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Green Bond Round-Up, January 25: BNP Paribas eyes dedicated green bond fund while S&P drops index

The latest green bond developments

France closed its landmark green bond yesterday, which became the world’s biggest. The €7bn deal saw demand hit €23bn – nearly five times the original target size. In an interview with RI, Tanguy Claquin, Head of Sustainable Banking at Credit Agricole – the structuring agent on the deal – said the reporting commitments made by the government could set a new best practice for the market.

Moody’s has predicted another bumper year for green bonds. In its latest report, published on Wednesday, Moody’s Investors Service forecasts a $206bn market in 2017 – based on continued market growth at the rate of 2016.

BNP Paribas is planning to launch a green bond fund, following hot on the heels of similar plans revealed by BlackRock last week. The French bank said its investment arm was “trying to develop a green bond fund” during a webinar about fixed-income investing with the PRI last week. No further details were given, although speaker and senior ESG analyst at BNP, Thibaud Clisson, added that the firm was also “developing a specific green bond strategy that is due to be released by mid-2017”. BNP Paribas has been stepping up its work around green bonds, with plans to become one of the top three managers on green deals, and the issuance of its own green bond late last year. “It’s an area where we should be able to be more active in the next few months,” Clisson said. Expanding on the idea of environmentally-assessed bonds, BNP Paribas is expected to launch a new methodology to carbon footprint its fixed-income investments beyond labelled green bonds, he added. That methodology is due out later this year.

Elsewhere, another big player in green bonds, S&P, has axed its green project bond index, citing lack of demand. The index was one of two indices it launched in 2014 dedicated to the asset class. It is still calculating its main green bond index, which comprises labelled deals, but will no longer calculate the project bond counterpart. “It was launched at an early stage in the green bond market, and we found it was a little too niche given market demand,” said a spokesperson for S&PDJI. “However, we remain committed to building solutions for the green bond market and we are now exploring new offerings for the future.”

And the Climate Bonds Initiative has created a Waste Management Technical Working Group to help it develop criteria for issuers seeking to issue green bonds to finance low-carbon waste management activities and infrastructure.h6. Europe

The first labelled green deal out of Switzerland has been issued by energy company Repower. The firm, whose key markets include Switzerland, Italy, Germany and Romania, issued two green Schuldscheine (traditionally a German, privately-place debt instrument) as part of a bid to “finance the transition to a 100% renewable energy generation portfolio”. The company sold €50m of notes with tenors of seven and eight years, and an undisclosed interest rate. Sustainalytics provided the second-party opinion. ING Bank was the lead arranger on the deal.

Luxembourg-based private train operator, Alpha Trains, has raised €250m in green notes through a private placement in the US. The firm, which claims to be the largest private leasing company of passenger and locomotives in continental Europe, will use the proceeds to refinance debt from the purchase of energy-efficient train kit. The deal is certified by the Climate Bonds Initiative, using Sustainalytics. The investors and terms of the transaction have not been disclosed. Alpha Trains is owned by Arcus Infrastructure Fund, AMP Capital and Public Sector Pension Investment Board.

Sweden’s Fabege has issued another green bond via financing company Nya Svensk FastighetsFinansiering. The three-year deal was for an undisclosed amount, but its previous two deals were SEK700m each. It has a spread of 105 basis points above the three-month Stibor and will be listed on the Nasdaq Stockholm Sustainable Bond list. Green financing now represents more than 20% of Fabege’s total funding, according to the property firm’s Head of Treasury, Asa Lind, who added: “It is also gratifying that the price differentiation we have seen on green bank loans now also can be seen on the green bond market”.

LatAM

Brazil’s Fibria Celulose issued a $700m, 10-year green bond, becoming the third Brazilian issuer in the market so far. According to insiders, at least three more transactions are expected by the end of March out of Latin America, including one from Brazil.

Asia

French utility and established green bond issuer EDF is expected to offer its first ever ‘samurai’ green bonds, according to reports. The firm will offer ¥20bn in yen-denominated notes in a number of tranches with maturities between 10 and 20 years.