Green Bonds Round-up, November 1: Nippon Life, SNCF Reseau, Mirova, IFC forestry bond

The latest green bonds developments

Japan is continuing to position itself as an up-and-coming force in the green bond market. The Environment Ministry officially announced its green bond working group, which RI reported on earlier this month and which had its first meeting last week. It will have three more meetings between now and March, at which point it hopes to launch a set of national green bond standards. Among working group members are representatives from Goldman Sachs Securities, Daiwa Securities, PwC, Development Bank of Japan, Tokyo Treasury, Kenedix Realty Investment Advisory and a number of universities. Link (Japanese)

Dovetailing with this government drive, the country’s largest life insurance company, Nippon Life, has tripled its pledge to responsible investment, in a bid to invest more in green bonds. The firm has raised its commitment to environmental, social and governance investing to ¥300bn, from its initial target of ¥100bn, which is has already exceeded. It has not set a deadline for the new investment target. Nippon Life has already bought green and social notes from the Mexican development bank Nacional Financiera (NAFIN), the World Bank, state-owned Banco del Estado de Chile and Transport for London.

Importantly, issuance is also set to grow in Japan. Insiders tell RI that government agencies, corporates and municipalities are making moves to tap the asset class and scale the market.


ShareAction, the 2° Investing Initiative, Client Earth, Carbon Tracker, Eurosif, WWF and others have together to publish a report calling for standards for green bonds. The document urges the European Commission to support the speedy development of standards – echoing Mark Carney’s recent call – as well as recommending policymakers look at tax incentives.

French train company SNCF Reseau has closed its first green bond, in a 15-year, €900m deal. The transaction priced at 98.57% and offers a coupon of 1%. The lion’s share went to SRI investors (62%). 44% of buyers were French, with another 44% coming from elsewhere in Europe. 11% came from Asia. It will finance the sustainable modernisation of its rail network, as well as some projects linked to biodiversity and natural resources. The bond has a second-party opinion from Oekom, as well as certification from the Climate Bonds Initiative (also performed by Oekom). SNCF Reseau – which has an Aa2 rating from Moody’s and an AA rating from S&P – plans to return to market annually, based on estimates that it will need to finance up to €1.8bn of eligible environmental projects every year.

Also in France, SRI investor Mirova has more than doubled its green bond fund since it launched last year. RI revealed last week that the fund, which invests in labelled notes across currencies and credit ratings, has gone from €62m to €138m, with many new clients investing over the summer.

Elsewhere in Europe, ING confirmed it would return to market with another deal. It has been a year since its inaugural transaction, which was well-received by the market. It has this week taken on Hans Biemans, former Head of Sustainability at Rabobank to help ING promote its green bond activity.h6. US

Clean energy financer Ygrene has joined Renovate America in issuing green PACE bonds in the US. PACE is a government initiative (it stands for Property Assessed Clean Energy) which 32 states – plus the District of Columbia – have written into legislation, and 19 have based lending programmes around. It allows municipalities to offer home- and small business-owners a loan to finance renewable energy, energy efficiency and water upgrades to their property. The loan is repaid over years, via a tax on the property. PACE green bonds involve the municipality selling the loans on to a facility owned by a finance company – in this case Ygrene – which uses them as a basis to issue securitised bonds, allowing the municipality to recycle the capital. Ygrene has done some privately-placed securisations before, but this is its first labelled green bond. Renovate America’s PACE securitisation programme, Hero, has closed eight deals so far. Initially the deals were not labelled green, but Renovate had them retrospectively assessed by Sustainalytics and labelled them.

“There’s been an uptick in the volume of securitisations through PACE – if you look at the growth of Renovate’s programme, and now Ygrene entering the market. I think this is partly because of a growing comfort around the structural aspects of PACE,” said Henry Shilling, who heads up green bond services for Moody’s, and awarded the top ‘green bond assessment’ rating to both Renovate and Ygrene’s deals. He added that he expects the PACE green bond market to grow further. Link

There is an issue with impact reporting on PACE green bonds: as Moody’s flags up, in order to assess the actual impact of the loans, Ygrene would have to visit the houses of borrowers. That isn’t viable, so Ygrene has committed to disclosing the expected environmental impact of the loans, recalculating them annually to accommodate for changes in the asset pool as some loans are repaid and replaced with others.


CalSTRS, Treehouse Investments, TIAACREF and QBE were among those investors that participated in IFC’s “first of its kind” $152m forestry bond. The five-year notes priced at 100%, with a coupon of 1.546%, and will be listed on the London Stock Exchange. Investors can opt to receive carbon credits from the IFC, instead of the cash coupon. If they do this, IFC will purchase the credits from a forestry project in Kenya, and offer them to the investors at a fixed price of $5 each. The investor can either retire those credits, to offset corporate emissions, or sell them on the carbon market. The objective of the structure is to conserve forests and increase private-sector engagement with the carbon credit markets. The instrument was developed by the IFC in partnership with mining and petrol company BHP Billiton and NGO Conservation International. BHP Billiton has committed to offtaking carbon credits generated by the Kenyan forestry project in instances where investors opt for a cash coupon instead of a carbon one.

With reporting by Elena K. Johansson.