Green Bond Round-up, May 23: Lombard Odier wins $100m green bond mandate from Japan investor

Lombard Odier has just won a $100m green bond mandate from a Japanese investor. Carolina Minio-Paluello, Global Head of Sales and Solutions at the Swiss asset manager, said at an event in London yesterday that an undisclosed institutional investor in Japan has requested a segregated account with a total of $100m, Swiss-franc equivalent. It will be run as a separate mandate because the investor requested a specific focus on European-based issuers, a spokesperson later told RI. Lombard Odier teamed up with Affirmative Investment Management to launch a green bond fund in March, which targets globally issued climate-aligned notes. It has so far raised €240m of new money for the fund, not including its new mandate. The fund doesn’t use a benchmark, but uses the Barclays Global Aggregate Bond Index as its reference point – it has outperformed this in its first 2.5 months by 30 basis points. “Interest has been much higher than I could have anticipated,” said Minio-Paluello, adding that private banks have been major investors in the fund so far, as well as institutional investors in Canada, Holland and the Nordics. The fund focuses on financing projects that mitigate and adapt to climate change, although broader ESG factors are considered, it claims, as well as alignment with the UN Sustainable Development Goals. Among labelled green bonds that the fund has ruled out on environmental grounds so far are Engie, Poland and Repsol. It also takes a small proportion of unlabelled climate-aligned bonds.

Europe

Poland has seen its second green bond, with commercial bank Bank Zachodni WBK tapping the market. The €137m subordinated deal was bought entirely by the International Finance Corporation (IFC), which said the proceeds will enable the bank – Poland’s third largest – to “significantly expand its existing climate portfolio in renewable energy, green buildings, and climate-smart equipment, among others”. The transaction follows Poland’s entry into the market in December, when it issued the world’s first sovereign green bond. Poland is Europe’s only coal-based economy, so its role in the green bond market has been viewed by some with skepticism. But the IFC says the country is one of the leaders in investing in energy efficiency measures. “However, a lack of targeted financing products and low appetite for risk in climate financing has hindered the development of green finance,” it explained. “With IFC’s support, BZ WBK will play a key role in increasing investments in Poland’s climate financing market.” RI was unable to reach the issuer for comment. IFC declined to disclose the terms of the deal, or whether there was an external review on the bond. Link*The Climate Bonds Initiative* and the Luxembourg Green Exchange – part of the country’s stock exchange – have together launched a paper designed to push debate forward around the role of stock exchanges in supporting green finance. The Nigeria Stock Exchange, Borsa Italiana and the London Stock Exchange also contributed to the research, which looks at the current state of play and what more can be done. It recommends that stock exchanges create green bond guidelines, establish dedicated lists or segments and ramping up their educational work around climate change, among other things.

German development bank KfW has doubled its target for investing in green bonds, saying its portfolio “is growing faster than initially planned”. Having issued a mammoth green bond itself two weeks ago, it has now turned its attention to its role as an investor, ramping up its five-year commitment from €1bn to €2bn. The move has been backed by the German Environment Ministry, which has extended its promotional mandate to allow for the new pledge. KfW started investing in the asset class in 2015. It says it will also continue its work as a “sounding board” for other market participants and a promoter of “sound practices”.

Rabobank subsidiary Obvion has sold its second mortgage-backed green bond, as reported in RI last week. The firm raised €550m for energy efficient housing. For the second time, it chose to screen out non-green investors from the order book, based on things like membership to the Institutional Investors Group on Climate Change and the Principles for Responsible Investment, and which mandates the notes would be integrated into.

Asia

The Asian Development Bank has issued a INR3bn ($47m) green bond in its first Indian rupee deal in the asset class. The offshore transaction has a tenor of 3.75 years and a coupon of 6%. It is denominated in rupees, but will be settled in US dollars. 70% of buyers were European, with 21% coming from the Americas and 9% from Asia. 52% of investors were fund managers and 48% were banks. Proceeds will be used to cofinance wind and solar projects in India. ADB plans to raise up to $30bn from the capital markets this year, but has no public target for green bond issuance.

Taiwan is slated for its first green bonds, according to reports. Taipei Exchange said four banks in the country would come to market with labelled deals, kickstarting the national market. CTBC Bank, E.Sun Commercial Bank, KGI Bank and Bank SinoPac will sell a total of NT$5.17 billion (US$171 million) of green bonds on the over-the-counter market, it said. CTBC and KGI are expected to issued NT$1bn each (with a tenor of three years and coupons between 0.83% and 0.9%) while E.Sun and Bank SinoPac will sell $60m and $45m respectively in the US dollar market, each with a lifetime of 30 years.