Green Bond Round-up, Dec. 13: Poland surprises with world’s first sovereign green bond

The latest developments in the green bond space

Poland has given the green bond market one of its biggest surprises so far, issuing yesterday the world’s first sovereign green bond. It beats France, Bangladesh, Morocco, Sweden, China and a number of other governments rumoured or confirmed to be readying themselves to come to market. The €750m, 5-year deal was priced with a coupon of 0.5%. HSBC was the sole green structuring agent, with JP Morgan and PKO Bank Polski as joint leads. Poland has a credit rating of BBB+ (negative outlook) from Standard & Poor’s, A2 (stable outlook) from Moody’s and BBB+ (stable outlook) from Fitch. The move is particularly interesting because Poland is considered by many to have been obstructive in the broader push to tackle climate change in Europe. However, it now wants to finance and refinance projects linked to renewable energy, clean transport, agriculture, afforestation, national parks and the “reclamation of heaps” – the rehabilitation of landfill sites. Proceeds will be held in a separate account and will be released to the relevant ministry when a project needs financing. Sustainalytics performed a second-party opinion, concluding that issuance under the framework “is a step that will help Poland achieve its objective of transitioning to a low-emissions economy”. Poland has a National Renewable Energy Action Plan, which it established in 2010, which outlines aims to generate 15% of its energy consumption through renewables by the end of the decade.
Polish environmental campaign group DY-OPMN said it is engaging with the banks involved in the transaction, over concerns with its credibility. In a letter seen by RI, the body slams the bond’s second-party opinion for being “extremely superficial, taking account only of what the government officials from the Ministry of Finance have told the company and basing on documents that are hardly implemented in Poland”.
But the bond was popular with investors – the order book hit €1.4bn. Manuel Lewin, Head of Responsible Investment at Zurich Insurance Group said: “Not only do sovereign green bonds fill an important gap in the market for those investors with large allocations to government bonds, but I also expect them to have a ‘catalytic’ impact, much like supranational issuers had a few years ago, in setting a best practice example for other national issuers such as municipalities, agencies or indeed corporates. From that perspective it is critical to see a very solid green framework, and I am pleased that the Green Bond Framework presented by the State Treasury of the Republic of Poland is robust, sets a positive precedent for the management of proceeds through a separate account, and generally follows the Green Bond Principles.”h6. Latin America

Latin America has had another busy week. Following Brazil’s development bank, BNDES, announcing a new fund to invest in renewable energy green bonds in the country, renewable energy generator CPFL Energia Renováveis has said it is considering coming to market.

Representatives from the firm made the comments at an event held in London last week, and insiders told RI that the transaction would be likely by the end of the year, and would finance wind projects. Speaking at the same event, Brazilian pulp and paper company Klabin also said it was mulling issuance. Both are currently constituents in the BM&FBOVESPA exchange’s Corporate Sustainability Index. RI understands that both transactions are expected to be issued in local currency.

On the municipal side, the City of Mexico has developed a green bond framework ahead of launching a dedicated programme. Proceeds from deals will be used to finance sustainable transport, sustainable buildings, renewables, energy efficiency, water efficiency and wastewater management, pollution prevention, conservation and biodiversity and climate change adaptation. The framework has been assessed by Sustainalytics.

Bancolombia has also become the first commercial bank in Latin America to issue a green bond, in a private placement with the IFC. Proceeds from the 350bn Colombian peso deal ($115m) will be used to support the bank’s work with renewables and green buildings in Colombia, by expanding its financial services linked to climate change. “We want to reduce our direct environmental footprint and encourage clients and partners to do the same by providing services and products that enable them to invest in areas like renewable energy and sustainable buildings,” said the bank’s president, Juan Carlos Mora. Deloitte undertook a second-party opinion on the bond. Link

Europe

In another private placement, this time in Europe, real estate firm Cofinimmo issued green and social bonds this week, making it the first Real Estate Investment Trust in the region to do so. The Belgian company, which has a portfolio of properties in Belgium, France, the Netherlands and Germany, focused on health-care property and office buildings, sold €55m of eight-year notes with a coupon of 2%. The proceeds will be used to finance and refinance the construction and retrofit of buildings in line with the BREEAM energy efficiency programme – scoring at least ‘very good’ – and those with social goals such as the housing of vulnerable people. Chief Finance Officer Jerome Descamps said the transaction allowed Cofinimmo to “optimize our cost of debt and to extend the average maturity”, adding that, as a result, he expects to return to market with similar deals in the future.

French investment giant Axa has said its green bond fund, Axa WF Planet Bonds, has hit €84m. The fund launched in November last year with some €60m of commitments. Its performance year-to-date is 3.77% and since launch is 3.41%, as of November 7.

With reporting by Carlos Tornero.

Update: This article was corrected to state that DY-OPMN was the campaign group that authored the letter to the banks regarding Poland’s green bond, not BankTrack, which simply hosted the letter on its website.