07 April 2017
When Obvion launched the world's first green labelled residential mortgage-backed security (RMBS), its intention was to create a "market-making bond", according to its treasurer Max Bronzwaer.
"It remains our goal to be a regular issuer of green RMBS. But, it remains to be seen how the market develops"
Max Bronzwaer, Obvion
Obvion is the largest originator of residential mortgage loans in the Netherlands and is a wholly-owned subsidiary of Rabobank.
"A lot of fellow issuers in the space have expressed appreciation for Obvion's green RMBS, which was the first on the market," says Bronzwaer, who is executive director and treasurer at Obvion. "For us this is not a one-off transaction, this is something we believe in and want to continue.
"It remains our goal to be a regular issuer of green RMBS. But, it remains to be seen how the market develops." The bond, which has been named the winner of the Asset-based bond of the Year and Award for Innovation – Use of proceeds was structured to attract the maximum amount of green investors.
Issuer: Green Storm 2016
Deal type: RMBS
Issuer rating: Aaa/AAA/AAA
Governing law: Dutch law
Lead managers: Rabobank and Societe Generale. Rabobank was the lead arranger.
Size: €500 million
Maturity: 5 years
Coupon: 30 basis points above three month EURIBOR – "the tight end of the guidance".
Use of proceeds: Energy efficiency loans and financing for green mortgages
External review: Sustainalytics provided both the second opinion and verified the bond against the Climate Bond Standards. Moody's awarded the bond a GB1 – its highest score out of 5.
- First green RMBS
Three different types of external review
Proceeds from the bond were used to refinance a pool of existing mortgages for Dutch residential buildings that are in the top 15% in terms of energy efficiency in the country, or have achieved a 30% improvement, based on Dutch energy performance certificates.
Unusually for a green asset-backed security, the freed-up capital from the bond was earmarked for further green investments.
It was nearly two and half times oversubscribed, with the entire €500 million ($562 million) transaction allocated to green investors.
In order to attract the maximum amount of green investors, Obvion took the unusual step of sourcing a second opinion from Sustainalytics and a certification under the Climate Bonds Standards, also from Sustainalytics. It also received one of the first Green Bond Assessments from Moody's.
The order book was 1.2 billion at close, and €900 million of that was from by "pure green investors", according to Bronzwaer.
Obvion gave priority to green buyers for two reasons:
- To help the market for this type of bond to grow.
- To diversify its investor base.
"Because Obvion, through its regular Storm RMBS, has a benchmark issuance programme, for us the diversification of our investor base through a green bond was fairly important," says Rachelle Rijk, head of funding and risk management at Obvion.
The issuer determined the "greenness" of investors through a two-step process.
Firstly, it looked at the principles-based socially responsible investment (SRI) activities the investors take, such as launching a dedicated green bond fund. It then looked at any SRI initiative the investor was a member of, such as the Principles for Responsible Investment (PRI).