Rabobank screens out non-sustainable investors for new €500m green mortgage bond

The issuer of the world’s first green residential mortgage-backed security has screened out investors who it did not view as green enough.

Dutch bank Rabobank structured a €500m transaction on behalf of its subsidiary, Obvion – a dedicated mortgage provider in the Netherlands. Obvion was established in 2002 as a joint venture between Rabobank and Dutch pension fund ABP, with the bank later taking full control.

Societe Generale was also a bookrunner on the deal, which received orders of over €1.2 billion.

Allocations were decided based on investors’ environmental credentials: no non-green investors were sold notes, and others underwent an internal assessment by Obvion and Rabobank to decide on their ‘shade of green’.

Engagement with initiatives like the UN-backed Principles for Responsible Investment, the Green Bond Principles and the Institutional Investors Group on Climate Change (IIGCC) were taken into consideration, as were the green mandates under which the bonds were being requested.

More than €900m of orders were placed by green investors. The ‘darkest’ green investors were given priority. “Investors without a green angle in their investment policies were asked to wait and invest in other issuances,” said Obvion treasurer Max Bronzwaer. The Storm programme – under which this deal was issued – was established over a decade ago, and is a conventional RMBS programme – this latest transaction is its first labelled green deal.
Obvion is not the first issuer to prioritise green investors. Schneider Electric last year issued a green bond for research and development that was “only targeting investors who are signatories to the Green Bond Principles or to the Global Investor Statement on Climate Change”.US municipality DC Water is understood to have launched an order period exclusively for green investors on its 2015 green bond, ahead of the main order period. Fellow muni Sound Transit is reported to be planning to follow suit on its next transaction, in order to enable green investors to compete with large, mainstream buyers.

“Investors without a green angle were asked to wait and invest in other issuances.”

But this is the only transaction so far to have performed such a thorough assessment of its buyers, and ranked investors on greenness.

Obvion’s notes have a certification from the Climate Bonds Initiative, a second-party opinion from Sustainalytics and a green bond assessment from Moody’s – for which it received the maximum grade.

Proceeds from the deal will be used to refinance mortgages on Dutch residential properties with energy efficiency certifications that put them in the top 15% of homes in the country. The bond is backed by that same pool of properties.

The weighted average maturity of the notes is five years, and the coupon is 30 basis points above three-month Euribor.

It comes amid a flurry of activity in the market. This week Renovate – a US firm providing financing under the country’s Property Assessed Clean Energy programme – completed its seventh securitisation in the residential real estate sector, raising more than $305 million. And the Ile de France, in the north of the country, also returned to market with its fourth green bond.