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Green bond round up: Moody’s, NTPC, Beijing Water, Central America Bank, Aegon

A rundown of recent activity in the green bond market

There has been a spate of green bond issuance from regions all over the world this week, supporting predictions by Moody’s that the market will exceed initial forecasts for 2016. In a note on the subject, Moody’s Investors Service said issuance in the first half of the year hit $37.2bn – up 89% on the same period last year, when issuance stood at $19.7bn. As a result, it revised its annual forecast up to $75bn from $70bn.

Asia

BlackRock, Bluebay Asset Management and the Singaporean government were among the investors on India’s National Thermal Power Company’s (NTPC) INR20bn (€269m) green bond. Proceeds from the five-year deal, which has a coupon of 7.375%, will be used to finance NTPC’s renewable energy portfolio. The bond is certified under the Climate Bond Initiative’s standards, and has been verified by KPMG.

Elsewhere in India, renewable energy producer Greenko is readying itself to issue a green bond. The firm came to market – via a Dutch subsidiary – with an unlabeled bond in 2014 to finance projects. This time, it has sought a second opinion from Sustainalytics, which identifies eight projects – five wind farms and three run-of-the-river hydro sites – which it will fund with the proceeds.

In China, the Beijing Enterprise Water Group has secured permission from the People’s Bank of China to join the growing number of green bond issuers in the country. It is now permitted to issue up to RMB4.7bn (€635m) through public offering. Because the firm is based in Hong Kong, it is the first overseas issuer to launch a green bond in renminbi (known as a green ‘panda bond’), although the New Development Bank – a partnership between the five BRICS nations – also came to market in renminbi recently. BEWG issued the first deal under the programme this week, with a RMB700m, five-year deal – with an option to extend to eight years – and a coupon of 3.25%.h6. Latam

Latin America has also seen activity recently, with the Central America Bank for Economic Integration issuing its inaugural transaction. The green bonds were sold to retail investors in Japan, but denominated in South African Rand. The deal was for ZAR1bn (€66m), with a tenor of four years and an undisclosed coupon. Proceeds will be used for renewable energy, energy efficiency and green infrastructure projects..

In response to the growth of interest in green bonds in Latin America, the Climate Bonds Initiative has released a report on the potential of the market in Brazil. It claims that issuance of bonds that finance climate-aligned projects – including public transport, renewables and energy efficiency – stands at some $2.4bn in the country, but less than a quarter are currently labeled as ‘green’ or have a second-party opinion or certification.

Europe

In a quieter week for issuance in Europe, German solar firm MEP Werke is preparing to come to market, according to a document from Oekom, which is expected to certify the notes against the Climate Bonds Standards. The transaction is slated to launch later this month and will finance solar projects.

Meanwhile, as the green bond market becomes more established on the continent, Aegon Asset Management joined the call for more innovations in the space – focusing on the need for greater issuance of green residential mortgage-backed securities. The investor said it had been “selected” to partake in Rabobank’s Green Storm deal – the first ever green RMBS, which financed mortgages for energy efficient homes in the Netherlands. It invested €17m of its own capital and €43m on behalf of clients, saying the transaction “added a new flavor in the busy market for green bonds”. Aegon portfolio manager Maarten Jan Hoefnagel said: “We need more green RMBS like Green Storm… There is a large demand for this asset. The problem is a lack of supply. The market is limited by the number of energy-efficient homes.”