Industrial and Commercial Bank of China's (ICBC) inaugural green issue won the approval of Western investors for its plans to finance projects that form part of China's vaunted Belt and Road initiative.
Issuer: Industrial and Commercial Bank of China (ICBC)
Size and tenor: €1.1 billion 3-year floating rate, $450 million 3-year floating rate, and $400 million 5-year fixed rate
Coupon: 3 month Euribor +55bps; 3month Libor +77bps; 2.875%, respectively
Date of issue: September 2017
Deal type: Senior, unsecured, drawdown from MTN programme
Use of proceeds: Sustainable transport (subway, light rail, bus rapid transit), water and wastewater infrastructure, and renewable energy generation and transmission and energy efficiency products or technology.
External assessment: Cicero (dark green), Zhongcai Green Financing and CBI
Rating: A1 from Moody's
Managers: BNP Paribas; Citigroup; Crédit Agricole; HSBC;ICBC; Merrill Lynch; SEB; Société Générale; UBS
Listed: Luxembourg Stock Exchange
Highlights: First green bond to finance Belt and Road projects; ICBC's inaugural green bond
The "new Silk Road" will see close to $1 trillion spent on opening up a trading route between the East coast of China through Asia into Europe.
The proceeds of this benchmark-sized, dual-currency deal, which raised some $2 billion, include the construction or upgrade of subway, light rail and bus routes, as well as renewables.
Whereas many Western investors are sceptical about the green credentials of Chinese green bonds, some of which allow the use of clean coal, this issue employed three layers of assessment to help allay fears.
The Centre for International Climate and Environmental Research in Oslo (Cicero), in its first assessment of a Chinese deal, awarded it a "dark green" status, and a Chinese agency called Zhongcai Green Financing also gave its stamp of approval and certified it as having met the Climate Bonds Standard.
The order book received solid demand from a diverse investor base across Asia, Europe and the US, which enabled ICBC to tighten the issuance spread by 15 to 20 basis points across the three tranches, with the combined books reaching $4.7 billion.
The book saw strong demand from the European investor base, mainly from French, German and Austrian investors, particularly for the three-year tranches.
ICBC hopes that its inaugural green bond issuance may have set a positive precedent for the promotion of sustainable infrastructure investment along the Belt and Road route by governments and developers.