Green Bond Round-up, Nov. 22: Green Investment Bank, CalSTRS, Caja Rural, Kommuninvest

The latest green bond market developments

HSBC has predicted “stable but not spectacular growth” in the green bond market next year, compared with this year. In its latest research note on the subject, the bank estimates between $90bn and $120bn of issuance in 2017.

Transaction-wise, RI broke the news yesterday that BNP Paribas is set to launch its first green bond this week.

The UK Green Investment Bank has added its name to the list of independent reviewers in the space. The government-owned GIB was set up in 2012 to leverage private investment in green technologies and last week launched its Green Impact Report service.
“We’ve always believed that accounting for green should be done with the same level of rigour as financial accounting,” says Gavin Templeton, Head of Sustainable Finance at the bank. “The whole thing is based on what we’ve been doing with our own investments – we create a sort of green balance sheet.”

The assessment focuses on the entire project/s, rather than the portion being financed by the bond.

The Green Impact Report methodology focuses on carbon emissions avoided by projects, and is aligned with the recent work done by the multilateral development banks on impact measurement harmonisation in the green bond market.

“We’ve also added in measurements for air impact, which has got a lot of people excited – especially around the work being done in emerging markets – and we can look at resource efficiency, which translates into tonnes-of-oil-equivalent not consumed as a result of the project,” says Templeton.
“It’s about knowing your audience: if you’re talking to people in commodities and banking they will know the measure of tonnes-of-oil equivalent. Being able to communicate effectively with mainstream stakeholders like that is a big part of what’s needed from the market now.”

As well as assessing green bonds, the GIB has the potential to invest in the asset class, although so far it hasn’t. Importantly, it is also currently being privatised, and is expected to be acquired by infrastructure giant Macquarie. Once private, the bank will for the first time be able to raise debt, which may well turn it into a green bond issuer too.


The first issuer to engage the GIB’s services is Morocco’s Banque Centrale Populaire. The €100m deal, which RI reported earlier this month, will have a tenor of between seven and 10 years and will be used to refinance existing wind projects in Morocco. Link


CalSTRS has revealed it has more than tripled its green bonds holdings in two years. The Californian pension fund owns $310.5m of bonds, including notes from Exim Bank of Korea, Georgia Power, Westar Energy, EIB, Morgan Stanley, African Development Bank, Asian Development Bank, Export Development Canada, Kommuninvest, ING Bank, Toyota and EBRD. It said the asset class was subject to attractive price stability, as “the bonds are traded less frequently than standard bonds because they are purchased mostly by buy and hold investors”.h6. Europe

Spanish credit cooperative Caja Rural de Navarra issued a €500m covered sustainability bond, too. Interestingly, the bond – which is in line with both the Green Bond Principles and its Social Bond Guidance, according to Sustainalytics – will break from the tradition of issuing green and social covered bonds linked to mortgages and real estate, and will instead use the proceeds to finance agricultural projects.
Swedish financing company Nya Svensk FastighetsFinansiering (Nya SFF) has returned to market with a SEK700m green bond, mirroring its inaugural issuance in September. Again, it will lend the proceeds to Swedish property firm Fabege.
Elsewhere in Sweden, municipal financing vehicle Kommuninvest has introduced a financial incentive to local governments borrowing money for climate-aligned projects, in order to grow its green lending book – which it finances with green bonds. The body, which is owned by 286 Swedish municipalities, issued the biggest USD-denominated green bond out of the Nordics earlier this year, followed in September by the biggest SEK green bond ever.
Municipalities that want to borrow from its green bond proceeds are required to make additional commitments around the projects’ green credentials, and must report in line with Kommuninvest’s green bond framework. The green lending book has grown from nothing last year to 4% of overall lending, but in order to scale it further, Kommuninvest earlier this month began offering a small reduction – of “single-digit basis points” – in the interest rate offered to green borrowers. The incentive applies to all green lending with a duration of 3 years and longer.
“The exercise is designed, ultimately, to speed up the sustainability transition in Swedish society,” says Bjorn Bergstrand, Kommuninvest’s Head of Sustainability, adding that there is already a “record number” of applications for green borrowing, driven partly by the pricing incentive, but also by growing awareness of the issues generally and outreach work undertaken by him and Kommuninvest’s lending team.
“If we build the lending portfolio then this will translate into us issuing more green bonds.”
Bergstrand took on the newly-created role of Head of Sustainability at Kommuninvest in September, and says part of his job is to work with other countries and financing bodies to foster the same kind of initiatives elsewhere. He is also looking at the potential to extend the model into the social finance space too.
Danske Bank – Denmark’s largest bank – has started offering a similar incentive for green borrowers this month, kick-starting the Nordic-wide initiative with a loan to Fabege. The new ‘green bank loans’ are bilateral loans that offer “improved terms” for the borrower, although Danske Bank declined to elaborate on what these terms looked like.
On the investment side, the Nordic Investment Bank has extended its cooperation with bookrunners, to help it buy green notes more easily. For more details on how the collaborations work, see RI’s previous story. New banks include Credit Agricole, Danske Bank, HSBC and Swedbank.