Green, Social and Sustainability Bond Awards 2019

Award for innovation - use of proceeds: Nippon Yusen Kaisha (NYK)

Deal highlights:

Issuer: Nippon Yusen Kaisha (NYK)

Size: ¥10 billion

Maturity: 5 years, 24 May 2023

Coupon: 0.29%

Use of proceeds: Clean transportation

External review: Vigeo Eiris

Lead managers: Mitsubishi UFJ Morgan Stanley Securities; Nomura Securities

Credit rating: A from Japan Credit Rating Agency

Other highlights/notable features: First green bond by a shipping company

NYK pioneers with world's first shipping green bond

NYK was the first shipping company to issue a labelled green bond, which was lauded as "a model case for green bond issuance in fiscal year 2018" by Japan's Ministry of the Environment.

The shipping company uses the net proceeds from the issue to finance and refinance new and existing projects, including liquefied natural gas (LNG)-fuelled ships, ballast water treatment equipment, sulphur oxide scrubber systems, and LNG bunkering vessels, which provide LNG to LNG-fuelled ships.

Vigeo Eiris, which provided a second party opinion, confirming the alignment of the bond with the Green Bond Principles, said that, as of today, LNG is the best available option to reduce emissions at full scale in the global shipping industry, especially for long-distance navigation.

It opined that the bond has a 'moderate' level of sustainability, as LNG fuel does not have the highest greenhouse gas emission reduction potential compared with other fuels and energy sources to achieve long-term targets of the industry.

The order book received strong demand from Japanese investors, reaching a combined total of ¥26 billion ($233 million). Yuichi Shirane, deputy manager of NYK's corporate finance team, said the issuance helped to expand its investor base, with 80% of new investors compared to a non-green bond issued in the previous year.

NYK will also participate in a shipping industry working group of the Climate Bonds Initiative, which will formulate evaluation criteria for green bonds issued by shipping companies.