ESG researcher Vigeo to the fore as institutions snap up massive new green bond

Key role for French house as GDF Suez launches largest green bond issue yet

Institutional investors have snapped up a new €2.5bn green bond from French utility company GDF Suez, the largest issue yet in a burgeoning market – with environmental, social and governance research firm Vigeo taking a key assurance role.

The bond was three times oversubscribed and “very successful” with French, German and UK institutional investors, the company said.

“Strong demand came from investors focused on environmental and socially responsible investing who bought 64% of the issue,” it added.

It is the latest green bond to be assessed by Vigeo, the Paris-based ESG house, which has also run the rule over recent green bonds from France’s Ile de France region, real estate firm Unibail-Rodamco and utility giant Électricité de France.

Vigeo is competing with assurance bodies such as DNV GL and Cicero (Center for International Climate and Environmental Research – Oslo), both based in Norway, in a market widely expected to grow to $40bn of issuance in 2014.

GDF Suez will use the proceeds to finance renewable energy and energy efficiency projects that contribute to fight climate change. These include wind farms and hydroelectric plants, but also energy efficiency projects like remote metering and biomass heating. RI reported earlier this month that GDF Suez was conducting a roadshow with potential investors.

GDF Suez will implement 10 environmental and social criteria – developed and validated by Vigeo – that each project should meet in order to be eligible.The criteria relate to five factors: environment protection; community involvement; ethics and business behaviour; human resources; and project governance.
The bond has two tranches: a six-year tranche of €1.2bn with a 1.375% annual coupon, or interest rate, and a 12-year tranche of €1.3bn with a 2.375% annual coupon. The average coupon amounts to 1.895% for a 9.1 years average duration.
“This unusually large issue will serve the strategic priorities and sustainable growth strategy of GDF Suez in renewables and energy efficiency in Europe and throughout the world,” said GDF Suez’s Chairman and Chief Executive Gérard Mestrallet. The company recently announced it had won a competitive tender for offshore wind farms in France.
Vigeo’s assessment noted that GDF Suez itself meets the requirements of international standards of sustainable development and that the environmental purpose of the projects is “clearly defined”.

“The selection criteria are coherent with GDF Suez’s commitments in terms of Corporate Social Responsibility, cover major environmental, social and governance (ESG) issues and act as incentives to develop more responsible investments,” Vigeo said. GDF Suez will regularly report on the projects financed with proceeds.

Vigeo concluded: “In light of these elements and of our interactions with GDF Suez, we consider that the endorsed projects to be financed through this Green Bond will contribute to the transition to a low-carbon and climate resilient economy, to the fight against climate change and to the development of responsible business.” Link