Green Bond Round-up, Oct 25: Nigeria, Bank of China, IFC, Kommunalbanken, Mass Transit Railway

The latest green bond developments

A report from Moody’s this week claims green bond issuance reached $26bn in the quarter ending September 30. This put the calendar year on track to hit more than $80bn, it forecasts, with particular help from Chinese financial institutions. But it’s not just China that looks set to boost issuance. The mania around sovereign green bonds continued this week. RI revealed on Friday that Sweden is working on issuing a sovereign green bond, and Nigeria has confirmed plans to come to market next year. Government green bonds seem to be the clearest way so far for investors to finance countries’ Nationally Determined Contributions (NDCs), which set out their commitments to curb emissions. France and Bangladesh have said they are looking at issuing, while Kenya, China and Italy are also rumoured to be mulling deals.
The Nigerian bond was confirmed by Amina Mohammed, Nigeria’s Minister of Environment, speaking at an event at the London Stock Exchange. She said the bond would be issued in the first quarter of next year and will be modest, at NGN20bn (€58m) – and only be open to domestic buyers. Mohammed said the government was keen to find instruments that would align with its NDC.

One dedicated green bond investor said the key to sovereign green bonds was getting the yield right. “If it was a European sovereign it would need to be very long-dated to avoid having a negative yield and to be attractive to investors,” he said, adding that this would probably need to be more than 15 years in the current climate. “I see merit in emerging countries issuing green bonds,” he continued, “although many investors would need them to be investment grade, or just below. That’s another challenge for sovereign green bonds, but the concept is interesting, particularly from emerging market countries.” Nigeria was earlier this year downgraded by Moody’s to B1 from Ba3, in part because of the global oil slump.


Bank of China has secured third-party verification ahead of its first covered green bond. According to the document, which was published yesterday by EY, proceeds from the transaction will finance renewable energy and pollution prevention and control. New and existing projects are eligible for financing through the bonds, and BOC has committed to annual reporting. The bank also announced this week that it had fully allocated the $3bn green bond it issued in July.

Hong Kong has seen the continent’s first labelled green bond for rail this week, too. Mass Transit Railway (MTR) runs nine commuter lines, a light rail network and an airport link, and has come to market with a $600m, 10-year deal. The notes are fully guaranteed by MTR and will finance “environmentally-friendly service and network enhancements”. It has a second-party opinion from Sustainalytics. Eighty-three percent of the notes were bought by Asia Pacific investors, with the remaining 17% taken by those in Europe, the Middle East and Africa. The order book reached more than $1.4bn from 94 accounts, according to bookrunners, so demand was high for this AA1/AAA-rated corporate issue.

The India Green Bonds Market Development Council held its first meeting this week, in a bid to bolster the market in the country. The council – a joint initiative between the Federation of Indian Chambers of Commerce and Industry and the Climate Bonds Initiative – will draft a ‘national blue print’ for the development of green bonds.h6. Africa

In addition to Nigeria’s news this week, the IFC has postponed the pricing of its innovative ‘REDD’ forestry bond, which will focus on projects in Kenya. The Forests Bond isn’t a labelled green bond, but it will offer investors the chance to be paid either a cash coupon or with carbon credits generated by a forestry project known as the Kasigau Corridor. The project will generate ‘voluntary emissions reduction’ credits (VERs) under REDD+, a UN initiative that stands for ‘reduce emissions from deforestation and forest degradation’. It received start-up funding from BNP Paribas which agreed to buy VERs over a five-year period. Investors on the IFC bond can choose to be paid in carbon credits which they can retire, or sell on the carbon offset market. Importantly, IFC will absorb project risk and buy credits to ensure the long-term viability of the project. The deal was supposed to price yesterday, but that will now happen at the end of the week, RI understands.


Kommunalbanken Norway (KBN), the state-owned Norwegian bank, issued its third green bond last week, in a $500m, four-year deal. The coupon is 1.375%. According to Credit Agricole, one of the managers on the deal, KBN secured “very strong support from environmentally-focused accounts”. Central banks and official institutions took 47% of the deal, while asset managers, banks and pension/insurance funds took 17%, 16% and 10%, respectively. The remaining 10% was bought by corporates. Thirty-one percent of buyers were in the US, followed closely by Europe (30%), with 16% coming from the Middle East and Africa, 12% from the rest of the Americas and 11% from Asia. The issuer finances welfare services in Norway, and proceeds from this deal will be used in accordance with its existing green bond framework.

In Sweden, local government debt office Kommunivest issued a SEK5bn green bond – its second for 2016. The deal was its first in Swedish krona and reached the top end of its estimated size, which was set at between SEK3bn-5bn ahead of roadshow. In fact, demand for the notes reached SEK13bn, according to underwriter SEB. AP7, Folksam, KfW and Storebrand all participated in the deal, which will finance renewable energy, energy efficiency, green buildings, public transport and water projects. Kommuninvest’s ‘green’ loan book is around SEK14.5bn currently, across some 60 projects. Earlier this month, a spokesman from Kommuninvest told RI that he expected between 15% and 20% of its lending to be green in the future, leading to more need for green bonds.


Michigan looks set to become the latest municipality to issue a green bond. According to a document on its website, the state is awaiting Climate Bonds Initiative Accreditation. Michigan is home to Flint, the city thrust into the spotlight in recent years following a major water contamination scandal. The state Treasury could not be reached for comment.

RI understands that DC Water is preparing for its third labelled green bond, which is expected to come to market in the first quarter of 2017.

With reporting by Vibeka Mair.