03 May 2016
Dutch lender ING Bank impressed investors when it issued its inaugural green bond, in one of the most oversubscribed deals of the year.
The bank launched the $1.33 billion, dual-currency green bond in November 2015, just ahead of the UN Summit on Climate Change, in December.
"The scale and popularity of this bond is a testament to the appetite for sustainable investment products and the confidence that investors have for our approach," says Leonie Schreve, global head sustainable finance at ING Bank.
The five-year, no-grow €500 million tranche priced at 58 basis points above mid-swaps, 12 basis points tighter than initial pricing thoughts, and was 2.7 times oversubscribed.
The three-year $500 million tranche was upsized to $800 million and priced at 90 basis points above treasury. It was 6.7 times oversubscribed and saw 'significant tightening' from its initial pricing thoughts of 105 basis points above treasury.
Despite being oversubscribed, the issuer allocated most of the bond to green and socially responsible investors, who bought 70% of the euro tranche allocations and 80% of the dollar tranche, helping ING diversify its investor base.
"By having a solid, well defined and verified green bond framework – a structure that was highly appreciated by investors – the bond achieved good diversification and solid placement," says Samantha Sutcliffe, a senior advisor for climate financial solutions at SEB, which was joint lead manager for the deal alongside Citi, Crèdit Agricole and Lloyds Bank. ING Bank was sole structuring agent for the deal.
"The large number of green investors participating in the transaction is a true testament to growing integration of climate awareness across financial mandates globally."
While most green bonds issued by commercial banks have been for refinancing, ING also committed to using 20% of the proceeds for new green lending.
The refinancing part of the bond was used for projects eligible under ING's green bond framework in five key areas:
- Renewable energy, including offshore and onshore wind and solar (41%);
- Green commercial real estate (35%);
- Low-carbon transport (16%);
- Water (2%); and
- Waste (5%).
The 20% used for new loans will be used to finance projects under the same framework.
ESG ratings agency Oekom provided a second opinion on ING Bank's green bond framework, which gives a breakdown of how proceeds were allocated in these five areas.
The bank has committed to provide impact reports at regular intervals on the individual projects financed by proceeds of the green bond, based on data from environmental research company Sustainalytics.
The bank's green bond also commits to auditing its use of proceeds annually.
"The large number of green investors participating in the transaction is a true testament to growing integration of climate awareness across financial mandates globally" - Samantha Sutcliffe, SEB
The bank's current auditor, EY, will provide assurance that the proceeds for the first year complied with bank's green lending framework. KPMG will provide assurance in subsequent years, when it takes over as the bank's auditor.
"ING has committed to a high level of transparency on use of proceeds complemented by a number of specific impact metrics, which impressed investors," says SEB's Sutcliffe.
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The robustness of the bank's green bond framework allowed ING, which was already the largest bank issuer of 2015 with its first bond, to issue another $50 million green bond the following month.
Before issuing, the bank analysed its entire loan book, again with the help of Sustainalytics, to allow it to come up with an internal scorecard measuring the environmental impact of its loans.
It has used this internal scorecard to identify a portfolio of "sustainable" transactions. This portfolio, valued at €23.8 billion, could be refinanced by the bank by further green bonds.
"The €23.8 billion sustainable transitions lending portfolio can now be refinanced through a green funding programme too," says Schreve. "We intend to issue green bonds more regularly, extending the green financing options available to our customers."
|Green Bonds Awards 2016|
|Bond of the Year - corporate||TenneT|
|Bond of the Year - SSA||Nacional Financiera|
|Bond of the Year - municipal||Central Puget Sound Regional Transit Authority|
|Bond of the Year - bank||ING Bank|
|Project bond of the Year||Wind MW (Meerwind)|
|Asset-based bond of the Year||Berlin Hyp|
|Special Award for Innovation (Structure)||Yes Bank / IFC 'back-to-back' transaction|
|Special Award for Innovation (Use of Proceeds)||Schneider Electric|
|Initiative of the Year||The Harmonised Framework for Impact Reporting|
|Personality of the Year||Sean Kidney, Climate Bonds Initiative|
|Biggest Issuer (SSA)||European Investment Bank|
|Biggest Issuer (Corporate)||EDF, Toyota, TerraForm Power|
|Biggest Issuer (Bank)||ING Bank|
|Biggest Issuer (Municipality)||Central Puget Sound Regional Transit Authority|
|Biggest Underwriter||Bank of America Merrill Lynch|