Bonds have overtaken equities in SRI, according to the latest report from BNP Paribas. The firm’s Head of Equity Derivatives Strategy, Edmund Shing, wrote that in 2014, half of SRI assets were invested in equities and 40% in bonds. This shifted majorly over the next two years, he says, with 64% of SRI assets in Europe and Canada now invested in bonds, and just 33% in equities. The report attributes the shift to the success of the green bond market.
The social bond market may also be helping though. RI wrote earlier this week about the growth in activity in the fledgling asset class, with imminent deals from the African Development Bank and Bayern LB. “We’ve definitely seen an increase this year in social and sustainability bonds and there are a few types of issuers that are well-positioned to go down this route,” said Trisha Taneja, and green and social bond specialist at Sustainalytics, adding that development banks and the European social housing sector were two sectors that were especially well positioned to tap the market. However, there are particular challenges to issuing social bonds. “The Social Bonds Principles encourage impacts to be targeted at underserved populations and it can require a bit more due diligence to understand how to assess that,” explained Taneja. “There is also a need to assess the environmental and social risks attached to projects. For example, developing transportation infrastructure can increase access and economic opportunities, but can also lead to an increase in fossil-fuel emissions. That balance between impact and risk is an important one to maintain.”
France’s Ircantec has awarded a €250m green bond mandate to Amundi. The €10bn public pension scheme has selected the Paris-based asset manager to run an actively-managed, developed-markets green bond fund (See separate RI story). The decision was made in September, after a request for proposals garnered “11 or 12” responses, which were whittled down to five. “All five were very advanced green bond fund managers, so by the second step we were also looking for all the follow up processes – how you assess the impact and reporting,” Caroline Le Meaux, Head of Delegated Management, told RI. “That was the main thing that put Amundi apart, and obviously the price.”
The fund will pool Ircantec’s existing green bond investments, enabling it to manage them more consistently and selectively, she explained. “The initial target was to increase the level of our exposure to green bonds. We’re now at 3% of our assets under management, so now we want to improve the quality of the management – to be more selective, for example, and to improve the follow-up and reporting processes.”
Amundi already has two open-ended green bond funds – which it launched in 2015 and 2016 – but this mandate will be run separately and “may be a little more restrictive” in terms of investment criteria. The investments are in the process of being moved into the strategy, which is expected to be fully up and running by January. There are no set targets to further grow green bond investments, but Le Meaux told RI that “exposure will grow with our AUM”.
The value of the contract is €4.5m, according to a contract award notice. Ircantec is managed by The Caisse des Depots et Consignations – France’s sovereign wealth fund. Amundi made headlines earlier this year when the IFC awarded it a contract to run a $2bn emerging markets green bond fund, which was due to reach financial close at the end of summer. However, RI understands the target has now been pushed back to 2018.French development bank Agence Française de Développement has secured a ‘medium green’ rating for a climate bond framework from Cicero. The agency will use proceeds raised under the programme to finance projects related to emissions reduction, adaptation to climate change and the implementation of climate change prevention policies. The main focus will be mitigation (emissions reduction). Cicero advises that, to reach a ‘dark green’ level, the climate bond process should include more granular reporting, and should consider strengthening of fossil-fuel exclusions.
Norway’s Scatec Solar has sold NOK750m (€80m) in four-year green bonds, attracting strong demand, it says. The firm claimed the deal, which offers a floating coupon of 475 basis points above the 3-month NIBOR, was “significantly oversubscribed”. It will refinance an outstanding non-green bond with a coupon of 650 basis points above 3-month NIBOR, which matures next year. It will apply to list on Oslo Børs, which has a dedicated green bond list.
Korea Electric Power Corp is reported to be readying itself to issue a dollar-denominated green bond. Other issuers out of Korea so far include the Export-Import Bank of Korea, Korea Development Bank and car maker Hyundai.
Tokyo has followed up on its inaugural green bond by announcing plans to issue a further ¥10bn before the end of the year – this time aimed at retail buyers. The municipality recently sold ¥10bn of notes, after issuing ‘trial’ bonds earlier this year. The next transaction will be issued in December, will be denominated in AUD and will have a tenor of five years. The coupon will be decided on November 24, according to reports.
Japanese construction specialist Toda Corporation has issued a ¥10bn (€75m) green bond to finance a floating offshore wind project. The firm, which operates in Japan and internationally, is involved in construction including residential, commercial and public buildings. Its green bond framework limits eligible proceeds to renewable energy projects, suggesting it does not plan to issue further deals to finance the construction of green buildings as part of its wider business activities. Sustainalytics conducted the second-party review. Japanese credit ratings agency, Rating and Investment Information Inc (R&I) have given the bond a GA1 score under its green bond assessment service – the highest score possible.
The City of Ottawa has developed a framework to issue green debentures for a broad range of green projects. Sustainalytics has conducted the second-party opinion.
US solar financing firm Mosaic has completed its second green securitisation, which it claims is the largest solar loan securitisation to date. It sold $307.5m in four tranches, after the order book swelled to $1.7bn. 29 investors received allocations, across the US and Europe. “Given the strong oversubscription levels, all tranches priced inside initial guidance levels, achieving an all-in yield of 4.2% and significant spread compression compared to the MSAIC 2017-1 transaction,” Mosaic said in a statement.