Green Bond Round-up, September 14: The launch of the Global Green Bond Partnership

Some of the world’s biggest green bond investors, issuers and experts have teamed up to create the Global Green Bond Partnership, to work on scaling corporate, bank and sub-national green bond issuance. Amundi and the IFC, which together run the world’s biggest green bond fund; the World Bank, which labels all its issuance SDG-aligned; the EIB, the world’s biggest green bond issuer; and the Climate Bonds Initiative, are among the founding members of the initiative, which also includes Local Governments for Sustainability, the Global Covenant of Mayors for Climate and Energy, Low Emissions Development Strategies Global Partnership and Ceres. The initiative will offer technical assistance, and support with capacity building, de-risking, investment and underwriting, in addition to helping develop innovative financial products to attract investment. The focus will be on cities, states, regions, corporations and financial institutions – in both emerging and developed markets – with an emphasis on providing assistance to issuers that sign up to the Green Bond Pledge. The Pledge was launched earlier this year and announced a number of founding members and supporters this week. A slew of states and cities across the Americas – including California and Mexico City – joined the initiative, which commits them to using green bonds for all long-term infrastructure and capital project financing. Australia’s Local Government Super and other non-issuers signed up to be ‘supporters’ of the initiative.
The members of the Green Bond Partnership have committed to having “at least one joint outreach event by the end of 2018”, they said in a statement, and will create a Green Bonds Readiness Framework/Toolkit for potential issues.

Cicero has published a paper reflecting on its first decade in the green bond market. The second-party opinion provider discusses its own methodology and Knut Alfsen, Senior Researcher, says he expects stronger competition in the second opinion market in coming years, “with provision of second opinions becoming mainstream business for the rating agencies and other professional consultant firms”. “A second way the market will change is a greater reliance on quantitative impact measurements. While welcome in principle, I will nevertheless warn against overburdening green investments with complicated measurement regulations, many of which may be not that relevant to the future long-term global development and our vision for a zero GHG emission and resilient economy,” he says. “We should be careful not to miss the transformative potential in our quest for quantitative measurements”. Link

Europe

ABN Treasury, Achmea, Actiam, Alecta, Banca Popolare Di Sondrio, Banca Profilo, Bankhaus Lampe, Candriam, Danske Bank Asset Management, De Volksbank, PGGM, APG and Union Investment are among 45 buyers of a water-focused bond from the European Investment Bank – its first Sustainability Awareness Bond. As reported by RI last week, the development bank and green bonds pioneer has launched a new programme to address non-climate SDGs. The debut, €500m no-grow deal has a 7-year tenor and a coupon of 0.375%, was popular with investors and the order book hit €700m within an hour. Demand peaked at €1.1bn and the final spread settled at mid-swaps -20bps – tightening from initial price guidance of mid swaps -18bps. A third of the bond was snapped up by pension and insurance companies, with another third went to banks. The rest was bought by central banks, official institutions and fund managers. By geography, Benelux investors took the lion’s share of the notes (28%), followed by those in the Nordics (21%), Asia (18%), Germany/Austria (13%) and the UK (13%). A small amount of investors came from France and Italy.

Proceeds will be allocated to “water investment that supports sustainability objectives as defined by EU legislation” such as marine protection, the circular economy and waste and pollution prevention.“We have selected the water sector as a starting point, as it is a mature sector, with well-defined impact indicators. We look forward to expanding the scope of the Sustainability Awareness Bonds in the coming months to cover health and education, which are key sectors where we can improve people’s daily life around the world,” said Werner Hoyer, President of the European Investment Bank. The methodology of the programme will feed into the current attempts by the European Commission to develop a sustainability taxonomy, the EIB said.

“Reflecting the high-impact focus and specific sustainable investment challenges it is expected that the new bonds will include stronger support for projects outside the European Union than overall EIB financing activity,” it added.

The Republic of Ireland is to become the latest country to issue a sovereign green bond. It announced plans earlier this year, as part of a wider green funding programme which includes a fossil-fuel divestment commitment from its sovereign wealth fund. But it has confirmed now that it will commence a roadshow this month, with JP Morgan and HSBC France as bookrunners. If a deal is successful, it will join Lithuania, Belgium, France, Poland, Indonesia, Fiji, Hong Kong and Nigeria as government issuers. According to a second party opinion from Sustainalytics, proceeds under the programme can be allocated to green projects for water, transport, energy and buildings, as well as those that tackle issues linked to natural resources, land use and climate adaptation.

Latam

Mexico’s biggest bank, BBVA Bancomer, plans to start issuing green bonds using its parent company BBVA’s existing SDG Bond Framework. The green bonds will finance energy efficiency projects, renewables, sustainable transport, waste management and sustainable water.

Asia

Shanghai Stock Exchange, Luxembourg Stock Exchange and Bank of China are now working together as part of the Green Bond Channel, which was launched in June to offer investors access to data and details about Chinese domestic green bonds listed in Shanghai. “China boasts one of the world’s largest bond markets… with green and sustainable bonds in excess of RMB250bn (33bn),” said the Luxembourg Stock Exchange. “However, the market may appear off-limits to the international investor community due to the difficulties of accessing the right level of information on the traded bonds.” Information on the Channel is provided in English about Chinese green bonds to offshore investors. The latest announcements sees Bank of China offer “related services”.

Mitsubishi UFJ Financial Group is returning to market with another green bond – its third to date. Having entered the market in 2016, the firm issued again in January. According to its latest second-party opinion, from Sustainalytics, the issuance will adhere to Japan’s recently developed green bond guidelines. Proceeds will be used to finance or refinance green building expenditures and renewable energy. Mitsubishi Estate and Mitsubishi UFJ Lease & Finance have also issued green bonds this year.

Korea Land & Housing Corporation, the government-owned firm that manages land and housing in the country, has developed a ‘Social, Green and Sustainability Bond Framework’ which has been assessed by Sustainalytics. According to the document, it plans to issue multiple deals to finance and refinance projects that support the SDGs. Areas include housing welfare, affordable housing provision, green buildings, energy efficiency, clean transport, renewables, waste management, water management.