Green Bond Round-up, Sept. 7: Market edges towards its 500th deal

The latest green bond market developments

The green bond market is edging towards its 500th deal, according to latest research for SEB Bank. It claims that $84.6bn of green bonds have been issued so far this year from 36 jurisdictions, and in total the market now stands at $309bn. Unusually, the US is the leader with $22bn, followed by France ($14.8bn) and China ($14.1bn). Securitisations have surged by 503%, according to the research, reaching $14.5bn, with potential to hit $20bn by year-end.

To mark World Water Week last week, the analysis says 22% of green bonds were used – wholly or in part – to finance sustainable water and wastewater. Adding to that will be China’s first retail green bond, which will fund water conservation and treatment projects.

The China Development Bank will issue the three-year deal, which is expected to be no more than 5bn yuan ($763m). It has already sold 15bn yuan of green bonds, but the unique thing about this transaction is that up to 600m yuan will be offered to retail buyers, and can be bought over the counter or online. This is the first time a green bond out of China has included a ‘mom and pop’ component. The retail green bond market has been showing signs of growth elsewhere in the world, with a series of green uridashi bonds sold in Japan to individual buyers, and lots of US municipal green bonds being open to retail investors. On top of the muni offering, the US has seen a couple of major ventures into the retail green bond space: the New York Metropolitan Transportation Authority has issued some massive deals marketed at the city’s inhabitants, as has San Francisco Bay Area Rapid Transport Authority; and Elon Musk’s Solarcity – now owned by Tesla – has a programme of asset-backed green bonds for retail buyers. Elsewhere, Canada’s renewable energy firm CoPower, South Africa’s Nedbank and Shanks Group and Ecotricity out of the UK have all come to market with retail offerings.


Asia has seen a fortnight of firsts: in addition to China’s first retail bond, Malaysia has issued the world’s first green Sukuk. After years of talk about the potential for Islamic finance to converge with green finance, the RM1bn deal was issued by a subsidiary of renewable energy firm Quantum Solar, to finance three new solar PV plants. It has a ‘dark green’ rating from Cicero’s%20Green%20Sukuk%20Framework_Final24072017.pdf. Fitch Ratings’ Bashar Al Natoor, the firm’s global head of Islamic finance, said there was strong potential for further green Sukuk issuance as Islamic finance grows in the Middle East, Asia and Africa. “In Malaysia in 2014, the Security Commission revised its Sukuk guideline by incorporating the new requirements for the issuance of socially responsible investing Sukuk,” he points out.

Although only one transaction has taken place so far, Al Natoor writes that “Islamic finance on paper seems to be a logical place where green bonds, or in this case green Sukuk, could proliferate.” Sukuk are bonds structured in compliance with Islamic law, meaning that – instead of taking interest payments, which are forbidden – the notes are tied directly to assets, and the investor takes a share of the revenues. “Green Sukuk funding and environmentally sustainable infrastructure projects, such as the construction of renewable or clean energy projects, could appeal to both Sukuk investors and conventional environment-focused investors, as Sukuk by design are structured based on a specific pool of assets.”

The State Bank of India is readying itself to raise $3bn in green bonds, in the offshore market, according to reports. The deal would become its largest overseas green bond. The bank is appointing managers for the fundraising, which may take place over a series of transactions, the report states. A roadshow is expected in coming weeks. The Climate Bonds Initiative will certify the deal, which includes the following eligible categories in its framework: solar, wind, hydropower, geothermal, low-carbon residential and commercial buildings, energy efficiency within appliances and data centres, recycling and green transport (link).Greenpeace East Asia has flagged up some serious questions about the green credentials of an upcoming green bond out of China, which will finance a ‘coal-to-chemical’ plant (which converts coal into other fuels like gas). “There is nothing ‘green’ about this project,” claims Huang Wei, a campaigner from the NGO, which claims the site will emit 1.9m tons of CO2 per year and be a “stain” on China’s climate leadership credentials.


Zurich’s Manuel Lewin has left his position as Head of Responsible Investment, to become Head of Risk Strategy and Reporting. His position as Zurich’s representative within the Green Bond Principles will be taken by his replacement, Johanna Koeb, Zurich told RI, but it is currently unclear as to whether Koeb will automatically take over this role as co-chair of the committee, or whether elections will take place. The move comes on the back of Zurich hitting its $2bn green bond investment pledge – which it made it 2014 – by investing in more than 120 deals from 75 issuers across seven currencies. Some of the notes are held in a dedicated portfolio, but others are integrated into other mandates. Lewin said the firm will now increase its focus on impact and measurement.

UK utility SSE has sold €600m of notes in an eight-year deal to refinance wind energy assets (production and transmission). The order book surpassed €1.7bn, with “barely [any] price sensitivity” and tightening prompted “only minor drops”. The result was that the final offering attracted €1.4bn, with tightening from IPT of 50-55 basis points above midswaps, to 38+. The deal was upsized from €500m to €600m. More than 100 accounts participated, including Dutch government and education pension fund, ABP, which bought €24m. DNV GL conducted the second-party review.

French real estate firm Icade has sold €600m of 10-year green bonds to finance existing investments in construction and renovation or green buildings; and investments in energy efficiency. The deal was three-times oversubscribed and the coupon was 1.5%. Sustainalytics provided the second party review.

German filtration company MANN+HUMMEL plans to issue Green Schuldschein to support its green products, and improve its own environmental performance. The latter will include financing renewables, energy efficiency, water efficiency and pollution efforts. Sustainalytics provided the second-party opinion.

ABN Amro is currently roadshowing a green bond from Hypo Vorarlberg to support green real estate – mainly residential mortgages – “which exceed the country requirements significantly”, it told RI.

North America

In another green bond which will finance an airport, the Greater Orlando Aviation Authority has issued $1bn of bonds. It will use the proceeds “to fund the expansion of Orlando International Airport” according to a note from S&P Global Ratings, which gave the deal its top score under its Green Bond Evaluation programme. This will include the construction of five new LEED-certified buildings and “several enabling projects”. The buildings will target 20% energy savings against a baseline rather than the minimum 16% required to qualify for LEED.


Mexican state-owned bank, Banobras, has developed a sustainability bond framework to enable it to issue bonds for infrastructure aimed at vulnerable parts of the population, public services, disaster recovery projects, sustainable transport, renewables, energy efficiency, water and wastewater management and pollution prevention. Sustainalytics provided the second-party opinion.