Green Bond Round-up, September 4: European Investment Bank readies Sustainable Awareness Bond

The European Investment Bank – the biggest green bond issuer in the world – will issue its first Sustainable Awareness Bond (SAB) later this week, reflecting a growing shift away from dedicated ‘green’ programmes to those financing more wide-ranging objectives. Having issued the world’s first green bond back in 2007, RI reported in April that the development bank planned to launch a parallel sustainability programme to address other SDGs.

“The new EIB Sustainable Awareness Bond represents the first sustainable bond to follow market best practice in transparency and accountability,” the bank said this week, in what seemed to be a veiled criticism of its biggest rival in the MDB space – the World Bank.

The World Bank was the first out of the blocks with a sustainability bond programme, which it launched earlier this year. It argues that, because its entire mandate is based on the SDGs, all its bonds are sustainable by default. But some say this is a tenuous claim, and enables the World Bank to issue labelled bonds without the same levels of disclosure and verification as other issuers – in much the same way as the ‘pure-play’ renewable energy sector came under fire a few years ago for issuing green bonds without second-party opinions or clearly identified projects. It doesn’t seem to have put investors off though: the World Bank notched up another ‘first’ last week when it launched a series of sustainable development bonds linked to water and oceans, counting Storebrand, AP1, SEB Företagsobligationsfond and Swedbank Robur Fonder among the buyers.

In addition, “the focus on water” attracted first-time investors to World Bank bonds,” it said in a statement. The seven-year, SEK1bn deal has a coupon of 0.625% and is listed on the Luxembourg Stock Exchange. SEB was the lead arranger. The programme will be at least $3bn (the bank’s “active blue economy portfolio” stands at $3.7bn) and will support SDGs 6 and 14 – clean water & sanitation and life below water. It runs alongside similar programmes launched this year focused on gender, and health & nutrition. The EIB will announce more details of its inaugural SAB tomorrow.

Europe

Ukraine may be set to join the list of European countries engaged in the green bond market, with reports that legislation will be changed to enable the State Agency for Energy Efficiency and Energy Saving of Ukraine to debut. It will take about two years to get off the ground, according to media, but will eventually raise money from both domestic and foreign buyers to finance energy efficiency projects.

As Sweden’s election looms this weekend, the Nasdaq Nordic Sustainable Bond Market has announced its hundredth listing, three years after launching. It said that there was a 40% rise in green bond listings in Stockholm in the first half of this year compared with the same period in 2017. “Currently, close to 10 % of all corporate and municipal bonds listed on the main market of Stockholm are either green or sustainable,” it said in a statement, describing this as “an extraordinary figure in a global comparison”. Climate change has shot up the political agenda this year in Sweden, after the country had its hottest summer on record. According to some polls, it is now the second most important issue for Swedish voters, after immigration.In the UK, utility SSE has issued its second green bond in a €650m deal. The seven-year, 1.375% offering will be used to fund renewable energy projects, and proceeds will be swapped into sterling after issuance. SSE first issued a green bond last year, with a €600m transaction for which it achieved record pricing.

Australia and New Zealand

In a relatively unusual move, the banking giants of Australia and New Zealand – ANZ, Commonwealth Bank, NAB and Westpac – have come together, along with the Clean Energy Finance Corporation (CEFC) and Macquarie, to back a report on green bonds and infrastructure in the region. The six have financed a report from Climate Bonds Initiative on the topic, which identifies more than 400 projects and assets in Australia and New Zealand “that could be considered green and qualify for refinancing, additional financing, or new financing”. Many are not labelled green, it points out, with only A$10.2bn of green bonds issued out of the two countries (New Zealand saw its debut just last year). Ian Learmonth, the CEO of CECF, which was set up by the Australia Government to invest in clean energy, said he sees growing interest from the country’s superannuation funds and managers looking for more exposure to sustainable assets. This bullishness from the investment and banking communities comes in stark contrast to fierce pushback against climate efforts at government and policy level – resulting last month in Prime Minister Malcolm Turnbull being ousted over a new energy policy that would have included modest emissions reduction targets.

Excitement ignited over plans to issue green bonds for the Great Barrier Reef has also been extinguished, with confirmation that the Government had knocked back proposals in favour of other options.

Asia

Hong Kong has launched its long-awaited Green Finance Association, led by Dr Ma Jun, who spearheaded the green bond market in China. Ma will be the President and Chairman of the new forum, which will focus in part on how develop effective policies for the country’s own green bond market.

There has been a flurry of activity in Japan’s green bond market, in signs that the Government’s efforts to scale the market are beginning to pay off. Banking heavyweight Sumitomo Mitsui Trust Bank is set to debut with a deal to support lending to green projects including renewables, energy efficiency, clean transport, pollution prevention & control, and green buildings – according to a second-party review conducted by Sustainalytics.

Ricoh Leasing, which leases equipment and provides financial services, is to issue a green bond to refinance solar facilities. The bonds, which secured the top ‘green’ rating from Japanese Credit Rating Agency, are reported to be the first set for subsidies from the Japanese government under its recently-launched scheme to encourage issuance. JCR also gave its top ‘green’ rating to a long-term loan provided by Sumitomo Mitsui Trust Bank to real estate investment trust United Urban Investment Management this week, to finance green buildings. Hitachi Zosen is reported to be planning a ¥5bn offering of green bonds in coming weeks, which it claims makes it the first Japanese manufacturer to tap the market. Proceeds from the transaction will be used to build and manage waste-to-energy plants – one of the company’s main businesses. DNV GL has assessed the bonds.