Green bond round-up, Aug. 16: Zurich Insurance, Asian Development Bank, Greenko, Moody’s

A rundown of recent activity in the green bond market

Last week, Zurich Insurance announced that it had hit the halfway mark on its $2bn pledge to the green bond market, in another positive sign for the market’s growth.

The firm, which made its initial commitment in 2013, has now invested more than $1.2bn across some 70 green bonds from 50 issuers, it said. This includes asset-backed notes, high-yield deals and “one very small allocation” to a Chinese dollar-denominated transaction.

“If this pledge had just been about the numbers, we could have gone to a couple of development banks and done huge private placements and be done with it,” Zurich’s head of responsible investment, Manuel Lewin, told RI. “But we made a deliberate choice to take an approach that would integrate these investments into our overall portfolios.”

As a result, unlike many institutional investors, Zurich didn’t launch a dedicated fund. It has a mandate for Sovereigns, Supranationals and Agencies (SSA) green bonds on its US balance sheet – according to Lewin, it’s the only section of the market big enough to warrant it – which now comprises around half its existing investment into the asset class. Beyond that, investments in green bonds are made through its existing balance sheets and mandates.

“Even though these green bonds are being held within established portfolios, there is a lot of effort going into maintaining relationships with intermediaries and potential issuers, as well as making sure that every portfolio manager – internal and external – looks at every green bond deal that might fit within their mandates,” said Lewin.

Looking ahead, Lewin hopes the remaining $800m of investments under the pledge will be helped by the emergence of a sovereign green bond market, and the growth of the corporate space, which he describes as having so far “taken longer than I would have hoped and anticipated”.


Asia is continuing to lead growth during a sleepy summer for green bonds in Europe and the US. Investor demand led the Asian Development Bank to significantly upsize its most recent transaction – a $1.3bn deal. The deal comprises two tranches and follows the ABD’s inaugural transaction last year, for $500m.The first tranche of this deal was upped to $800m, from an original size of $500m, on the back of an oversubscribed order book. The tenor is three years and the coupon, or interest rate, is 1%. The second tranche remained at $500m, with a 10-year maturity and a 1.5% coupon. Proceeds will be used to finance projects under the ADB’s existing green bond framework, including renewables, energy efficiency and green transport.

Although Zurich – and many other dedicated green investors – may not be participating in the Chinese green bond market much so far, the country continues to lead the way in terms of volume. According to a new report from the Climate Bonds Initiative, China is the biggest issuer of climate-aligned (labelled and unlabelled) green bonds in the world, with $246bn of issuance outstanding. 78% of these are investment grade, and the majority have government backing.

“China is steadily progressing its green finance systems,” said Sean Kidney, CEO of the Climate Bonds Initiative. “This alignment of bond market activity with low emissions growth, climate and environmental goals will provide enormous opportunities for global investors.”

Elsewhere in Asia, India’s Greenko came to market with the country’s first high-yield green bond in US dollars. The $500m, seven-year deal carries a coupon on 4.875% and had a rating of B+ from Standard & Poor’s. It will finance renewable energy projects.


In other developments, Moody’s has further shaken up the market by assessing its first US municipal green bond. The ratings giant launched its Green Bond Assessment earlier this year, which gives transactions a score based on the issuer’s management and effective allocation of proceeds, rated notes set to be issued by Upper Mohawk Valley Regional Water Finance Authority. The organisation got the highest rating on Moody’s scale (a GB1). The move was particularly significant because municipal green bonds out of the US have historically shied away from traditional ‘second-party opinions’, which other sectors are expected to secure before issuing. This has divided opinion in the market. Upper Mohawk is one of just a handful of US muni bodies to pay for an independent assessment.