BNP Paribas is launching an emerging markets green bond fund, it has said, hot on the heels of Amundi and the IFC. The asset management arm of the French bank launched a developed-markets vehicle last year, and its next fund will focus on corporates, municipalities, banks and sovereigns in emerging economies.
The move follows the close of the world’s biggest ever green bond fund, also targeted at emerging markets. Amundi Planet Emerging Green One (EGO) is a partnership between Amundi, the French fund manager and the International Finance Corporation (IFC) – the latter of which will take a ‘first loss’ position and provide technical assistance to issuers. Last year, when IFC and Amundi announced fundraising plans, they said they were targeting $2bn by the end of summer 2017, but the fund closed at $1.4bn last week. 16 global institutions have invested, including ERAFP, France’s €28bn public service additional pension scheme; Alecta, AP3 and AP4, three of Sweden’s largest pension funds; Austria’s APK Pensionkasse and APK Vorsorgekasse; MP Pension, the scheme for academics in Denmark; insurers Crédit Agricole Assurances, LocalTapiola General Mutual Insurance Company and LocalTapiola Mutual Life Insurance Company; the European Investment Bank; the European Bank for Reconstruction and Development; and Proparco, the private-sector investment arm of France’s AFD development agency. ERAFP committed $50m, while the EIB invested $100m and EBRD has put down $38.5m so far of a potential 5% of the net asset value of the fund, capped at $100m. IFC made a $256 million cornerstone commitment. The fund seeks to buy notes primarily from banks in eligible countries, deploying up to $2bn over a period of seven years, as there is not enough supply to absorb the full capital immediately.
“We also want to be part of this movement,” said BNP Paribas’ Senior ESG Analyst, Felipe Gordillo, “by launching our first emerging markets green bond fund, which is actually investing across all of the green bond issuers, not just the financials… With the additional flexibility of doing this in local currencies.” No further details about the timeframe or characteristics of the fund have been disclosed. Gordillo was speaking at the Climate Bonds Initiative’s annual conference in London yesterday, which saw a number of other asset owners and managers discuss innovations in the green bond market.
The Loan Market Association (LMA) and its Asia Pacific sister (APLMA) have launched the Green Loan Principles (GLP) with the support of the International Capital Market Association (ICMA), a set of market standards and guidelines with consistent methodology for use across the wholesale green loan market. The GLP build on and refer to the Green Bond Principles (GBP) of the ICMA.Former AP4 bond trader Ulf Erlandson says Glacier Impact, the fund he is currently launching in his new role at Strukturinvest, will take a different approach to financing issuers. “When it comes to green bond issuance, I understand that issuers need to say something about the economic benefits – how that actually effects not only the green bond issuance, but the rest of the cost of capital that they have,” he said. “So we’re going to try and be invested in green bonds… but at the same time commit to buying other parts of the capital structure, as a sort of ‘bone’ to the issuer. We will do that using borrowed capital, which we will raise by shorting ‘brown’ assets on the other side. So for us it’s a super-green trade, and I hope it will help entice more issuers to come to the market.”
The sovereign market was also highlighted as an area that is seeing huge growth. Dutch pension fund PGGM’s Senior Investment Manager, Wilfried Bolt, said: “The last time we met with the Dutch Government, they asked us how a sovereign green bond would fit into our portfolios, and what characteristics it should have.” He added that the sovereign green bond market has developed enough in the Eurozone that “you have to [issue] this year or next year, otherwise you will be a laggard in this market.”
Outside of the Eurozone, the IFC has also released a report outlining how emerging market sovereigns can issue green bonds, based on Fiji’s experience. Among other things, it outlines considerations governments need to make before issuance, things that need to be prepared in order to come to market, and commitments and considerations that arise post-issuance.
Nigeria is further stepping up its ambitions on green bond issuance, announcing yesterday that two of its national entities – FMDQ OTC Securities Exchange and Financial Sector Deepening Africa – had partnered with the Climate Bonds Initiative to jointly develop a green bond programme in Nigeria. The country issued its first sovereign green bond in December – a domestic deal – and plans to come with an international offering in the near future.
Iberdrola returned to market with a €700m green hybrid bond, while Danone made its entry into the social bond space with a €300m offering. The Council of Europe Development Bank – the EU’s ‘social development bank’ – has mandated Credit Agricole CIB as a joint bookrunner on a 7-10 year €500m ‘social inclusion’ bond. Swedish wind power company Arise has refinanced its 2014 green bond in a SEK650m deal.