Green Bond Round-up, Oct. 3: Year-to-date issuance outstrips 2016 total

The latest green bond market developments

This year’s green bond issuance has already outstripped 2016’s, according to figures from the Climate Bonds Initiative. The body, which excludes self-labelled green bonds that don’t meet its criteria, recorded $81.6bn of issuance for the whole of last year, while by the end of September there had been some $83bn.

Asia

The world’s largest listed company, the Industrial and Commercial Bank of China, has issued a multi-currency green bond to grow its green loan book. ICBC is also the largest bank in the world, and the deal has an A1 rating from Moody’s. €1.1bn of three-year, floating-rate notes were sold at 3-month 55 basis points above Euribor; while $450m of three-year floating-rate notes were sold at 77 basis points above 3-month Libor. A further $400m of fixed-rate notes offer a 2.875% coupon. ICBC will be able to finance and refinance green loans within renewables, energy efficiency, green transport and sustainable waste and water, according to its green bond framework, which was assessed by Cicero. It is only the third Chinese issuer to sell an offshore green bond this year, along with China Three Gorges Corporate and Modern Land. HSBC and Credit Agricole were joint structuring green advisors (link).

In Japan, Mitsui Sumitomo and Mizuho Financial Group are both reported to be gearing up to issue green bonds. Japan has its own national green bond standards, but the deals are also expected to be aligned with global expectations, according to local media.

The Indian Renewable Energy Agency, IREDA, has issued a $300m five-year masala green bond. The deal has certification under the Climate Bonds Initiative standard and will be listed on the London Stock Exchange and the Singapore Stock Exchange.

North America

Nine banks made a play to buy the US’s first sustainability bond from a public body, in a deal that secured better pricing than its non-labelled counterpart, according to the issuer. The Massachusetts Bay Transportation Authority came to market with $370.3m of sustainability bonds, alongside conventional notes. The offerings attracted bids from nine and eight banks, respectively.Citibank was one of those to buy the sustainability bonds, which will finance capital investments. “Not only did the market acknowledge our creditworthiness and commitment to fiscal sustainability, investors rewarded us for our positive green and social impact,” said the issuer’s general manager, Luis Manuel Ramirez. “With more banks participating in the MBTA’s Sustainability Bond issuance than its traditional issuance when the deal was priced on September 26, and banks bidding the sustainability, this strong market demand translated to historically lower borrowing costs from the MBTA,” the issuer confirmed.

Europe

BNP Paribas has this week launched a €100m green bond fund as a sub-fund of an existing Luxembourg SICAV. RI revealed earlier this year that the French asset manager was planning to create its own fund, and now the vehicle, known as Parvest Green bond, is being registered for distribution in a number of European countries, including the UK. It’s expected to invest 10% in sovereign issuance, 30% in corporates, 10% cash and the balance in supranationals and agencies.

Sixty percent will be invested in euro-denominated deals with the remaining 40% in USD and sterling notes, hedged back into euros. The fund will hold a maximum of 20% in B- bonds, with nothing currently below BBB-. The ongoing charges are as follows: I shares: 0.38%; C shares: 0.88%; P shares: 0.63%.

French local and regional governments currently have about 3% of their total outstanding debt in green bonds, according to the latest report from S&P. The report focuses on France’s public sector issuance of green bonds, saying the country’s government-related entities have sold $15.7bn of labelled notes in the past five years – equivalent to 6% of global issuance.

More than 80 investors piled into a $1bn green bond from German development bank KfW last week. The order book hit $2.4bn, and the five-year notes were allocated mainly to banks and asset managers – more than half in Europe. The coupon is 2%.
Spanish development bank ICO issued two social bonds in September – one in euros and one in Swedish krona. The bank, which was a driving force behind the creation of the Social Bond Principles by ICMA earlier this year, has also said to local media that it is considering tapping the green bond market next year.