Investors scrabble for France’s debut green bond as order book hits €23bn

€7bn green bond becomes the biggest in the world

BlackRock, Nordea, JP Morgan and Standard Life were among the investors that piled in on the French government’s debut green bond yesterday, in a deal which saw the order book reach more than €23bn. The €7bn transaction has become the world’s biggest green bond, and only the second from a sovereign issuer.

Other investors to publicise their participations in the 22-year deal include: Achmea lnvestment Management, Actiam, AG2R La Mondiale, Amundi, APG, Apicil, Aviva Investors France, AXA France, Barclays, BNP Paribas, Caisse Régionale du Crédit Agricole Mutuel de Paris et d’Ile de France, Covea Finance, Crédit Agricole, DekaBank, ERAFP, HSBC Assurances, IRCANTEC, Kempen Capital Management, MIF : Mutuelle D’Ivry, Mirova, Nippon Life Insurance, NNIP, PGGM, Pro BTP, SCOR SE, Sumitomo Mitsui Trust Bank and WWF France.

“We had tremendous interest from green investors – dedicated green bond funds and large institutional investors with commitments to the asset class – as well as OAT buyers and others,” said Tanguy Claquin, Head of Sustainable Banking at Credit Agricole – the structuring agent on the deal.

The target size for the deal was between €2.5bn and €5bn, but based on the scale of demand, the transaction was upped to €7bn, with a coupon of 1.75%.

“It priced just as any other French OAT would have,” said Claquin, at 13 basis points above a 2036 OAT.This mirroring of conventional notes is a key take-away for other governments looking at tapping the green bond market, according to Claquin, who recommends: “If they want to do green bonds, they should do them with the same liquidity as their conventional bonds”.

“The other thing that should be noted about this green bond is the commitment the government has made through the creation of its Green Bond Evaluation Council,” he added. The council was created last year and will “independently guide and review” reporting on the bond’s ex-post environmental impacts.

“It’s a very long-term transaction and therefore very long-term assets. So over the next 22 years, France will have to report on a regular basis on the observed and actual impact of the green expenditure. Sovereign green bonds wouldn’t be impossible without that feature, but other states looking to lead on this should look at it too,”

This reporting commitment, Claquin said, may have an even more profound impact on the wider green bond market. “It may move the market in a direction where impact reporting is more systematically organized and independently reviewed, which is not the case at the moment,” he explained. Currently, most impact reports are performed internally and, unlike pre-issuance information, are often not audited or assessed by a third-party. “This could become best practice.”