Green Bond Round-up, November 15: Bank of China, Green Climate Fund, BAML, NRW and Thrive

The latest green bond developments

It’s been a week of repeat issuers, showing the growing maturity of the market. Bank of America Merrill Lynch, Bank of China and NRW Bank have all returned to market with benchmark deals. But COP22 has also thrown up the suggestion of an interesting new entrant to the green bond market: the UN’s Green Climate Fund is reportedly considering becoming an issuer as part of its work scaling up climate finance for developing markets. The body was launched last year, seeded by investment from numerous governments, with a mission to leverage private-sector money for climate mitigation and adaptation projects in emerging economies. Insiders are understood to have made the comments about issuing green bonds in Marrakesh last week. The GCF has played a limited role in the green bond market so far – it acted as a guarantor for green bonds issued by the Inter-American Development Bank earlier this year, but hasn’t invested in the asset class. “One could imagine that the GCF should first enter the green bond space as an investor, rather than as an issuer,” said one insider from a bank involved with both the GCF and the green bond market, adding that “unless clear mandate is given at COP, we believe the GCF should not be in a position to issue in the financial markets in the short term”. The GCF did not respond to comment in time for publication.


Bank of America has successfully placed its third green bond. The $1bn transaction priced last week with a coupon of 2.151% and a tenor of four years (with an option for BAML to call it after three years). Demand reached $3bn. Suzanne Buchta, managing director of green bonds at the bank, said there was strong interest from green investors. For the first time, the green bond will finance renewable energy exclusively – BAML’s previous green bonds identified energy efficiency as a second sector for financing, but according to Buchta the majority of the proceeds were allocated to renewables anyway, so to simplify the process for investors, the latest deal will relate only to the bank’s renewables financing. This is not indicative of BAML doing less energy efficiency financing, she pointed out. There is no second-party opinion on the framework, but PwC audits the green bonds, and BAML performs annual reports and discloses the estimated impacts of the projects financed. It has also explicitly outlined how the bond aligns with the Green Bond Principles for the first time.


China’s first ever securitised green bond has come to market. Bank of China has issued $500m of notes with a coupon of 1.875% to European and Asian investors, according to a statement from the London Stock Exchange, which listed the bond. The deal was 1.8 times oversubscribed. Proceeds will finance renewables, pollution prevention, clean transport and sustainable water management. “This particular green covered bond connects China’s onshore green bond market with international investors, via an asset-backed structure,” said Tian Guoli, Bank of China’s chairman. The bond is secured against loans to renewable energy projects on BoC’s loan book.h5. Europe

NRW Bank has also sold its third green bond, in a 10-year deal that attracted Actiam, BMO, Mirova and Triodos, among others. Interestingly, says Christian Hardt, an ESG specialist on NRW Bank’s investor relations team, this year’s transaction saw 25% participation from French investors – up from less than 5% last year. “Definitely Article 173 and the Energy Transition Law is a part of the reason for increased interest in France,” Hardt explained. “NRW Bank is strong on its impact reporting for green bonds and this is part of the interest for investors trying to address Article 173.” NRW Bank saw overall demand reach more than double the €500m no-grow offering, which will be used to refinance green loans it has made over the past year – predominantly in renewables and clean transport, but with a portion also dedicated to adaptation projects such as river restoration. The bank’s inaugural issuance was in 2013, and it has returned to market annually since. This year, as well as seeing more interest from French buyers, Hardt said “the quality of second-party opinions was a topic” with investors on its roadshow. NRW Bank has an opinion from Oekom, which Hardt told RI was considered a high quality provider.

UK renewables developer Thrive has launched an unlabelled green bond for retail and institutional investors. The seven-year, £7.5m bond will be used for general corporate purposes at Thrive, which was created by ethical bank Triodos before becoming independent in March. The bond is the first to be eligible under the UK’s Innovative Finance ISA scheme, launched this year, which allows retail savers to use some of their tax-exempt savings to invest in bonds and ‘peer-to-peer’ lending. First close is slated for December 9, with the final close scheduled for February 27.

The UK’s Green Finance Initiative, run by the City of London to make the country’s a hub for green finance, has highlighted the possibility of “green tagging for loans” to “build upon the success of the green bond market”. The proposals come as part of the report from the body, laying out a six-point plan.

The suggestion may be welcomed by some, including Allianz’s head of climate advisory, Simone Ruiz-Vergote, who last week called for more climate solutions in the fixed-income space. She told an audience at the EU’s Climate-KIC conference in Frankfurt that while equities offered a series of options for addressing environmental risks and opportunities, the debt space was currently reliant on green bonds.

Note: This story was updated to include information about Bank of America Merrill Lynch’s green bond auditing