Bonds & Loans: MEPs drop opposition to nuclear and gas in green bond standard

New-look sustainable debt update: Dutch and Austrian governments in race to first taxonomy-aligned govvie.

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European parliamentarians have dropped their opposition to the inclusion of natural gas and nuclear in the EU’s green bond standard, as they adopt their negotiating position on the new rules.

The EU’s economic and monetary affairs committee voted on Monday for a number of alterations to the Commission’s proposal, including requiring verified transition plans from issuers, stronger controls for external reviewers and requiring bonds that intend to allocate proceeds to nuclear or gas to declare this prominently on the first page of their factsheet.

A previous proposal had seen gas and nuclear entirely excluded from eligibility. Investors will also be able to take legal action against issuers where failure to live up to climate commitments results in devaluation of a firm’s green bond.

Negotiations are set to begin with EU member states in the next few weeks to work out a compromise deal on the standard. Ahead of the vote, green bond rapporteur Paul Tang said: “The Parliament is sending a clear signal to the EU member states that are trying to weaken the European Green Bond Standard: you can’t have your cake and eat it too. For the market to embrace the European green bonds, the money raised should go 100 percent to the activities that are truly defined as green.”

He added: “Our deal also prevents companies using green bonds to greenwash their brown business models.”

In other taxonomy news, the Netherlands has claimed it will be the first EU sovereign to issue a green bond “to be fully EU taxonomy-compliant for the expenditures that map to the economic activities currently covered by the EU Taxonomy Climate Delegated Act”, as it looks to raise up to €5 billion from an auctioned reopening of its 2040 green bond in mid-June. The updated Dutch framework has received a second-party opinion from Sustainalytics, which confirms that the eligible activities outlined in the framework align with the taxonomy criteria. It notes, however, that some areas – including flood risk management and water quality – are either not directly covered or not yet covered by the taxonomy.

The Dutch will be racing Austria to the market, with the latter announcing plans to come to the market with its green bond debut before the end of June. The Austrian framework, published earlier this month, has a second party opinion from ISS ESG confirming its alignment with EU taxonomy criteria. The sovereign is reportedly holding investor calls this week to present its framework.

Meanwhile, the Hong Kong branch of Industrial Bank has raised $650 million from its first green bond aligned with the EU-Chinese common ground taxonomy. The bond was very well received by investors, reaching more than 5x oversubscription. The focus of allocation will be on lending for renewables and low-emission transportation, the bank said. The deal was also notable for breaking an Asia record by hiring 46 banks for its syndicate, according to reports in IFR.

China Construction Bank also came to the market, raising $1.48 billion from two green deals intended to fund renewables projects across China, as well as $268 million for a solar project in Kyrgyzstan and $21 million for a green building project in Malaysia.

The past week has seen two oil and gas firms enter the market, with Japanese oil refiner Eneos Holdings looking to sell ¥100 billion ($773 million; €733 million) in “transition-linked” bonds in June, and Bahrain’s state oil and gas company adding sustainability targets to a $2.2 billion loan refinancing.

Eneos is looking to cut its Scope 1 and 2 emissions by 46 percent by 2030 for a possible 10-year issue and reach net zero by 2040 for a possible 20-year deal. Unusually for a sustainability-linked deal, Eneos will not pay a higher coupon if it fails to hit its targets, but will instead be obliged to make a donation or purchase emissions or green energy certifications, it said.

Bahrain’s Oil and Gas Holding Company saw participation from 22 banks in its refinancing, which it claims is the largest sustainability-linked loan in the region, with the SOFR-based interest rate tied to GHG reductions and health and safety targets. The group’s CEO, Mark Thomas, said that the facility would allow it to “cover its CAPEX program for 2022 aimed at increasing scale and diversification of its oil and gas assets and achieving goals that align with the UN Sustainable Development Goals”.

Last but not least, one deal to mark on the calendar is a potential green bond debut from Kenya’s largest company, Safaricom. Bloomberg reports that the firm is in talks with the Nairobi Securities Exchange and Kenyan regulators.