HSBC put out its latest report on green bonds this week, saying that Europe had “picked up the baton” in the first half of the year, in the face of slow deal flow out of North America and Asia. Issuance was up 56% on the first half of 2016, driven by city, regional and sub-sovereign transactions out of Europe, the report says. As well as adding trading calls, the bank said it preferred green bond verifiers that ranked deals, rather than “simply to certify”. It concluded that the creation of the Social Bond Principles last month might spur on the new asset class – a prediction that is playing out already, with Mexican development bank Nacional Financiera (Nafin) being the latest issuer to issue a social bond. The bank is already a repeat green bond issuer, but says it will now sell social notes to finance its social loan book, which includes providing credit for young people, microbusinesses and female entrepreneurs, as well as sustainable housing, energy efficiency projects and natural disaster and economic recovery. Sustainalytics provided the second party opinion.
France’s Natixis sold $72m of green notes backed by property in New York last week. The issuer loaned the proceeds to global real estate investor Ivanhoe Cambridge for the purchase of a site at 85 Broad Street. The bond is secured against the building, which has a platinum rating – the highest possible – under the LEED green buildings framework. The bond has a second-party review from oekom. Natixis said the bond was oversubscribed and received “very strong interest” from green investors in the US and overseas. The bank has securitised nearly $20bn of loans since 1999 and said the deal enable asset-backed bond investors to invest in sustainable investments.
The City of Long Beach in California has responded to the state treasurer’s call for more green bonds by issuing $26m of labelled notes. Acting through its Board of Harbour Commissions, the city will use the proceeds to redevelop a harbour into a “state-of-the-art terminal to improve cargo movement efficiency and environmental performance”.h6. Asia
India has seen its first “official” green bond, since the regulator, the Securities and Exchange Board of India (Sebi), launched its national guidelines earlier in the year. The International Finance Corporation has bought INR6.67bn ($103m) of green notes from L&T Infrastructure Finance Company in a private placement. The notes mature in 2024 and have a coupon of 7.59%. Proceeds from the deal will be used to finance loans to solar projects, in a bid by L&T Finance Holdings to increase its focus on renewables. The sector currently comprises nearly 40% of its portfolio, representing some $3.5bn. In May, Sebi specified that bonds funding projects or assets linked to renewables, clean transport, sustainable water, sustainable land management, climate change adaptation and energy efficiency are eligible.
Clean energy firm Greenko is reportedly raising a further $1bn in green bonds on the offshore market. The Indian firm, which came to market with a $500m, seven-year offshore deal last summer, is expected to complete its second deal today, with the same tenor. According to the second-party review, by Sustainalytics, proceeds will be used to refinance expenditures relating to wind, solar and run-of-the-river hydro assets.
Spanish stock exchange BME has said it is considering creating green bond segments. Managing Director of the exchange’s fixed income arm, Julio Alcantara, said the growth of green bonds globally had prompted its corporate debt market, AIAF and its alternative fixed-income exchange, MARF, to “pay close attention” to market developments. “We do not rule out the creation of an ad-hoc section for these bonds in both markets,” he said, “when the volume admitted to trading reaches a certain critical mass”.
For now, AIAF has admitted a €600m, six-year green bond from the state-owned rail infrastructure company Adif Alta Velocidad. The bond, which has a coupon of 0.8%, is the first to be issued – directly or indirectly – by the Spanish state and will be used to finance new high speed rail lines, extensions to existing lines and maintenance, renovation and improvements to energy efficiency. The bond has a ‘dark green’ rating from second-party review provider Cicero, who assessed the bond in partnership with the Basque Centre for Climate Change. Only “up to 45%” of the deal went to green investors, according to a statement from the issuer. Banks on the deal were BBVA, Santander, BNP Paribas and Credit Agricole.
Note: This article has been updated to include the terms of the bond issued by L&T Infrastructure Finance Company