Green Bond Round-up, May 9: S&P Global Ratings, Union Investment, Volvofinans, North Rhine-Westphalia, BART

The latest green bond developments

S&P Global Ratings has launched its long-awaited green bond rating service. The Green Evaluation process assesses the environmental quality of investments – primarily green bonds – to help investors “avoid being ‘green-washed’”. Stocks, loans and securitisations can also be assessed, and S&P says it will identify the proportion of any transaction that is dedicated to green projects. It will calculate the environmental impact of that investment, based on its sector, asset class and industry. Sixty percent of the score is based on environmental impact, with the remaining 40% split between governance and transparency. It is the second major ratings agency to enter the green bond market, after Moody’s launched its Green Bond Evaluation last year. The first green bond to use the S&P service is Cross Sound Cable – a US electrical transmission company that is using the proceeds from the deal to refinance a cable for the transmission of renewable energy in the US. The bond has received the top score from S&P Ratings under the new system. Moody’s has in the past received criticism for only awarding the top score to bonds it is hired to assess. Second-party opinion providers have also come under fire historically for what some perceive to be a lack of criticism of bonds paying to be reviewed. However, providers argue that green bonds that do not meet adequate standards simply do not end up getting a review, or change their approach to ensure a good review.


Germany’s Union Investment has launched a green bond fund that assesses the issuer as well as the offering. RI reported the asset manager’s plans to create a dedicated product earlier this year, but is has now formally launched UniInsitutional Green Bonds – an open-ended fund targeted at institutional investors.

It says the fund, which has been seeded with Union Investment money, will not include the full universe of green bonds because issuers will be screened for their ESG credentials before being considered. That means that those who breach broader ESG standards will be excluded. EDF’s green bonds, for example, would not be eligible for investment because the broader business includes operations in nuclear energy. “As a result, the universe isn’t too big,” said a spokesman, “so we also invest in non-labelled bonds from issuers that have businesses aligned with the UN’s Sustainable Development Goals”.Currently, some 70% of the fund is made up of green bonds, but this is slated to rise to between 90% and 100% within coming years as more eligible labelled bonds become available. The mandate covers corporates and SSAs (Supranational/Sovereign/Agencies) globally, although high-yield offerings can account for only 10% of the portfolio.

Sweden’s Volvofinans Bank – which offers loans and leasing for Volvo cars – has issued its first green bond. The programme has been launched as part of the issuer’s broader medium-term notes programme, and will finance ‘environmentally-friendly cars’ such as electric and hybrid vehicles. Volvofinans has committed to impact report at portfolio level, and provide a selection of project examples for investors on a regular basis. Eligible projects will be chosen by the Head of Treasury and the Head of Sustainability at the firm, both of whom will have the right to veto projects.

North Rhine-Westphalia Bank (NRW) will begin buying green bonds as well as issuing them, it has announced. The German development bank, which is a well-established issuer in the asset class, will invest at least €200m by the end of the decade, it said in a statement. It will target ‘dark green’ notes in line with Cicero’s ‘shades of green’ system, and will seek out those that support mitigation projects. The bank will continue issuing its own green bonds annually, with another €500m deal understood to be in the pipeline.

North America

San Francisco’s Bay Area Rapid Transit will begin selling its first green bonds today. The US public transport body will initially sell to retail buyers before selling to institutional investors. It expects to sell $388m of notes to finance railway track replacement, station improvements and other “climate-friendly” projects “that provide low-carbon transportation alternatives for Bay Area residents and reduce the impacts of climate change”. The bonds are certified by the Climate Bond Initiative and will be secured by property taxes.