the Japanese market in 2020.  

In other sovereign news, Singapore is to issue its first green bond this year, and has increased its target sustainable debt raise from S$19bn (€12.4bn) to S$35bn (€22.9bn) by 2030. Further details including currency will be announced close to the issuance date. Meanwhile, the Filipino Finance Secretary has urged European investors to take part in the country’s inaugural $500m inaugural green bond, which will take place “in the coming weeks”. According to the Manila Times, Carlos Dominguez III said that Western countries had given a “disappointing” response to the call for $100bn of climate finance to developing economies, and “[the Philippines] cannot wait for the bureaucrats in the industrialized world to take their sweet time splitting hairs on the idea that the countries that polluted and continue to pollute the most must bear the greater part of the financial burden of reversing global warming that they started 175 years ago”. 

Infrastructure manager Actis has signed a $1.2bn sustainability-linked revolving credit facility for its fifth energy fund, which combines an interest rate discount with a use of proceeds format. Any funds drawn from the facility will see a discounted interest rate if they meet one of three criteria: investment in an energy sector that contributes to climate change mitigation, investment in a country where energy access is limiting economic growth, and investment creating “new positive impact” according to an in-house impact measurement system, with a higher discount the more of the criteria apply. The fund aims to invest in sustainable infrastructure projects which contribute to SDG 7 – affordable and clean energy – but is not solely a renewables fund as investments may, for example, be made in gas projects if the overall impact is deemed beneficial.  

Belgian marine specialist DEME has converted its entire €579m loan book into sustainability-linked loans. The loans, signed with ten banks including KBC, Rabobank, ING and Credit Agricole, will now be linked to two KPIs relating to work safety and an increased proportion of low carbon fuel usage.  

In other shipping news, BMO acted as sustainability structuring coordinator for a syndicate of Canadian, US and European banks to add a sustainability link to an existing $250m revolver with container ship leasing firm Seaspan. The interest rate on the facility is now linked to targets relating to vessel carbon intensity and sustainability-linked contracts with charterers. Meanwhile, Japan’s ORIX Corporation has provided a $21m sustainability-linked loan to an un-named Hong Kong shipowner. The interest rate on the loan, which is secured against two bulk transport vessels, will be reduced if their annual CO2 emissions are lower than a “standard value” measured by marine non-profit ClassNK.  

Chinese appliance manufacturer Midea Group has raised $450m from an eight-times oversubscribed green bond. Orders peaked at $2.4bn for the 5-year bond, leading Midea to upsize the issue, with a fifth of allocation made to ESG investors and interest from investors across Asia, Europe, the Middle East and Africa. 

US engineering and consultancy firm Tetra Tech has signed a $750m sustainability-linked credit facility with a group of eight banks including HSBC, BNP Paribas and the Bank of Nova Scotia. Bank of America acted as sustainability coordinator on the deal, which is composed of a $250m term loan and a $750m revolver with an optional upsize of $300m. The interest rate will be reduced if Tetra meets a greenhouse gas reductions target and a target relating to “improvement of people’s lives as a result of the Company’s projects that provide ESG benefits”. 

The investment arm of the Inter-American Development Bank has raised A$300m (€191m) from its first green bond in the Australian market. The 5-year bond, which pays a coupon of 2.3%, saw orders of A$360m from 20 investors, with central banks and official institutions taking 70% of allocation. Proceeds will be allocated to eligible projects, with a particular focus on sustainable infrastructure. IDB Invest is also road showing its debut sterling deal, and is considering a deal in Mexican pesos later this year. 

The European Commission has launched an €85,000 contract to advise on the development of an impact measurement methodology for the NGEU green bond programme. 

Bank of New Zealand and retirement home provider Metlifecare have signed New Zealand’s first ESG-linked derivative deal. BNZ was the sole participating bank in the NZ$75m (€45m) deal, which will see the firm’s interest rate hedging costs tied to its performance against three targets: joining the SBTi and setting a Paris-aligned decarbonisation target, building six new retirement homes which receive the highest ‘six green star’ sustainability rating from the New Zealand Green Buildings Council, and increasing the number of dementia care beds in its portfolio six-fold within five years as well as making its entire portfolio dementia friendly. 

Norwegian savings bank Sparebanken Sør has raised NOK2bn (€198m) from its inaugural green bond. The 5-year bond is split into a NOK1.1bn tranche paying 3-month Nibor + 0.63% and a NOK900m tranche paying 2.885%. 

Verizon has raised $1bn from its fourth green bond, a 30-year note paying a coupon of 3.875%. The telecoms firm also said last week that it had allocated the proceeds of its third green bond entirely to renewable energy purchase agreements. These projects are for around 910MW of new renewables capacity, split 51%/49% between wind and solar. 

The International Bank for Reconstruction and Development has privately placed a SEK4bn (€377m) green bond with Folksam. SEB was sole lead manager for the 5-year bond, the coupon of which was not disclosed.