Green Bond Round-up, Sept. 27: Rabobank, SocGen, Nomura, China Three Gorges Corporation

The round-up of the latest green bond developments

The green bond market has continued its love affair with the finance’s big hitters this week, as Mark Carney – head of the Financial Stability Board and Governor of the Bank of England – dedicated a major chunk of a lecture on climate change to the importance of the asset class. He revealed that authorities were developing a “green bond term sheet with standardized terms and conditions” which included the possibility of “an appropriate dispute mechanism for when these conditions are not met”. This is an interesting move forward for a market which has not yet even reached consensus on what ‘green’ is, let alone how to deal with bonds that fail to live up to investor expectations after issuance.

Swedish property firm Fabege earlier this year launched a medium-term notes programme which included the green terms within it – potentially giving them the same weight as the financial terms when it comes to defaults – but as a whole, the market hasn’t addressed mechanisms to protect investors from post-ante controversy, so this could be a big move.

In addition, there have been a string of notable transactions out of Europe, Asia and the US this week.


Rabobank has launched a green and social bond programme. The Dutch cooperative bank has been an underwriter of green bonds for years, and helped develop ICMA’s new social bond guidance alongside the Green Bond Principles. It has now joined the list of banks moving into the issuing space. What’s interesting about this programme is that it’s underpinned by a sustainability bond framework, assessed by Sustainalytics, but Rabobank will go against the current trend of financing its green projects via sustainability bonds. Instead, it will issue both labelled ‘green’ bonds and labelled ‘sustainability’ bonds via the programme, meaning investors with strict green mandates can still participate in deals. Green bonds will finance and refinance renewable energy projects, while sustainability bonds will finance lending to SMEs with relevant certification on their products, processes or buildings. Rabobank has stated that the certifications will have to “set stricter requirements than the legal minimum requirements”. Other sustainability bonds, such as Starbucks’ issue last year, received criticism for financing projects with certifications that only required borrowers to be in compliance with basic legal requirements, such as paying the minimum wage and not using banned pesticides.

France’s Société Générale is about to return to the market with its second ‘positive impact bond’, RI can reveal. The programme was launched last year in response to a ‘Positive Impact Manifesto’ developed by the UN Environment Programme Finance Initiative with SocGen and nine other financial institutions. Positive impact finance, according to the bank, aims to “verifiably produce a positive impact on the economy, society or the environment once any potential negative impacts have been duly identified and mitigated”. The bond framework considers 17 types of impact, including nine social aspects, seven environmental and one economic. These factors will be assessed over the life of the bond, SocGen says, and if non-compliance is established then “the considered asset would lose its qualification”. In this instance – as with the first green bond – the proceeds will be used for renewable energy projects. It has a second-party opinion from Vigeo. Link. Asia

Japanese consulting and finance IT services firm Nomura Research Institute – owned by the Nomura Group – issued its first green bond, to finance the construction of a building which it expects to secure LEED certification of at least ‘gold’. Significantly, the 10-year, ¥10bn (€89m) bond has a green assessment score from Japanese ratings agency Ratings & Investments (R&I). R&I have given the bond a GA1 rating – the highest on its scale. Vigeo Eiris performed the second-party opinion, concluding that the framework was “robust”. NRI said the deal was intended “to activate the green investment market in Japan”. Market participants have told RI that there is lots of activity going on in Japan around green bonds currently, so expect more deals out of the country in coming months. Link

Dam-builder China Three Gorges Corporation (CTGC) has announced what it claims is the largest corporate green bond out of China so far. The RMB6bn deal was closed last month and will finance a hydropower project along the Jinsha River. Experts at the Climate Bonds Initiative pointed out in a blog this week that the deal throws up some “tricky questions” about the credentials of green bonds. The issuer says the notes were “certified” by EY “in accordance with international standards”, but CBI suggests the assessment was made using the guidelines from the People’s Bank of China, not international standards. RI could not establish which international standards the bond was certified against, and was unable to get comment from either CTGC or EY on the assessment. CBI also said the plants being financed were “the first mega hydro projects we’ve seen included in a green bond”. Large hydro is generally not accepted as ‘green’ by investors because projects often result in significant methane emissions and the displacement of communities and wildlife, among other things. Earlier this year, the Barclays MSCI green bond index revised its inclusion rules around hydro, introducing a sustainability scoring system for projects. Engie, formerly GDF Suez, had two green bonds removed from the index as a result, as they were found to finance a large hydro project that failed to meet the new standards.

More than 50 institutional investors joined the order book, according to the company, driven by the fact its “credit highlights are highly accepted among market investors”. The bonds are listed on the Shanghai Stock Exchange.

Dutch development bank FMO has bought INR 330 crore ($50m) of green notes from India’s Yes Bank. The deal marks FMO’s first investment in a green bond out of India, and proceeds will be used to finance “green infrastructure” such as wind and solar. This is Yes Bank’s third green bond so far. The financial terms were not disclosed, but Yes Bank has agreed to have the bond “externally assured by a reputed third party”.

North America

Renovate America has closed the biggest ever green bond dedicated to Property Assessed Clean Energy financing, in a $320m deal. The PACE programme enables public bodies in the US to provide loans to building owners for energy efficiency upgrades and the installment of distributed solar. The money is then repaid via a levy on the property. For its latest deal, Renovate has securitized 12,394 residential PACE assessments offered by local governments in California. Each assessment has an average outstanding balance of $21,310 with a weighted annual interest rate of 7.93% over an average of just under 15 years. Renovate said its green bonds, issued through a dedicated platform called HERO, have received “significant interest” from investors “around the world” – in part because they finance existing green projects, rather than intended ones. The notes have a green bond assessment from Moody’s, which awarded the deal its highest grade: GB1.