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Green Bond Round-up, Oct. 26: First emerging market sovereign as green securitisations leap 222%

The latest market developments

The first emerging market sovereign green bond has been issued, with Fiji selling FDJ100m ($50m) of notes with technical assistance from the World Bank and the IFC. The Government of Fiji, which will chair COP23 in Bonn next month, sold two tranches: a five-year offering with a 4% coupon and a 13-year offering with a 6.3% coupon. Proceeds will be used mainly to improve climate resilience in the country, but also to achieve the island’s target of 100% renewables and energy-sector emissions reductions of 30% by 2030. Fiji is particularly vulnerable to natural catastrophes and climate change: last year it was hit by a cyclone that cost it almost one third of its GDP and 20% of its population is at risk of displacement from climate change by 2050. Poland issued the first green bond last year, followed by a mammoth deal from France earlier this year. Nigeria is expected to be the next in line for government issuance.

The broader green bond market had hit annual issuance of $110bn by mid-October, according to SEB’s Christopher Kaminker, who said in his latest report that total cumulative green bond issuance had reached $338bn. China overtook France in the number two spot for issuance, with $19bn and $17bn, respectively. The US retained the top spot, driven by securitised and municipal bonds, which account for 81% of issuance out of the country. This is a broader trend, too, with asset- and mortgage-backed offerings leaping by 222% year-on-year. Other trends include the growth of government agency issuance (up 127% YoY) and, importantly, 36% YoY growth in the corporate space, which reached $50bn, driven by a 131% rise in corporate non-financial green bonds. Overall, September’s figures were “strikingly” higher than the same period last year, up 131% and boosting third-quarter issuance by 36% year-on-year. “A healthy pipeline of announced deals remain for October or later”, Kaminker added, and SEB maintains its annual issuance forecast of between $125bn and $150bn.

Europe

A group of Nordic green bond issuers has released a report on impact reporting, hoping to “break down the barriers for new issuers” – in the region and elsewhere. Speaking at an event to discuss the document, Antti Kontio, Head of Corporate Responsibility and Funding Manager at Finnish issuer MuniFin, said the document was a response to a particularly Nordic problem: “The challenge that we have in the Nordics is that we are small issuers – we are not like the EIB or KfW, who have billions of assets for green. So we need to be able to go broader,” he said, referring to the number of sectors with impact reporting guidelines attached to them. Typically, the green bond market has focused on impact reporting for renewable energy and energy efficiency but, Kontio said, the new framework looks at how to report on green buildings, water and waste management, public transport, sustainable land use and adaptation measures. The document is endorsed by nine Nordic bodies, including municipalities and issuers, who have all agreed to adhere to the guidelines in their own impact reports from next year.Mirova, Actiam, AP4 and Storebrand were consulted on the work, and changes were made based on their feedback, the authors said. Further feedback is now being welcomed from the wider investor community. Swedbank is this week roadshowing its inaugural green bond, which it has aligned with the Sustainable Development Goals. The Stockholm-based banking group will use the proceeds of the expected €500m, five-year deal to finance renewables, energy efficiency, clean transport, resource management, pollution control and clean transport.

Deutsche Hypothekenbank has mandated ABN AMRO, Credit Agricole CIB, DZ BANK, NORD/LB and UniCredit to roadshow a euro-denominated benchmark-sized green bond, which is expected to be rated Aa1 by Moody’s. Proceeds will finance and refinance green buildings. The second-party review was done by oekom.

Asia

Japanese mutual life insurance company Fukoku Life has bought an entire green offering from Munifin. The A$50m (€33m) deal was the Finnish municipal financing body’s third green bond, but its first private placement. It issued benchmark USD and Euro deals in 2015 and 2016. Cicero gave the second opinion along with the Stockholm Environment Institute.

The Metropolis of Tokyo has priced its long-awaited green bond in two tranches: ¥5bn of 30-year notes with a coupon of 0.982% and ¥5bn of five-year notes with a coupon of 0.02%. Japanese insurance company Dai-ichi was one investor on the longer-tenor tranche. The issuer has an A+ rating from S&P Global Ratings Japan. Last year, Tokyo committed to reduce its emissions by 30% by 2030 (based on 2000 levels). Proceeds will be used to support these goals, with projects including renewables, energy efficiency, smart cities, climate adaptation projects and environmental measures for Tokyo’s 2020 Olympic Games. The transaction follows the issuance of ‘Tokyo Environment Supporter Bonds’ issued earlier this year in Australian dollars, which the issuer describes as a “trial”. It says it will issue ¥20bn of green bonds in total, so more transactions are expected to follow. oekom provided the second-party review.

North America

US renewables investor, Hannon Armstrong Sustainable Infrastructure Capital, sold $164m of ‘sustainable yield bonds’ to refinance leases that support a 1.2GW solar portfolio in the country. The bonds have an E1/80 rating from S&P under its green bond assessment framework.

The City and County of San Francisco issued ‘Special Tax Bonds’, assessed by Sustainalytics against the Climate Bonds Standard on low-carbon transport. Proceeds will finance a transport initiative called the Transbay Transit Center Programme.

Australia

KfW has tapped its AUD green bond for a second time, increasing it to A$1bn. The German development bank sold A$200m of notes, which mature in 2020 and offer a coupon of 2.4%. KfW also released its latest green bond reporting here

Additional reporting by Elena K. Johansson