6 December 2017

Green bond comment, December 2017

A record amount of new issues, several significant 'firsts' and important regulatory initiatives in November, suggest the green bond market is well-placed for further dramatic growth.

37 labelled green bonds were issued in the month, with a combined value of more than $17.3 billion, far outstripping the previous record of $15.3 billion set in November last year and taking the total for the year-to-date beyond $100 billion. The biggest issuers were New York's Metropolitan Transportation Authority ($2.0 billion), China Development Bank ($1.7 billion), Bank of China ($1.5 billion), and Iberdrola (€1 billion).

But perhaps more significant for the long-term health of the market was evidence of diversification into new currencies, new industry sectors and new geographies. The month saw the first green bond denominated in Swiss Francs – from the Canton of Geneva, the first issue from a life insurance company – Manulife, the first Canadian municipal issue from the City of Ottawa and the first sovereign green bond from an emerging market – Fiji.

In addition to the Swiss Franc, two other under-represented currencies – sterling and Yen – also saw welcome new issues. UK sewer company Tideway's inaugural issues, amounting to £450 million, made it the largest corporate issuer of sterling-denominated green bonds. And the JPY20 billion issue from a Japanese railway company underlined the great potential of the transport sector to benefit from labelled green debt.

Other notable transport issues came from Italian rail firm Ferrovie and automotive giant Toyota, while many muni bonds and bank issues also include transport projects in their list of eligible projects.

November's three yen-denominated issues marked a significant step up in activity, as only seven green bonds had previously been issued in the Japanese currency. The fact that Manulife's bond was only the second green issue to be denominated in Singapore dollars, also suggests growing interest in the market in Asia.  

This was underlined by the launch of the Asean Green Bond Standards in Kuala Lumpur early in the month. These are based on the internationally accepted Green Bond Principles but are also consistent with the laws governing the issuance of Islamic bonds or sukuk.

Another cause for optimism on the regulatory side of the market is the initiative to develop a 'Rosetta Stone' for the green bond market to harmonise taxonomies of eligible environmental projects. The project, led by the European Investment Bank and China's Green Finance Committee, aims explicitly to promote further growth in the market.

Such initiatives, leading to standardised definitions in the market, are necessary pre-conditions for the UK to issue a sovereign green bond, climate change minister Claire Perry hinted to Environmental Finance.  

But several other countries are likely to come to market before the UK. So far only Poland, France and Fiji have issued sovereign green bonds, but there are believed to be 15 issues in preparation. Nigeria is expected to join the market within weeks, Poland's second issue is due in Q1 2018 and Morocco recently signalled its intent by publishing a green bond framework.

We understand, however, that the next sovereign issue will be a third tap of France's ground-breaking Green OAT – tomorrow (7 December) at 11.00 CET. Watch this space!

Graham Cooper is consulting editor of Environmental Finance

Issuer Value (M) Currency Dollar value (M)
African Development Bank  60 AUD 45.94
Agence Francaise de Developpement  750 EUR 873.61
Avangrid 600 USD 600
Bank of China 2200 USD, CNY, EUR 1476.3
Barclays 500 EUR 579.73
Canadian Solar 7400 JPY 66
Canton of Geneva 620 CHF 620
China Development Bank 1000 EUR 1171.52
China Development Bank 500 USD 500
City of Ottawa 102 CAD 79.62
Deutsche Hypothekenbank  500 EUR 589.78
Ferrovie 600 EUR 713.95
Fingrid 100 EUR 117.51
Gas Natural Fenosa 800 EUR 947.79
Government of Fiji 100 FJD 48.22
Iberdrola  1000 EUR 1179.72
Iowa Finance Authority  347.46 USD 347.46
Japan Railway Construction, Transport and Technology Agency  20000 JPY 178.4
Manulife 500 SGD 368.79
Nederlandse Watershapsbank NV 500 USD 500
Nederlandse Watershapsbank NV 10 EUR 11.61
New York Metropolitan Transportation Authority  2021.461 USD 2021.461
Nya Svensk FastighetsFinansiering AB 300 SEK 35.24
Nya Svensk FastighetsFinansiering AB 950 SEK 111.6
Obos Forretningsbygg As 430 NOK 52.71
Orsted 750 EUR 884.85
Orsted 500 EUR 589.8
Overseas Private Investment Corporation 7 USD 7
Overseas Private Investment Corporation 3.9 USD 3.9
Scatec Solar ASA 750 NOK 92
Specialfastigheter 1250 SEK 149.81
Sveaskog  550 SEK 64.67
Sveaskog  450 SEK 52.92
Tideway 200 GBP 266.45
Tideway 250 GBP 333.17
Towngas Group 2600 JPY, HKD 94.7
Toyota 600 EUR 710.49
Westpac Banking Corporation  500 EUR 592.07
Ygrene Energy Fund  280.4 USD 280.4

Subscribe to Environmental Finance for more green bond news and analysis