Green Bond Round-up, November 21: Deutsche Kreditbank, Toyota, Ferrovie dello Stato Italiane, Manulife

In a well-timed milestone, green bond issuance smashed the $100bn mark midway through the world’s annual climate summit last week. According to the Climate Bonds Initiative, the market started the week at $99.79bn, and edged over the $100bn threshold with the help of the China Development Bank’s offering, which settled on the 16th. The breakthrough comes just weeks after issuance for 2017 so far exceeded last year’s total. China has regained its crown as the largest source of issuance after a quiet start to the year, followed by France, the US, Germany, the Netherlands, Sweden, Mexico, Spain, India and Canada, according to data from CBI. The NGO predicts $130bn by the end of 2017, which is roughly in line with other predictions in the market: SEB recently reiterated its forecasts of between $125bn and $150bn, while Moody’s latest report said issuance would hit $120bn. In response to the announcement, former UN Climate Chief Christiana Figueres called on banks and corporates to “commence large-scale green bond programmes” and asset owners and managers to “adjust their capital allocations”.

Europe

Deutsche Kreditbank (DKB) is moving from issuer to investor in the green bond market. The bank, wholly owned by BayernLB has issued two green bonds over the past year and a half, and has now decided to become an investor itself. It will focus on both green and broader sustainability bonds, investing an initial target of €200m in the asset class. DKB said the investment process would “focus on the compliance with the Green Bond Principles based on a comprehensive analysis of the credit and sustainable performance of the issuers”. Another arm of BayernLB – its development bank, Bayern Labo – sold a social bond last week.

Italy’s Ferrovie dello Stato Italiane SpA (Ferrovie) has said it plans to issue multiple green bonds for public transport assets. The firm, which provides transportation, infrastructure and real estate services globally, will use proceeds from transactions to finance and refinance new electric trains and new high-speed trains, according to a second party review created by Sustainalytics. It has completed some investor calls, it told RI, and will now commence a Europe roadshow ahead of a transaction. Last week, Italy saw one of its only ‘purpose’ bonds to be aimed at institutional investors: state bank Cassa Depositi e Prestiti SpA sold €500m of social bonds to finance SMEs in economically deprived areas or those hit by natural disasters.

Sweden’s third largest city, Malmö, has developed a green bond framework on the back of plans to finance or refinance low-carbon transport and buildings, energy efficiency investments, natural resource management, pollution management, renewables and water and waste water management. Interestingly, the framework also includes climate change adaptation measures – a relatively unusual category for green bonds, currently, although one that is gaining increasing attention. Link. North America

Toyota issued its fourth green bond, in the same week US senators called the firm out for its lobbying on climate change. Ed Markey of Massachusetts and Sheldon Whitehouse of Rhode Island addressed US auto-industry lobbying at COP23, with Markey pushing for stronger standards on fuel. Think-tank InfluenceMap launched a report on the subject at the same event, focused on the two main US trade groups for the industry: the Alliance of Automobile Manufacturers and Global Automakers. The latest bond, issued by Toyota Motor Credit Corporation, is a €1.2bn deal, but only one tranche is green. The issuer did not disclose further terms. The bookrunner on the deal was Unicredit. Sustainalytics provided the second-party opinion.

Manulife has issued its debut green bond. The life insurance giant sold SGD500m (Singapore dollars) of notes in a deal expected to close today. They have a fixed-rate coupon of 3% until 2024, and from then on will offer a rate of 0.832% over the five-year swap rate of the Singapore dollar, as it stands at the time. The bonds mature in 2029. Manulife has identified a range of eligible criteria, backed by the Climate Bonds Initiative, that can be financed by the proceeds: renewables, green buildings, sustainable forestry, energy efficiency, clean transport, sustainable water management and pollution prevention and control. (Link)

Asia

NN Life and The Dai-ichi Life Insurance Company are two of the buyers of a debut green bond from the Japan Railway Construction, Transport and Technology Agency. The ¥20bn (€152m) issue will support the Urban Railway Convenience Enhancement Project, which is expected to take drivers off the road and onto public transport. The bond is the first to be verified by the Ministry of the Environment for conforming to Japan’s national guidelines, according to Dai-ichi. The guidelines were launched earlier this year, but the country’s green bond market hasn’t seen much activity so far as a result. Tokyo City priced its first green bond last month, and has committed to issuing more by the end of the year.

Other sustainability bonds

HSBC has issued a bond to finance the Sustainable Development Goals. The $1bn deal – which RI understands has a tenor of six years, but is callable after just five – was three-times oversubscribed. Although HSBC hit the headlines two weeks ago when it announced plans to invest $100bn in climate finance, this bond will not be limited to environmental goals – it will finance projects and businesses that support good health and wellbeing, quality education, clean water and sanitation, affordable and clean energy, industry, innovation and infrastructure, sustainable cities and communities, and climate action. Sustainalytics provided the second-party review, which says HSBC will report annually on its progress. The World Bank issued the first labelled SDG bond earlier this year, with many green and sustainability bond issuers ‘mapping’ their deals to the goals. Others have issued thematic bonds that support SDGs, such as the African Development Bank’s ‘Light up and Power Africa’ bonds and gender bonds from National Australia Bank’s and QBE Insurance Group.