The World Bank has smashed through the $10bn mark for issuance of green bonds. The development bank was the first issuer of ‘green bonds’ in the world (the European Investment Bank was the first to issue a bond explicitly linked to green projects, but it does not call its programme ‘green’) having come to market in 2008. Since then, it has issued more than 130 deals across 18 currencies. Its latest, a $350m transaction, was sold entirely to Swedish insurance company Folksam. It is split into two tranches: $300m with a 2% coupon, and $50m that pays one basis point above the three-month Libor. Both are five-year deals. SEB was the manager on the deal.
Europe
In addition to buying the World Bank’s latest green bond, Folksam has said it will ramp up its overall investment in the asset class. Michael Kieller, Chief Investment Officer at the firm, told RI that it had invested SEK10bn (€1bn) in green bonds since it began buying them last May, and it planned to reach SEK12bn. “But I do expect we’re going to set our targets even higher later this year,” he added. He described the World Bank transaction as “inspiring”: “Financing important global projects while providing safe returns for our policyholders – it simply can’t get any better.” So far, the insurer only invests in green bonds from SSAs (sovereigns, supranational and agencies), including Swedish municipalities and development banks.
KommuneKredit has reportedly begun the process of issuing green bonds by mandating banks. The organization provides finance to local authorities in Denmark, in a similar way to Kommuninvest – a regular green bond issuer – in Sweden. KommuneKredit is expected to come to market with a benchmark deal to help it finance loans to municipal borrowers for green projects.
Asia
Singapore has seen its first green bond this week. City Developments Limited (CDL) has issued a two-year, S$100m ($71m) deal to finance and refinance the retrofit of one of Singapore’s tallest skyscrapers, Republic Plaza. The property is dedicated to office space, and proceeds from the deal will finance initiatives such as upgrading and replacing equipment to reduce energy and water consumption, and reducing waste produced. The bond has a second-party review from Sustainalytics and a certification by KPMG, using the Climate Bonds Initiative’s standards for buildings.Deputy CEO, Sherman Kwek, said green finance offered CDL “an alternative finance stream”, enabling the firm “to tap on investors who are supportive and appreciative of the green building efforts at our flagship building”. He added that more, similar green bonds may be on their way. The Singapore government aims to make 80% of the city state’s buildings energy efficient by 2030. The latest deal offered a 1.98% coupon and was issued under the company’s medium-term note programme. DBS Bank was the sole bookrunner. Singapore recently announced plans to introduce a green bond subsidy scheme to help boost the country’s market.
The Indian Renewable Energy Development Agency is edging closer to formalizing its transformation into a green bank. Although the finance body already functions in much the same way as a state-owned green investment bank, the move to a more legal definition means IREDA should be able to begin issuing green bonds in the international markets, to help it offer lower-cost financing to clean energy projects in India. India has very ambitious renewables targets – with plans to produce 160GW of its power from solar and wind within the next five year – but, despite high hopes from market players globally, has seen relatively slow growth in green bond issuance in recent years.
North America
A Texas school is issuing green bonds to finance the construction of three new schools. The Fort Bend Independent School District plans to issue around $52m of labelled notes to finance three LEED-certified buildings, due to open next year. The issuer’s CFO, Steve Bassett, said he hopes the move would attract new investors to the books. The University of Texas issued a $200m green bond last year.
Canadian ESG research house Corporate Knights has said that the country has the potential to issue at least C$56.3bn (€39.7bn) of green bonds this fiscal year. Analysing the capital requirements, debt-raising capacity and use of proceeds in place for Canada’s 21 largest bond issuers, Corporate Knights concluded that the issuers had the need and ability to finance C$23.6bn of “explicitly” green projects, like public transport, renewables and electric vehicles. They have the need and ability to finance a further C$32.7bn of “potentially green” ventures, such as building construction that could be made energy efficient.
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