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Fixed-income update: Developments from Japan, Sweden, Spain, Indonesia, the US, Italy, UK and more

Green and social deals from the world’s banks, corporates and SSAs

Bonds

Switzerland, Argentina, Slovenia, the UAE, Chile, Singapore, Lithuania, Malaysia, Fiji and Nigeria all entered the green bond market in 2017, according to a new report from Climate Bonds Initiative. The NGO forecasts 2018 growth of at least 60% on last year – meaning issuance of between $250bn and $300bn.
Mitsubishi UFJ Financial Group is preparing to issue its second green bond. Japan’s largest financial institution came to market in September 2016 with its debut deal, but a new second-opinion has been published on Sustainalytics’ website, stating that “MUFG is planning to issue another green bond to finance lending to renewable energy projects”. The document is dated this month. MUFG declined to comment on the plans.
Italy’s Enel Group has issued a €1.25bn green bond with a coupon of 1.125% and a tenor of eight years. The BBB+ rated firm, which has a big focus on renewables, will use the proceeds for renewables and smart grid projects, but may also allocate it to green transport and buildings, or “decarbonising technologies”, according to its framework. Vigeo Eiris has provided a second-party opinion. This is Enel’s second green bond, and the order book hit €3bn. Enel is reportedly looking at entering the renewables market in India.
A Swedish task force, led by AP4’s former CEO Mats Andersson, has presented the government with a report concluding that it should issue sovereign green bonds. The special inquiry was launched in 2016 to help the country bolster green finance, and was presented to Financial Markets Minister Per Bolund this week. “I think it is interesting that the investigation proposes that the state should issue green bonds,” said Bolund. The inquiry also looked at how to strengthen third-party assessments of green bonds, among other things.
The World Bank has sold C$1bn of gender bonds to institutional investors in a five-year deal that priced at 99.433% and offers a coupon of 2.25%. 40+ investors placed orders for the notes, and the lion’s share was allocated to Canadian investors (55%), followed by Europe * the Middle East (24%), Asia (11%) and the US (10%). Roger Beauchemin,CEO of Addenda Capita, which took the notes, said the investment “reinforces our view that investors must look beyond green bond labels”. No details were provided as to how the proceeds would support gender equality. Gender is one of five priorities under Canada’s 2018 G7 Presidency.
Hong Kong’s Swire Properties has sold a $500m green bond in its market debut. The 10-year senior notes will be used to finance or refinance green building development, energy efficiency, renewables, sustainable water and wastewater management and climate change adaptation. The bond has obtained local Green Finance Certification from HKQAA. Pricing on the deal tightened from 130 basis points above 10-year Treasuries, to 110 basis points above, and the final order book hit $1.2bn – 2.4 times more than the offering. The coupon is 3.5% and the notes will be listed on the Hong Kong Stock Exchange. Sustainalytics provided the second part opinion. HSBC and BAML were the book runners.
The State of Nevada Department of Business and Industry issued green bonds in order to lend the proceeds to a biofuel company. Fulcrum Sierra BioFuels will use the capital to finance and refinance the costs of acquiring, building and updating biorefineries and feedstock processing plants for solid household waste.
India-based Yes Bank has reportedly invested Rs 1,000 crore into the country’s first social bonds issued by Indiabulls Housing Finance for affordable housing. The social bond, listed on the country’s national stock exchange, has a five-year maturity and offers 8.12% annually. It meets the criteria of the Social Bond Principles and KPMG will assure use of proceeds. Yes Bank was the sole investor.Barcelona City Council recently issued a €35m social bond as part of a four-year action plan to generate sustainable social and economic development in the city. The bonds have a term of 10 years and a coupon of 1.921%. Credit Agricole CIB acted as structuring entity and sole underwriter for the issue, while Caixabank is acting as payment agent for the bond. Proceeds will be used to finance projects including affordable housing, job creation, energy efficiency, clean transport, pollution prevention and control and sustainable water. Sustainalytics provided a second-party opinion, claiming the deal would contribute towards a number of UN Sustainable Development Goals.
The Tokyo Stock Exchange will launch a dedicated green and social bond segment this month, it has confirmed. From January 22, the platform will allow issuers to post details about eligible bonds on the exchange’s website. It is the latest is a raft of exchanges to develop dedicated lists for green and social bonds. Others include Luxembourg, Mexico, London and Oslo. Earlier this week, Sean Kidney, CEO of the Climate Bonds Initiative, said he expected Japan to be one of the countries in 2018 that stepped up its green bond activities.
Indonesia’s Financial Services Authority (OJK) has reportedly issued regulation on green bond requirements for deals issued within the country. It states that only certain projects are eligible to receive proceeds from green bond issuance: renewables, energy efficiency, pollution prevention and control, natural resource management, sustainable land use, biodiversity, green transport, water and waste management, climate change adaptation and green buildings. Apparently the rules require issuers to repurchase the notes or pay a higher coupon if it does not meet the green commitments. According to local media, the move is part of the Government’s Long-Term Development Plan to 2025, which includes sustainable economy measures and the protection of natural resources. This is laid out in a Sustainable Finance Roadmap.

Loans

Fromageries Bel will include social and environmental commitments in their latest revolving credit agreement with Societe Generale CIB, BNP Paribas, BPCE, Credit Agricole, Citi, MUFG, HSBC, Commerzbank and KBC. The cheese giant extended the maturity of an existing €520m multi-currency facility for a further five years. Bel Group committed to reduce its emissions, develop nutrition education programmes and deploy “a concrete action programme for a sustainable dairy upstream sector” by 2025. It will report on progress on these goals as part of a “virtuous result obligation” – meaning if it doesn’t not achieve them, it will “implement corrective measures through direct investments or financing of associations or non-governmental organizations”.
Lloyds Bank has agreed a £50m green loan with Manchester Science Partnerships (MSP). MSP is one of the UK’s major science and technology park operators, and has agreed the three-year debt facility at a lower rate of borrowing because it is green. In return, MSP must spend more than £600,000 on energy efficiency upgrades, reducing consumption by 3.5% per year and upping its renewable energy usage by 10%. It is part of Lloyds’ Green Lending Initiative for its commercial real estate arm.