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Green bond round up, Sept 20: Nafin, Berlin Hyp, Entra, Bank of China

The latest green bond developments

There have been a series of deals out of Europe this week, but it’s emerging markets that have seen the more significant moves. Namely, Mexican development bank Nacional Financiera coming to market with Latin America’s first domestic currency deal. The bank’s second transaction reached the top end of its MXN1bn – 2bn estimate, after investor demand hit nearly MXN6bn. The seven-year notes offered a coupon of 7.9% and were offered exclusively to Mexican buyers, due to its structure. 70% of investors were trading desks, brokerage houses and government entities, while the remaining notes went to pension funds, mutual funds, insurance companies and private banking networks. “It’s really a first from a local issuer in local currency for an emerging market outside China and India,” said one major green bond investor, adding that it was “something we’ve been looking for for a while”. Nacional Financiera’s deputy general director of Treasury and markets, Pedro Guerra Menendez, told RI it plans to do a second local currency green bond – this time for non-domestic investors.

Europe

RI reported that the Nordic Investment Bank has set up a new strategy to encourage the bookrunners on deals to take more responsibility for the integrity of the market, by getting them to disclose how they judge if a bond should be labelled green.

On the policy side, the European Commission last week reiterated “the need to support EU green bond standards” via the Capital Markets Union.

Germany’s Berlin Hyp priced its first use-of-proceeds green bond yesterday, as part of a new programme. The €500m seven-year senior unsecured bond priced with a coupon of 0.5%, and will finance loans to green buildings. 145 investors applied for notes, with the order book reaching more than €1bn. The final allocation saw 35 new investors to Berlin Hyp, and 40% of notes were sold to green buyers. 42% were funds, 28% were banks, 14% were insurance companies, while the remainder was made up of corporates, governments and agencies and “other”. More than 98% were European investors, with 53% based in Germany.

Real estate firm Entra claims it has become the first in Norway’s property sector to issue a green bond.NOK1bn (€108m) of notes were sold last week, in the first deal under a programme to finance properties with a BREEAM certification of ‘excellent’ or above. Cicero provided a second-party review on the deal, awarding Entra a ‘dark green’ rating – the highest on its scale.

The World Bank has issued two ‘sustainable development bonds’ for Italian investors. Both three-year transactions were sold to Italian investors, and were issued in Brazilian Real and South African Rand.

Asia

China’s market has taken another step forward with reports of its first covered bond. The bond is expected to be issued by the Bank of China, which has already sold $3bn of ‘use of proceeds’ green bonds so far this year. Covered bonds normally have a higher credit rating, because they are tied to assets, and this may help attract European and American investors to the Chinese green bond market, which has not seen a high proportion of overseas investors so far. According to the Climate Bonds Initiative, the move was prompted by the bank’s involvement in the G20’s Green Finance Study Group. Further details, such as the pool of assets linked to the notes is not clear, although the bond is set to list on the London Stock Exchange.

Beijing Enterprise Water Group has sold its first round of green notes after securing permission from the People’s Bank of China earlier this summer. It issued RMB2.8bn (€375m) of perpetual bonds. Its total programme, as agreed with PBOC, is RMB4.7bn.

Mitsubishi UFJ has tied up its inaugural green bond, which will finance renewables projects “selected based on environmental and social impact assessments performance by BTMU in accordance with the Equator Principles”.

Middle East

The National Bank of Abu Dhabi has reportedly postponed its green bond transaction because investors weren’t keen on the terms. The deal, which was expected to be for $500m of notes, would be the first green bond from an issuer in the Middle East, and finance a range of green projects including renewables and energy efficiency.