Green Bond Round-up, Oct. 10: Issuers are scoping out the potential for other sectors

The latest market developments

Green bonds have traditionally been synonymous with tackling climate change – largely through mitigation efforts. There have been very few offerings addressing other environmental issues. However, in what seems to be a growing trend, issuers are scoping out the potential for other sectors.

The Seychelles looks set to issue the world’s first sovereign ‘blue’ bond. In a modest deal, RI understands the country will sell $15m of notes – either latest this year or early next year – to support sustainable marine management. The transaction will be part of a broader initiative known as the South West Indian Ocean Fisheries Governance and Shared Growth Programme. The IBRD and the Global Environmental Facility will provide guarantees and grant funds as part of the blue bond, to help reduce the coupon cost for the government, RI understands. $3m will be given in grants over six years, to the Seychelles Conservation and Climate Adaptation Trust, which was set up to manage the cash flow from the complex debt conversion the country closed, in partnership with US-based environmental charity Nature Conservancy. That money will finance the implementation of a new fisheries management plan and to manage newly-designated Marine Protected Areas. The remaining $12m will take the form of a revolving loan fund to support ‘blue economy’ activities. It will be managed by the Seychelles Development Bank. Australia has also been looking at its capacity to issue blue bonds to help protect the Great Barrier Reef.

The Environmental Defence fund has said it is developing the first ever bond for wetland restoration, which it is calling a Wetlands Restoration and Resilience Pay-for-Success Environmental Impact Bond. Though not a bond in its true sense (returns will be based on outcomes rather than a coupon, for example), the issuer will explore the financial benefits of protecting wetland, which could make it easier to present a business case for capital markets transactions in the sector in future.


Barclays’ plans for its debut green bond have been welcomed by investors hungry for UK issuance. A long list of banks have already tapped the market, including Morgan Stanley, Bank of America Merrill Lynch, SEB, Credit Agricole, BNP Paribas, HSBC, ICBC, Bank of China and National Australia Bank, but none in sterling. Terms of Barclays’ potential deal (it has just wrapped up a non-deal roadshow) have not been announced yet, but RI understands it is expected to be a sterling issue. One well-established green bond investor said Barclays’ efforts would be welcomed because UK offerings were so thin on the ground. Unilever, Transport for London, KfW, SSE, Anglia Water and EIB make up the lion’s share of sterling notes in the green bond market currently. According to data from the Climate Bonds Initiative, the UK doesn’t even come within the top 15 issuing nations, despite the country being the world’s fifth largest economy, and London having such a dominant role in the wider capital markets.

Proceeds from the potential deal would be used to finance and refinance mortgages on energy efficient homes. Barclays says that, as a major player in the UK mortgage market, the green bond is part of a “broader commitment in managing the environmental risks associated with lending”. The methodology means it will target properties with low carbon intensity, based on the UK’s Energy Performance Certificate programme.

“While home improvements are encouraged to improve energy efficiency, Barclays to date has not found a robust data methodology that captures this improvement,” its framework says, adding that it may in future include energy efficiency improvements in its eligibility criteria. Carbon Trust has helped to develop the methodology and will verify any bonds using the Climate Bonds Initiative certification programme.

BNP Paribas Asset Management has confirmed further details of its €100m green bond sub fund, which launched last month. The fund has already invested €90m, and has a commitment to invest 83% in labelled green bonds – although it has some room to take sustainability notes too.As part of the launch, BNP Paribas Asset Management has tightened its approach to green bond investing (it already has €500m in the asset class through dedicated SRI funds and mainstream portfolios). “There’s been a lot of new thinking and innovation in the green bond market, so we’ve updated our methodology to deal with that,” explained Felipe Gordillo, Senior ESG Analyst at BNPP AM, but added that it has not led to divestments. “It’s essential for us to challenge the issuer and have a full knowledge of the deal before it’s sold,” said Gordillo, “and then to monitor activity for as long as we own the bonds”. BNPP AM will no longer invest in green bonds without impact reports, Gordillo says, because that’s the basis for the second stage of its engagement strategy. Arnaud-Guilhem Lamy, the fixed income manager who will head up investment for the fund at BNPP AM, told RI that the focus would be on primary issuance, partly because it strengthened its ability to engage with issuers, and partly because “we still believe on the primary market there is no greenium”. On the other hand, he added, “green bonds trade a bit tighter on the secondary market than conventional bonds”.

For a new infographic on green bond pricing, see this from S&P Ratings.

North America

Tenaska Energy Holdings, a US company that operates conventional and renewable energy, is to issue a green bond via its subsidiary, CSOLAR IV West. Proceeds will refinance a solar project in California (link).

Californian rooftop solar and PACE lender, Dividend Finance, is also planning to issue a green bond. The bond – which will be issued by a special purpose vehicle – will be securitised against a portfolio of residential solar loans.


The government of Mexico City, Gobierno de la Ciudad de Mexico (CDMX), is readying itself to issue a sustainability bond to finance social and environmental projects in the City. The municipality has already issued green bonds, but has now developed a framework that includes categories such as “essential” public services and sustainable buildings, as well as green ones like renewables, energy efficiency and water and pollution management. Sustainalytics, which performed the second-party opinion, says the issuer will target proceeds “towards disadvantaged populations by selecting projects that are providing essential services to these populations”. It recommends that CDMX reports on “quantitative KPIs relevant to project categories” where possible.


The African Development Bank has sold SEK733m of bonds to the Dai-ichi Life Insurance Company. The transaction is the bank’s first deal under its Light Up and Power Africa initiative, and AfDB says it “will use its best efforts to direct an amount equal to the net proceeds of the issue of the Notes to lending projects within the strategic Light Up & Power Africa priority”. It added that “the aspirational goal of this priority area is to help the continent achieve universal electricity access by 2025 with a strong focus on encouraging clean and renewable energy solutions”.


A property developer owned by Korean Airlines is planning to issue a green bond. Hanjin International Corp, which owns Wilshire Grand Centre – a 1,100-foot skyscraper in the financial district of downtown Los Angeles, will sell the notes to deconstruct and rebuild the property to LEED Gold standard (link).

Last week, RI reported that Sumitomo Mitsui Financial Group was planning to issue a green bond. It priced a seven-year offering on Wednesday at 41 basis points over midswaps. According to the second-party opinion by Sustainalytics, the proceeds will be used “to finance and refinance expenditures related to renewable energy, energy efficiency, green buildings, clean transportation, and pollution prevention and control”.

RI also reported that Mizuho Financial Group would come to market. Further details reveal it “intends to issue multiple green bonds” to finance projects in the renewables, clean transport and pollution prevention/control sectors. It will issue in euros.

Additional reporting by Vibeka Mair