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European Investment Bank prices new rand–denominated climate bond

Latest signal of green bond market growth

The European Investment Bank (EIB) has priced a new ZAR300m (€20m) Climate Awareness Bond (CAB), in the latest sign of a burgeoning market in green bonds.
Just last week (February 18) the EIB announced the fourth and largest ‘tap’ of its euro-denominated CAB. And as RI reported, the international green bonds market could grow to $100bn by the time of next year’s United Nations conference on climate change in Paris, according to industry group the Climate Bonds Initiative.
The latest issue carries an annual coupon, or interest rate, of 7.75% and has a maturity date of March 12 2018. It is the EIB’s fourth climate bond denominated in the South African currency following transactions in 2010 and 2013. It is also the second issue in Eurobond format targeting retail investors (the first two transactions were in Uridashi format, whereby a bond is denominated in a foreign currency and sold directly to Japanese retail investors).

Climate Awareness Bonds raise funds from fixed income investors to support lending for renewable energy and energy efficiency.“This issue will offer traditional retail buyers of ZAR Eurobonds the opportunity to buy an investment with a positive environmental impact,” the EIB said. The lead manager for the transaction was RBC Capital Markets and co-managers were BNP Paribas, Citibank, Danske Bank, Deutsche Bank, Morgan Stanley, Nordea Bank, TD Securities and ZKB Zurich.
Since inception, CABs have raised €4.6bn equivalent in seven currencies.
Bertrand de Mazières, Director General of Finance at EIB, said that Climate Awareness Bonds had already raised the equivalent of €1.5bn this year.
“We have seen increasing interest from the retail investor base for ESG product though it still remains a relatively new asset class with the bulk of buyers being institutional investors with specific green funds and/or investment polices based on ESG principles,” added Stuart McGregor, Head of Sovereign, Supranational and Agencies Debt Capital Markets at RBC. EIB Announcement