07 April 2017
Poland's upsized €750 million ($798.74 million) bond was the first ever sovereign green bond.
"The market of green financing is growing rapidly and, certainly, we would like to be an inherent part of it"
Piotr Nowak, Ministry of Finance, Poland
The bond was originally expected to raise 500 million, but this was increased due to investor demand.
Poland passed a law allowing the proceeds of the bond to be ring-fenced in a green cash account, and set up a committee to oversee the use of proceeds.
"That the law has been changed and approved by parliament shows very strong support in the Polish establishment," says Odilbek Isakov, director of debt capital markets at HSBC.
He also noted that other countries may have to adopt a similar policy.
Issuer: Republic of Poland
Deal type: Sovereign
Issuer rating: A2, BBB+, A- by Moody's, S&P Global Ratings and Fitch, respectively.
Governing law: Polish
Lead managers: HSBC, JP Morgan and PKO Bank Polski
Legal advisor to issuer: White & Case
Tenor: Five years
Spread: 48 basis points over the five-year, euro, mid-swap rate
Date of issue: 12 December
Use of proceeds: Renewable energy – including manufacture of components of renewable energy technology, clean transportation (excluding fossil fuel transport) – investments in rail infrastructure, sustainable agricultural operations, sustainable forests management, national parks management, reclamation and remediation of contaminated land
External assessment: Sustainalytics
Highlights: First ever sovereign green bond
"It is the first time that we have found a way of linking a government balance sheet, which is much more complex and requires a different structuring approach, with the ICMA Green Bond Principles," said Ulrik Ross, the then global head of public sector and sustainable debt at HSBC, which was the sole green structuring advisor.
Some industry analysts have predicted 2017 will be the year of the sovereign green bond, with Poland's issue soon followed by a €7 billion bond from France.
Meanwhile, Poland said it will look to be a regular issuer.
"Our aim is to issue green bonds with some degree of regularity. Of course, such transactions are contingent on many different conditions, but our intention is not to do a one-off exercise," says Piotr Nowak, undersecretary of state, Ministry of Finance of Poland. "The market of green financing is growing rapidly and, certainly, we would like to be an inherent part of it."
The issue caused a surprise not only as both France and Nigeria were deemed to be much closer to issuing, but also because environmental policy and the work the government has been doing," countered Isakov. "It's a great way of showing such commitment to environmental projects [and] making sure the government departments are implementing these green projects."
The proceeds of the Luxembourg listed bond will be spent on projects outlined within the country's green bond framework, which has six eligible sectors:
- Renewable energy
- Clean transportation (excluding fossil fuel transport)
- Sustainable agricultural operations
- National parks
- Reclamation of heaps (rehabilitation of landfills)