Green bond round-up, 8 November 2017

Channels: Green Bonds, Investors, Policy

China Development Bank (CDB) has revealed plans to issue its inaugural international green bond.

The state-run bank's offering will consist of a five-year tranche denominated in US dollars and a four-year euro tranche.

Proceeds from the bond issue could reach $3 billion and will be allocated to green projects within 24 months after issuance, according to the bank. CDB plans to finance and refinance projects such as offshore wind farms, hydro-solar assets, railway infrastructure and water resource management projects.

Pricing of the bond is slated for later this week.

Agricultural Bank of China, Bank of China, BNP Paribas, China Construction Bank, Commonwealth Bank of Australia, Credit Agricole, Deutsche Bank and Standard Chartered Bank are acting as joint lead managers and bookrunners for the US dollar tranche.

CCB Europe, Bank of Communications, Commerzbank, Credit Agricole, Deutsche Bank, HSBC, ING and SEB are joint lead managers and bookrunners for the euro tranche.

CDB had issued more than CNY 15 trillion ($2.26 trillion) of debt as at the end of October, with over CNY 8 trillion outstanding.

Ottawa issues Canada's first municipal green bond

The City of Ottawa has pioneered Canada's entry into the municipal green bond market with a C$102 million ($80 million) issue that priced at 97 basis points over federal government bonds.

Rated AA by S&P Global and Aaa by Moody's, the bond has a 30-year tenor, the longest of any Canadian issue, and carries a coupon of 3.25%.

Lead underwriters on the deal were RBC Capital and TD Securities

Proceeds from this issue will be used mainly for a light rail transport project, although the second opinion provided by Sustainalytics says that projects in renewable energy, pollution prevention and control, energy efficiency, sustainable management of living natural resources, sustainable water management, clean transportation, climate change adaptation and green buildings, will also be eligible.

Inaugural issue expected from Korea Electric Power

Korea Electric Power (Kepco), the largest electricity utility in South Korea, is planning to issue a $500 million green bond, according to local press reports.

The proceeds are likely to be used in part to develop renewable power plants, according to the BusinessKorea website. The country has set itself an ambitious target of boosting its renewable power capacity to approximately 33GW by 2029 from 7GW in 2015.

Kepco could not be reached for comment.

If, and when, the utility comes to market, it will be the fourth Korean issuer of green bonds, following Korea Export-Import BankHyundai, Korea Development Bank, and Hanjin

BNG Bank launches its third sustainability bond

Bank Nederlandse Gemeenten (BNG Bank) has returned to the market with its third sustainability bond. The €750 million ($870 million), seven-year bond has a coupon of 0.2%. Orders exceeded €1.1 billion within 40 minutes, allowing the spread to narrow to 25 basis points below the mid-swaps rate.

The biggest investors were predominantly central banks and other official institutions, who took 42% of the allocation, banks bought 25% and asset managers 22%. Some 27% of the investors were from Asia, with Benelux buyers taking 17% and Germans 15%.

Previous sustainability bonds from the public sector bank were issued in 2014 and 2015. In July this year, BNG also issued a €1 billion social bond to support housing associations.

The proceeds of the latest bond will be directed to 'best-in-class' sustainable municipalities, as determined by the Telos Institute of Tilburg University, which helped BNG develop its sustainability bond framework.  Sustainalytics has given a second opinion confirming that the framework aligns with the Sustainability Bond principles 2017.  

Lead managers on the bond were Bank of America Merrill Lynch, Rabobank and Credit Agricole CIB.

ASEAN aims to go green with new bond standards

Capital market regulators in southeast Asia have opened the door for more green finance in the region with the launch of new green bond standards to drive sustainable investments.

The ASEAN Green Bond Standards were launched at the ASEAN Capital Markets Forum (ACMF) held today in Malaysia. They are based on the Green Bond Principles developed by the International Capital Markets Association (IMCA), but tailored to meet the needs of the region.

ASEAN is the association of southeast Asian nations comprising Myanmar, Thailand, Cambodia, Singapore, Indonesia, Laos, Vietnam, Malaysia, Philippines and Brunei Darussalam.

Ranjit Ajit Singh, chair of ACMF, said: "We need to support efforts to protect the environment and the ASEAN Green Bond Standards will help in the allocation of resources towards climate friendly investments."

ACMF's definition of ASEAN Green Bonds includes sukuk which comply with the ASEAN Green Bond Standards as well as the relevant laws and requirements applicable for the issuance of Islamic bonds or sukuk.

Martin Scheck, CEO of ICMA, said: "We welcome the alignment of AGBS with the Green Bond Principles, representing voluntary international guidelines that recommend transparency and disclosure, and promoting integrity in the green bond market."

Morocco publishes guidelines for green bonds

The Moroccan Authority for Capital Markets (AMMC) has published a framework for issuing green bonds.

AMMC's Green Bonds Guidelines could provide the foundations for a sovereign green bond issue, according to analysts.

The 19-page document states that AMMC "does not take a position on the greenness of the bond", but verifies that the conditions of the offering have been reviewed by independent third parties. This process is essential in order to, among other factors, "protect the reputation of the issuer against potential allegations of greenwashing", according to the document.

The adoption of recognised standards during the preparation of the green bond proposal is beneficial, and reduces verification costs and time, as well as improving the credibility of the issue, AMMC said.

So far only Poland, France and Fiji have issued sovereign green bonds, although Nigeria is expected to become the first African nation to join the market before the end of 2017.

Barclays's €500m green bond marks first for UK banks

More than half of the investment (56%) in Barclays' €500 million ($579 million) green bond, issued this week, came from asset managers, with another 22% coming from insurers or pension funds according to the UK-based bank.

The order book closed at €1.85 billion, with the majority of investment coming from Central and Western Europe. 27% came from Germany, Austria and Switzerland combined, 22% from France, and 19% from the UK & Ireland, while 15% was from investors in Southern Europe, and 7% each from the Nordics and Benelux regions.

The green bond is the first issued by a UK bank to finance UK assets.

Proceeds from Barclays' five-year notes, which will settle on 14 November and have a fixed coupon of 0.625% paid annually, will be used to finance or refinance mortgages on residential properties in England and Wales.

Carbon Trust, a UK non-profit organisation, provided a second party opinion on the green bond, which confirmed its alignment with the International Capital Markets Association's Green Bond Principles 2017. It is understood to be the first time the organisation has provided an opinion on a green bond.

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Graham Cooper, Michael Hurley, Marine Durrieu, Nick Roumpis