ESG Briefing, February 10th: Bonds & Loans

Brown Brothers Harriman has launched an ESG framework for the securitisation market. The US private bank used Sustainalytics data on severe ESG incidents to conclude that “historically, securitised assets have protected investors from price declines experienced by companies during severe ESG incidents”. Securitisations make up about a quarter of the fixed-income market, and the report claims “the ESG risk profile of this part of the fixed income market is generally very favourable compared to the broad credit market”.

Moody’s expects green, social and sustainability bond issuance to hit $400bn this year – up 24% from last year’s record of $323bn. Green bond issuance will reach $300bn, while social and sustainability bond issuance will reach $25bn and $75b, respectively. Meanwhile, SEB bank has made its own, more ambitious forecasts for green bonds, predicting issuance of $375bn in 2020.

BNP Paribas has teamed up with the UK’s biggest housing association Clarion Housing Group on a 5-year, £100m sustainability-linked revolving credit facility. The interest rate is linked to Clarion’s success rate in supporting residents to find jobs through its jobs and training programme.

Macquarie Infrastructure Debt Investment Solutions and BAE Systems’ pension fund have invested in a synthetic securitisation of green loans. The securitisation is based on a £1.1bn portfolio of project finance loans in the UK from NatWest, focused on clean energy such as onshore and offshore wind, solar, smart meters and biomass. According to a statement, NatWest will reallocate the capital raised to the renewables sector.

Telecoms company Telia has issued a €500m hybrid green bond to finance energy efficiency projects, including moving from copper to fibre optic cables for its Swedish network, and offering ‘green’ digital products and services. The bond, which will be treated as 50% equity, 50% debt, has a maturity of 61.25 years, with the first reset date after 6.25 years. It has a coupon of 1.375%.  

Chile has returned to market with its third and fourth sovereign green bonds. The country – which became the first green sovereign issuer in the Americas last year – has listed the notes, a 20-year Euro-denominated deal and a 12-year USD transaction, on the London Stock Exchange. Chile has also tapped its existing green bonds to raise a further €693m and $900m.

MSCI’s ESG ratings and research data will be applied to IHS Markit’s fixed-income and credit indices, as part of a new collaboration between the pair. To begin, HIS Markit has launched sustainability-focused, short-maturity corporate bond indices – in euros, USD and GBP – which exclude firms screened out under MSCI’s assessments, and include only those with an ESG rating of BBB or above.

Intesa Sanpaolo has announced the successful completion of its €750m sustainability bond, the first for the Italian financial group. The bond, which saw demand reach €3.5bn, will support the bank’s ‘circular economy’ loans. It has a fixed rate of 0.75% and a five-year maturity. Asset managers made up 75% of subscribers. Banca IMI and Crédit Agricole CIB acted as green structuring advisors and joint bookrunners. ING and Société Générale acted as joint bookrunners for the transaction.

Ørsted, the Danish utility and the world’s largest operator of offshore wind farms, has raised €600m from a 1,000-year green bond – attracting an orderbook more than six times the size of the offering – with a coupon of 1.75%. A recent analysis reported that European sustainable debt offerings for the year were on average three times oversubscribed.

The Inter-American Development Bank has issued a ‘Sustainable Development Note’ in Indonesia Rupiah. An equivalent of $100m of 3-year notes notes were sold, with a coupon of 5.5%. Proceeds will be used to support the development bank’s work in Latin America and the Caribbean linked to the SDGs. Deutsche Bank ran the deal – the first time it has priced a sustainability bond in Asian local currency.