Headline story

The Green Bond Pledge is now live,  launched at our Annual Conference by climate chief Christiana Figueres. Signatories are being sought from Cities, municipal authorities and corporates. $1trillion in green bonds by 2020 is the goal.  
 

Other highlights:

• Chinese entrants dominate March list by number.
• Landsvirkjun kick starts Iceland’s green bond market.
• Growthpoint Properties is the first corporate green bond listed on the JSE. Prologis becomes the first green bond issuer from the logistics sector worldwide.
• US muni issuance grows with New York State Energy Research and Development Authority’s Certified Climate Bond and San Rafael Joint Powers Financing Authority’s green bond.
• More on Certified Climate Bonds from Westpac and Ivanhoé Cambridge & Natixis Assurances.
• March trends: Low Carbon Transport takes the lead in proceeds allocation, followed by Renewable Energy. Sovereigns keep driving issuance among issuer types.

​

Click here to see the full list of new and repeat issuers in March

At a glance

Among the debut deals is the first green bond from an Icelandic issuer and the first from a logistics company. But it is the Kingdom of Belgium and the Republic of  Indonesia green sovereigns – analysed in our previous market blog– that top the rankings as the largest bonds accounting for an astounding 56% of March issuance to date.

As of 28^th March, the month has also seen the highest green issuance so far this year, totalling USD12.1bn – more than doubling February volume (including Swedbank’s green bond deal which has priced and is closing on the 29^th). The twelve new issuers account for 72% of volumes so far, a reversal on February which saw very high volumes contributed by repeat issuers.

Use of proceeds became more diversified compared to previous months, with Belgium’s Green OLO boosting allocations to Low Carbon Transport to 50% and the remaining half spread across all other sectors.

>See the full list of new and repeat issuers here.

Certified Climate Bonds

New York State Energy Research and Development Authority (USD18.5m) issued a 16-year US Muni green bond. This is the first US green bond being certified under the renewable energy sector criteria of the Climate Bonds Standard and the third sub-sovereign/agency certified issuer in the State of New York after New York State Housing Financing Agency and the NY MTA.

Proceeds will be allocated to loans for residential solar PV for eligible applicants to the NYSERDA’s Green Jobs – Green New York program for one-to-four family residential structures. First Environment provided the Independent Verification Statement.
 

Ivanhoé Cambridge and Natixis Assurances(EUR480m/USD558m) put in place a senior secured loan in November 2017 and certified it in February 2018 under the Climate Bonds Standard for Low Carbon Buildings (Commercial), making it the first European green loan to be certified under the commercial buildings criteria. Oekom provided the Post-issuance Verification Report.

In another first, the Canadian real estate investor and French insurer will apply the loan’s proceeds towards the construction of the DUO towers in Paris, rather than refinance an existing property. The project comprises two towers with office space, shops, hotel and restaurants. The buildings will be built to comply with the Effinergie+ label and to obtain a HQE Exceptional and LEED Platinum certifications.
 

Westpac Banking Corporation (AUD117.3m/USD91m) has continued the Australian market’s best practice model of certification issuing a 5-year Certified Climate Bond in a private placement. Westpac issued its first Certified Climate Bond in 2016 and is eligible for Programmatic Certification under the Climate Bonds Standard. Eligible assets identified under the bank’s green bond framework cover Low Carbon Transport, Low Carbon Buildings, Solar and Wind Sector Criteria. Proceeds will be allocated to renewable energy projects, low carbon commercial property and rail transport.

EY provided past Post-Issuance Verification Reports. The one-year post-issuance report is currently due.

New issuers

Beijing Capital Group (USD603m), issued a green bond in two tranches of USD500m (3-year tenor) and CNY630m (2-year). This is the first offshore green bond issued by a Chinese corporate that is denominated in two currencies. Proceeds will finance water & waste management, air pollution control, low carbon transport, sustainable agriculture and green buildings with minimum certification thresholds of LEED Gold, Silver BREAAM Plus, China Green Building Standard and other equivalent labels. Sustainalytics provided a Second Party Opinion.

Climate Bonds view: For sustainable agriculture, Sustainalytics notes that the framework does not explicitly exclude genetically modified (GM) crop seeds from their definition of sustainable farming methods and prompts the issuer to ensure that proceeds don’t finance this type of projects. We include this bond to our database for now as GM is not automatically excluded from either international green bond definitions or China’s domestic guidelines. According to PBoC’s green bond endorsed projects catalogue, GM projects are permissible as long as they are in compliance with the Safety Management Regulation of Agricultural Genetically Modified Organisms (GMOs).
 

Growthpoint Properties (ZAR1.1bn/USD93m), South Africa’s largest real estate investment trust (REIT), issued a three-tranche green bond deal with a 10-year term. Growthpoint Properties is the first South African corporate to issue a green bond on the Johannesburg Stock Exchange. The REIT will mainly finance office buildings within its THRIVE Platinum Portfolio, which includes Growthpoint’s highest rated assets, but retail and industrial buildings that meet the eligibility criteria may also be financed. Proceeds will be allocated only to properties which have obtained at least a Four-Star Green Star SA rating on a scale from one to six. The deal benefits from a  KPMG assurance report.  

Climate Bonds view: It’s encouraging to see to see South Africa’s pool of green bond issuers expanding with new issuer types coming to market and we hope to see more of the country’s corporates following suit. We also note that in our 3^rd Annual Green Bond Pioneer Awards last week the JSE was recognised for introducing a green bond list and listing guidelines in 2017. Well done!

We haven’t analysed the Green Star SA rating tool before, so let’s take a closer look. The rating system covers several categories that evaluate the environmental performance of a commercial property, including energy, emissions, materials and land use. Each category is assigned a percentage score and category weighting factors are then applied to calculate the final rating. The six levels of the scale also indicate the weighted score range and a recognition parameter of the rating level achieved (acknowledgement, best practice, South African Excellence, World leadership). We note that a Four-Star Green Star SA level stands on the middle to upper range of the rating system, which is good. What would be even better is seeing issuers achieving commercial property certifications on the highest end of the scale.

Huarong Xiangjiang Bank (CNY2.5bn/USD396m), China, issued a 3-year bond, its debut green bond, on China’s interbank bond market. The green bond framework states proceeds will be allocated to clean energy, energy saving, pollution prevention and adaptation, and all the categories are eligible under PBoC’s green bond project catalogue. The issuer has disclosed examples of projects to be financed by this bond, including dredging to maintain the holding capacity of a reservoir and construction of sewage treatment infrastructure. EY provided a Second Party Opinion for the deal.

Climate Bonds view: We strongly support clarity on the use of proceeds for each bond issued – particularly in the case of banks and local governments, who may have wide-ranging green bond frameworks. Ideally, transparency around funded projects should be a feature of both issuance disclosure and post-issuance reporting.
 

Landsvirkjun (USD200m), the National Power Company of Iceland, became the first Icelandic green bond issuer with its 10-year, four-tranche private placement green bond deal. The proceeds will fund the development of the 900MW Theistareykir geothermal station and the 100MW expansion of the Burfell hydropower plant.

More broadly, the green bond framework lists geothermal, hydropower and wind as eligible assets. Geothermal energy projects must comply with a direct emissions upper limit of 100g CO²/kWh. Hydropower projects must have a capacity of up to 100MW and annual emissions of less than 4g CO²/kWh to be eligible. The deal benefits from a Sustainalytics Second Party Opinion.

Climate Bonds view: We identified Landsvirkjun as a candidate for green bond issuance in our Nordic and Baltic Public Sector Green Bonds report earlier this year and are very pleased to see it come to market. Both geothermal and hydro eligibility criteria reflect best practice in the market, setting a high benchmark for future issuers.
 

Prologis European Logistics Fund (EUR300m/USD369m), the European fund manager of US-based warehouse REIT Prologis, issued a 10-year green bond. It is the first logistics investor to enter the green bond market. Funds will be allocated to green buildings, solar panels and wind related assets. The eligibility criteria require properties to have obtained LEED, DNGB, BREEAM, HQE or CASBEE building certification, with the thresholds set from the middle to the high end of the scale. In its Second Party Opinion, Sustainalytics notes that imposing certification criteria for large and potentially energy intensive properties will have a positive environmental impact.

Climate Bonds view: Promoting high energy performance in large logistics units is important for achieving lower property emissions overall. We agree with Sustainalytics that setting certification requirements in the framework is aligned with good practice, but we hope to see certification thresholds tightened further in the future.
 

San Rafael Joint Powers Financing Authority (USD45.5m), California, closes a 16-year green US muni bond on March 28^th. Proceeds will be allocated to a new public safety centre and two new fire stations. All three buildings have received a LEED Gold certification. The prospectus lists building elements that will be present within each project, including recycled content of building material and solar power to reduce electrical grid demand.

Climate Bonds view: This is the third California US muni which has come to market this year so far. The preliminary prospectus offers a good level of disclosure on the proceed allocation and a LEED Gold certification is on the highest end of the scale. Although the issuer did not seek for an external review, we see an increasing trend in US Muni green bonds benefiting from Second Party Opinions.
 

Shanghai Lingang Economic Development Group (CNY1bn/USD160m), China, issued a two-tranche green bond. Proceeds will be used for the construction of three office buildings at Shanghai Lingang industrial park, and all three are designed to achieve China Green Building Evaluation 2-Star Label. The expected environmental and climate impact of the bond includes: avoidance of 2305t of standard coal equivalent per year, water savings of 2378m³ per year, and use of 425k tons of recycled materials. CCXI provided an external review.

Climate Bonds view: The China Green Building Evaluation standard rates buildings against a range of criteria in six categories: land savings and outdoor environment, energy savings, water savings, materials savings, indoor environmental quality, and operations and management. The standard is administered by the Ministry of Housing and Urban-Rural Development and is considered as one of the most widely used green building rating systems in China. We consider the intended use of proceeds on green buildings is aligned with our definition.
 

Suntien Green Energy (CNY590m/USD93m), China, is engaged in planning, development and operation of wind farms as well as the sale of electricity. Proceeds from its green bond will finance or refinance 15 wind farms in China. In the bond prospectus, the issuer disclosed the expected climate impact of two eligible wind farms. For example, a wind farm in Hebei province has a total installed capacity of 200MW and will deliver positive impact by avoiding 180k tons of standard coal equivalent, 1010k tons of CO2 and 42t of SO2. EY provided an external review.

Climate Bonds view: We consider this bond a good example of the level of disclosure we prefer. Not only is the intended use of proceeds fully aligned with the 2^oC target for global warming, but the issuer provided very detailed disclosure on the name and location of eligible projects as well as expected impact.

Tianjin Rail Transit (EUR400m/USD496m), China, issued a 4-year green bond. Proceeds will be allocated to renewable energy, low carbon transport, energy efficiency and pollution prevention. Eligible projects falling under Transport include the construction and maintenance of rail tracks, upgrade of electric line network, upgrade of signalling system to improve capacity and reliability, as well as towards adopting technologies to increase air circulation and air filtration, set up noise barriers, and improve efficiency of rail turnouts. Sustainalytics provided a Second Party Opinion.

Climate Bonds view: This is the first green bond issuance from Tianjin Rail with all eligible projects related to the construction or efficiency improvement of rail infrastructure. Although noise barriers may not have significant positive climate impact, we included this bond to our database considering it’s an essential part of the urban rail system and its role in mitigating noise pollution.
 

Vellinge municipality (SEK200m/USD24m), Sweden, issued a 5-year green bond. Proceeds can fund a range of eligible categories including sustainable bioenergy, waste management, low carbon transport infrastructure and property, according to its green bond framework. To be eligible, buildings must use at least 25% less energy per m² Atemp/year than the construction requirements of the National Board of Housing, Building and Planning (Boverket), a minimum certification of Silver Miljöbyggnad or a Green Building certificate from the Swedish Green Building Council. In its Second Party Opinion, CICERO noted that the building criteria are below best practice.

Climate Bonds view: The Vellinge Municipality is one of 13 Swedish local governments which was identified in our Nordic and Baltic Public Sector Green Bonds report as potential green bond issuers. We agree with CICERO that the building eligibility criteria could be more stringent but hope to see proceeds allocated to green buildings exceeding the minimum levels when the municipality starts reporting on use of proceeds.

>See the full list of new and repeat issuers here.

Repeat issuers

• Arise: SEK650/USD79m
• California Infrastructure and Economic Development Bank (Ibank): USD449m
• EIB: AUD200m/USD157m (tap), EUR250m/USD307m (tap)
• Iberdrola: EUR700m/USD859m
• Modern Land: USD350m
• Province of Quebec: CAD500m/USD394m

Pending and excluded bonds

We only include bonds with at least 95% proceeds dedicated to green projects that are aligned with the Climate Bonds taxonomy in our green bond database. Though we support the Sustainable Development Goals overall and see many links between green bond finance and specific SDGs, the proportion of proceeds allocated to social goals needs to be no more than 5% for inclusion in our database.

• Kungsleden AB (SEK2bn/USD244m)– Pending: we are waiting for additional information on proceed allocation to be made available by the issuer.
   
• Land NRW (EUR1.8bn/USD1.9bn)– Excluded: sustainability bond with 82% of proceeds to be allocated to sustainable development projects, including education and healthcare. Only 18% of proceeds are to be allocated to projects aligned with the Climate Bonds Taxonomy.
   
• Cassa Depositi e Prestiti (EUR500m/USD614m)– Excluded: social bond issued in November 2017. Proceeds to be allocated to SMEs to support Italian employment, economic growth in areas affected by natural disasters, and economically underperforming regions.
   
• African Development Bank (EUR500m/USD614m)– Excluded: social bond issued in November 2017 to finance a wide range of projects, including education, health and financial inclusion.
   
• Bayerische Landesbodenkreditanstalt (EUR500m/USD614m)– Excluded: social bond issued in November 2017 as part of BayernLabo’s Social Bond Programme. Proceeds will refinance loan programmes for low-interest loans for private housing and modernisation of rental housing, as well as the company’s municipal subsidy loan programme.
   
• Danone (EUR300m/USD370m) -  Excluded: social bond with proceeds allocated to projects within five eligible categories: research & innovation of advanced medical nutrition, social inclusiveness, responsible farming and agriculture, entrepreneurship financing and quality healthcare and parental control.

Trends of the month

Green bonds in the market

• Credit Suisse: USD500m – roadshow started 12^th March
• Swedbank: EUR700m – priced, closes 29^th March

Investing News

On 16^th March Amundi and IFC successfully launched the Amundi Planet Emerging Green One, the world’s largest green bond fund focused on emerging markets. The fund closed at USD1.4bn, attracting a wide range of investors including pension funds, insurance companied, asset managers and development banks. The goal, however, is to reach USD2bn over the fund’s lifetime to support climate-aligned investments and stimulate green finance development in emerging markets. The fund will also provide technical assistance programme to promote best-practice standards in EM’s green bond markets. 

BMO Global Asset Management has launched a responsible Euro corporate bond fund, following increasing demand for ESG-focused funds.

UK-based Gore Street Energy Storage Fund aims to raise £100m from its initial public offering on the London Stock Exchange.

President Macron said France would extend an extra EUR700m (USD861m) through loans and donations by 2022 for solar projects in emerging economies.

The UK Government joined forces with the Lima Stock Exchange and contributed£22,900 towards the development and publication of a Guide to Green Bonds in Peru, which presents the basic principles that must be met in order to issue green bonds to finance projects for the mitigation and adaptation to climate change.

The China-UK Green Finance Taskforce has included the development of an international ABS market based on Chinese green loans as one of the four priorities.

Lots of Green Gossip

Auckland Council, New Zealand, plans to issue NZD green bonds later this year to fund infrastructure projects. 

Swedish real estate company Jernhusen has released its green bond framework in preparation for its first green bond issue and has obtained a Second Party Opinion from Sustainalytics.

Californian company Climatic Energy is planning to use credit enhanced green bonds to retrofit commercial buildings.

The first publicly placed Commercial Property Assessed Clean Energy (C-PACE) ABS is expected to come to market in May, according to Environmental Finance. The first C-PACE ABS was issued by Greenworks (USA) in September 2017, but was privately placed,  unlabelled and not rated.

Massachusetts Governor Charlie Baker submitted a USD1.4bn bond bill, with USD300m that will be directed to climate mitigation and adaptation projects.

Belarus’ Deputy Economy Minister Dmitry Matusevich stated the country’s interest in introducing green financial instruments that support the development of its green economy.

Reading and Reports

The UK Green Finance Task Force Report is hot off the press! 

The Loan Market Association launched the Green Loan Principles (GLP) on 21 March. They reflect the Green Bond Principles (2017) and provide a high-level framework for the green loan market. In the future, we hope to see a stronger push towards disclosure of external reviews, harmonisation of reporting standards and convergence of green project/asset documentation.

S&P reports on green bond issuance from top 200 banks.

The Transition Pathway Initiative published a study assessing how the business strategies of oil and gas companies align with the Paris Agreement’s emission reduction targets.

Climate Bonds Reports: 

“Korea State of the Market Overview and Opportunities”, launched at our conference, explores Korea’s green bond market and prospects for development.

“Sovereign Green Bonds Briefing”, launched on Monday, focuses on sovereigns, and their key role in growing local markets and meeting national climate targets.

Moving Pictures

Renewable Energy World has a delightful 1:07min clip explaining the Green Bond Pledge and associated 2020 target. Don’t miss it.

‘Till next time,

Climate Bonds

The Climate Bonds team will be in the Americas, Europe & Asia this month, don't miss the chance to hear our experts discussing the future of green finance.

April 2018 Events

See you around.

'Till next time,

Climate Bonds

55 nations participate: Investors have appetite: Emerging markets: Resilient infrastructure: $1tn by 2020 target is real, the Green Bond Pledge is here: Markets should move faster to meet demands from green bond champions  

We know that some of you couldn’t make it to our 2018 Annual Conference, here’s our high level 2-minute takeaway for you

Everyone wants more

From the opening plenary session to the last of the specialist roundtables, investors were asking for more. More quality, investable green product, more action from governments and development of country climate plans, pipeline growth and focus on emerging markets.

The message that the national development and infrastructure directions of China, India and Africa are where green investment expertise must grow and climate capital must flow reverberated throughout proceedings.

Mainstream is outpacing the market

We’ve had over 55 nations represented this year, up a healthy 20% on the 44 nations at our 2017 event. Representation came from investors, emerging markets’ organizations, financial institutions and government bodies.

This diversity of attendees was matched by the depth of discussions that included pricing, proceeds, market behaviors, aggregation and harmonization. The Green Bond Pioneer Awards also mirrored this trend with 15 countries from 6 different continents being officially recognized.

Green bonds are mainstreaming but scale and secondary markets still lag.

The $1tn by 2020 target is real

From its origins post-Paris in 2015 to Marrakesh in 2016 to the six climate leaders clarion call in Nature Magazine and a Mission 2020 milestone in mid-2017 to our 2018 conference, the target is real.

There’s now 32 months to the end of 2020, 3 more COPs and innumerable opportunities for investment decisions to be made.

Expectations are growing that more of the top 100 banks should commence green issuance, announce green lending programs and expand green underwriting.

The largest global emitters being engaged by the Climate Action 100+ coalition will also be drawn in over time as insitutional investors look for green issuance as a part of corporate balance sheets reflecting TCFD, 2 degree compliant business planning and the brown to green transition. 

Christiana Figueres articulated the challenge during COP23 last November:

“A systemic response from global finance is required. Asset owners and managers need to adjust their capital allocations. Banks and corporates need to commence large scale green bond programs. Funding clean energy and green infrastructure to meet NDC goals is the objective. $1 trillion in green finance by 2020 is the performance measure.”  

Which leads us neatly into……

Has your organisation signed the Green Bond Pledge?

The Green Bond Pledge is aimed directly at issuers, cities, governments and corporates with an attendant Investor Statement targeting asset owners and managers.

The Pledge builds on the seminal 2015 Paris Green Bond Statement but has garnered significant new support. Christiana Figueres has been one of the leading voices engaging with global finance since lead up to COP21. Patricia Espinoza, current UNFCCC chief has kept up the momentum, both are backing the Pledge.

Watch for more signatories as the rollout program loops from the London launch to the Global Climate Action Summit (GCAS) in September, to the UN General Secretaries Climate Summit in 2019 to COP25 in Latin America.

You know where this is going: $1trillion in green bonds by 2020, as stressed by Ms Figueres in this interview, is just the start.

Warming up to Adaptation, Resilience, SDGs, you name it….

Discussion on the role of green finance has moved apace with climate science. The leaked IPCC forecast that 1.5 degrees warming will be breached was the latest in a stream of depressing assessments on climate impacts. In contrast to earlier years where green bonds were oftened positioned as part of the mitigation response, recognition is here that adaptation and resilience factors must be embedded on a whole of government basis as well as investment in infrstructure, due diligence, design & use of proceeds.   

The crossover between green bonds and progressing key SDGs and the 2030 Agenda, particularly those centered on sustainable cities, transport, energy and water also came through from various speakers. Look out for a coming blog from Climate Bonds on this very topic.

The Last Word

There’s more to come from our Conference, a host of briefing papers will be available including conference interviews on our YouTube Channel, Twitter,Facebook and Instagram. Follow them for the latest. 

Meantime, a big thank you to our sponsors, media partners and participants who helped make the three days such a success.

‘Till next time,

Climate Bonds

Q1 reflects growth in sovereign and emerging market issuance

Quarterly Highlights:

• USD25.8bn of issuance*
• 71 green bond issues with 11 from Sweden, 10 from China and 9 from the USA
• 52 issuers from 21 countries
• 25 market entrants from 12 countries bring the total number of green bond issuers to 440
• 2 new countries – Iceland and Indonesia – bring the number of “green bond” countries to 47
• 2 new issuers – Indonesia and Belgium – bring the number of sovereign green bond issuers to 6
• March issuance was strong with 27 deals in 10 countries and 17 new issuers (7 from China)

What’s it all about?

Green bond issuance kept a good pace in 2018’s first quarter with 71 green bonds coming from 52 issuers, with preliminary figures reaching USD25.8bn.

USD17.4bn were issued in developed markets, with a third of the volume coming from two Belgian deals: Belgium’s sovereign Green OLO and logistics company WDP’s green bond.

Issuance from emerging markets (including supra-nationals) is increasing, representing 32% of quarterly issuance compared to just 15% in Q1 2017.

Sovereigns played a central role this quarter, accounting for approximately a third of issuance in both developed and emerging markets. This trend is set to continue in the coming quarters.

Download the full report here. 

2017 green bond issue volume revised to USD160.8bn

Our annual numbers for green bond issuance in 2017 have been revised from USD155.5bn to USD160.8bn. The main reasons for the adjustment are summarised by the chart below (see page 2 of the report for more details).

Underwriters League Table

Q1 league table shows JP Morgan, BNP Paribas and ING in the top three spots, with ING appearing on the podium for the first time!

The Last Word

Q1 has shown that 2018 is off to a good start. With big green finance events in the pipeline and the launch of the Green Bond Pledge, there is plenty of opportunity to double the market yearly and meet the imperative USD1tn by 2020 milestone.

The enthusiasm and appetite witnessed at our 2018 Annual Conference last month, along with the increase of sovereign issuance from both developed and emerging economies, make the USD300bn target seem well within our reach.

Download the full report here. 

‘Till next time,

Climate Bonds

*  All charts and analysis are based on preliminary figures for Q1 2018 issuance volume and number of deals, pending the inclusion of Q1 Fannie Mae Green MBS deals and six deals still under assessment for inclusion in the CBI green bond database (see p.4 of the summary for more details on the database inclusion methodology).

Global asset manager is the latest in a group of major European investors to join our Partners network

What's it all about?

AXA Investment Managers (AXA IM) has become the latest global investor to become a Climate Bonds Partner. Partnering with CBI reflects AXA IM’s support for responsible and sustainable practices, green finance and green bond markets.

AXA IM has had ESG policies and RI practices established for almost two decades, receiving accreditation by CIES (a grouping of major French unions) in 2002 and becoming a signatory of the UN PRI in 2007 and developing an active impact investment programme from 2013 in green bonds and alternatives.

Since 2015, AXA IM has had a green bonds expert group, receiving the TEEC label (French Label for the Energy and Ecological Transition) for its Planet Bonds strategy in January 2017, and in March of the same year gaining a Responsible Investor award for Innovation & Industry Leadership.

Who’s saying what?

Matt Christensen, Global Head of Responsible Investment, AXA IM 

​“Green bonds are an effective instrument to address the growing environmental challenges posed by climate change. We believe that providing investors access to green bonds allows them to directly invest in the global transition to a low carbon economy.

Nevertheless, green bonds themselves continue to require rigorous due diligence. Being selective through our proprietary green bond assessment framework is key for us in working to continually raise the market’s integrity and transparency standards. Selectivity is key in ensuring that only the most relevant and impactful green projects receive the necessary financing.

We are very much looking forward to benefiting from the broad research capabilities and expert insight into the issuers of green bonds through collaboration with the Climate Bonds Initiative as well as working together with peers to share best practice, develop key learnings and drive collective progress on green finance.”

Manuel Adamini, Director, Investor Outreach & Partners Program

“France has a deepening green bonds market, having been amongst leading nations for total issuance for several years. The political and financial sector leadership from Paris has been instrumental to this achievement.

AXA IM is a significant global investment management brand that has been active around responsible investing agendas for many years now, also working with its parent company AXA Group on multiple RI initiatives. Building on that strong commitment to sustainable directions for investment and finance, we see many avenues for cooperation.”

The Last Word

Momentum is growing within Europe around green finance as the European Commission’s Action Plan on Sustainable Finance announcement last month reflected. We are keen to work with AXA IM in this encouraging context.

Welcome!

‘Till next time,

Climate Bonds

Climate Bonds publishes the first full report on the French green bond market, providing an overview and discussing opportunities

What’s it all about?

The Climate Bonds Initiative has released a new country report, analysing the latest progress in the French green bond market. 

Commissioned by Lyxor, the report is the latest in a new 2018 series of Overview & Opportunities-based analysis that commenced with the twin Nordic and Baltic Public Sector and Green Bond Markets in the Nordics reports published in February 2017, and the subsequent Korea Climate Bonds Market Report released during our Annual Conference this March.

The report is available in both English and French.

Available for download now.

French market leadership

France boasts one of the earliest domestic green bond markets and in 2017 ranked No.3 in the record year of global green bond issuance behind the US & China.

Issuance commenced in 2012 when three local government bodies issued the first green bonds to fund projects that included green buildings and eco-materials, low carbon transport & transit systems, cycleways, renewable energy, wastewater management and biodiversity (including forest management). 

French issuers are supporting market transparency with an excellent track record in the use of external reviews, global best practice with over EUR3bn of Certified Climate Bonds and a high standards of disclosure in annual green bond reports.

Figure 1: Green Bonds in Europe 

The country’s green bond market has been fuelled by corporate and government-backed issuers since 2013, with a recent push from the state via the landmark Sovereign Green Bond of Jan 2017. We recognised the French sovereign issuance in our 2018 Green Bond Pioneer Awards.

On 9^th April this year, Agence France Trésor (AFT) renewed its commitment by tapping its sovereign Green OAT for a third time for EUR1.1bn as part of the EUR8bn of eligible spending for 2018.

Table: Top 10 French Issuers

Government policies are supportive of climate action

On a policy level, Article 173 of the Energy Transition for Green Growth Law, a ground-breaking piece of legislation introduced in August 2015, has had a resounding impact in Europe. In December 2016, the European Parliament adopted the IORP II Directive, a new regulation that will require pension funds in the EU to account for climate-related risks in their investment strategies.

Furthermore, the French government has embarked on a Big Investment Plan worth EUR57bn, to be implemented during the current 5-year term. It includes EUR20bn for the energy transition. Numerous initiatives have been created to drive market momentum, including asset labelling to increase visibility and Paris EUROPLACE’s Finance for Tomorrow, originally launched in May 2016 as Paris Green & Sustainable Finance Initiative.

Banque de France has started assessing banking risks related to climate change. It's one of the founding members of the Central Banks and Supervisors Network for Greening the Financial System (NGFS), which held its inaugural meeting in Paris in January 2018. French banks have proposed, through the French Banking Federation, a green supporting factor for climate related finance and the concept has been put forward to the European Commission's Expert Group on Green Finance (HLEG).

From the investor side, French institutions have largely integrated the sustainability agenda in their investment strategies, and French asset managers have embraced green bonds with dedicated funds offered by Amundi, AXA, BNP Paribas, Crédit Mutuel and Natixis/Mirova, and a green bond ETF by Lyxor.

The road ahead

• We believe there is significant potential for future growth across sectors and issuers. The report identifies 25 municipalities, departments and regions, 9 government-backed entities and several non-financial corporates in a variety of sectors as prospective green bond issuers.
• A Paris Green Exchange? Eleven stock exchanges have established dedicated green or sustainable bond segments, and the Luxembourg Green Exchange has been a success. Could Paris be next?
• Facilitating market access for SMEs can provide a major boost to green bond issuance. Tax incentives for smaller companies and aggregation platforms for green securitisation are potential growth avenues.

The Last Word

Global green bond issuance needs to double each year from the 2017 record of USD155.5 - now adjusted USD160.8bn - to reach USD1tn green finance milestone by end 2020.

The French Government has been a consistent world leader on climate action. President Macron is continuing on this path and it's having an impact.

French green bonds stakeholders are also at the forefront of green finance and we expect they'll continue making big contributions. 

This combination of political will and investor action has put France in the world's top 3 for green issuance. 

Other G20 & OECD nations should take note. 

Vive la France!Vive la Republique! 

Download the report now.

'Till next time,

Climate Bonds

Disclosure: Organisations named or linked to in this post are Climate Bonds Partners. A full list of Partners can be found here. 

Latest annual conference interviews now on our YouTube Channel. 

Choose your future: Enjoy this lovely little 30sec clip"My mum works at a bank & she issues green bonds". 

Ruurd Brewer from TCX: “Emerging markets, currency risk & hedging.” 2:33secs.

Christiana Figures: “Green Bond Pledge, the 2020 Milestone and green infrastructure” 3:08secs. 

More in the Moving Pictures section.

Highlights:

• 17 green bonds totalling USD6.3bn have been issued so far this month
• ABN AMRO issues first green bond Certified under the Marine Renewable Energy Criteria of the Climate Bonds Standard
• First Belgian logistics real estate company enters the market
• Republic of France taps Green OAT, increasing the bond size to almost EUR11bn
• 7 new issuers from 2017 reclassified and included in our green bond database following 2017 reconciliation analysis
• Updated Q1 2018 figures including Fannie Mae’s Green MBS deals: USD4.5bn for Q1

Go here to see the full list of new and repeat issuers in April

Q1 GB now at USD30.7bn

Fannie Mae has published its list of Green MBS deals for Q1 2018, taking our revised quarterly figures to a total of USD30.7bn, just 11% below Q1 2017 volume. Proceeds allocations are driven by Energy and Buildings, both at 29%, and Transport (22%). Fannie Mae’s issuance pushed the US to the top of quarterly country rankings at USD6.2bn, followed by Belgium (USD5.7bn) and China (USD2.5bn).

>The full list of new and repeat issuers here.

Certified Climate Bonds

ABN AMRO(EUR750m/USD930m) is making waves, returning to the market for the third time issuing a 7-year Certified Climate Bond. This time it’s the very first green bond to be certified under the new Marine Renewable Energy Criteria of the Climate Bonds Standard! The new Criteria was launched in late 2017 and there’s more issuance on the way.

Proceeds of the deal will finance mortgage loans for energy-efficient residential buildings and four offshore wind projects – a Netherlands North Sea project of 150 turbines and three Germany North Sea projects of 80, 54 and 31 turbines.

Eligible categories under the Green Bond Framework also include commercial real estate loans for energy efficient/sustainable buildings, loans for buildings energy efficiency upgrades of at least 30%, renewable energy and loans or investments for circular economy projects/assets.

Oekom provided the Pre-Issuance Verification Statement.

New issuers

WDP (EUR100m/USD12m), Belgian logistics real estate company, issued an 11-year US private placement. This is the first green US private placement from a Belgian company and the second green bond from the logistics sector. Proceeds are earmarked for onsite renewable energy, green buildings with threshold certification levels of BREAM “Very Good” or LEED “Gold”, recycling, clean transport infrastructure and water management. In its Second Party Opinion, CICERO assessed the green buildings category at “Medium to Light Green” partly because the eligibility criteria do not specify energy efficiency thresholds (in addition to certification levels).

Climate Bonds view:  We welcome increased issuance from the logistics sector. Setting green building certification requirements on the higher end of the scale is best practice. We agree with CICERO that combining this with minimum thresholds for energy efficiency improvements would improve the buildings’ green credentials. 
 

Klövern (SEK900m/USD107m), a Swedish property company, issued a 4-year green bond to finance new and existing building projects. The deal benefits from CICERO’s Second Party Opinion. Certification thresholds for new constructions and major renovations are set at Miljöbyggnad Silver, LEED Gold, BREEAM SE Very Good, or BREEAM Very good, combined with energy performance improvements of at least 25% of Swedish building regulation. Building refurbishments must also yield an energy performance of under 100 kWh/m² or at least 25% reductions in energy use. The green bond framework lists a range of project types that qualify under this category, such as onsite renewables, LED lighting, assets related to clean transport such as electric charging stations, recycling, and terrestrial and aquatic biodiversity conservation.

Climate Bonds view: Green building certification thresholds and minimum energy efficiency improvements of 25% are aligned with best practice.
 

Jernhusen AB (SEK500m/USD59.5m), a Swedish real estate company focused on the transport sector, issued a 5-year green bond. Proceeds will be allocated to renewable energy, new/existing green buildings with certification levels of Miljöbyggnad “Gold”/ “Silver” or equivalent, freight and passenger transport infrastructure and waste management. The deal benefits from Sustainalitycs’ Second Party Opinion.

Climate Bonds view: Miljöbyggnad “Gold” is the highest certification and aligns with best practice in the market. We hope to see improvements in existing buildings matching this ambition level going forward.
 

Pace Funding Group (USD50m), California, issued a PACE ABS secured on a pool of residential PACE loans which finance property improvements related to energy efficiency, water efficiency and renewable energy installations.

Climate Bonds view: It’s good to see the pool of PACE ABS issuers expanding. It would be good to see PACE ABS issuer commit to ongoing impact reporting.
 

Zhejiang Huayou Cobalt Co (CNY620m/USD99m), China’s largest cobalt chemicals producer, issued a 3-year green private placement bond. According to the news release, all proceeds will be used for the recycling of batteries and cobalt waste, efficiency improvement of wastewater treatment and comprehensive utilization of renewable resources. The deal benefits from an Assurance report from Pengyuan Credit Rating, however the document is not publicly available.

Climate Bonds view: Waste recycling and water treatment are aligned with both PBoC’s Green Bond Project Catalogue and the Climate Bonds Taxonomy. However, we do encourage issuers to disclose detailed project information to increase transparency.
 

Zhuhai Huafa Comprehensive Development (CNY1bn/USD159m), China, issued a 5-year green bond that benefits from an Assurance report from Lianhe Equator (not publicly available). 94% of proceeds will be used to finance and refinance a commercial building located in the coastal city of Zhuahai. It has received the China Green Building Evaluation Standard 2-Star certification. The other 6% will be used to build an urban wetland park, which is designed to absorb excess rainfalls during storms and reduce flooding in cities.

Climate Bonds view: In China, 30 cities have signed up to the Sponge Cities Initiative which aims to ensure that 80% of each city features enough wetlands to absorb 70% of storm water runoff by 2030.  With the massive scale of urbanisation happening in China, municipalities need to take climate resilience into consideration for new urban infrastructure at design stage. 

We hope to see more green bonds issued by the China’s local government, water authority, or state-owned enterprise in the future.
 

Sihui Rural Commercial Bank(CNY100m/USD15.93m), China, issued a 3-year green bond. Funds are to be allocated to 5 waste recycling projects with design recycling capacities of 1 million tons of waste metal, 2000t of electrical motor, 30m tons of waste cable, 1460t of plastic and 4000t of aluminium respectively. The issuer also intends to finance the purchase of 36 public buses, flood control and air pollution prevention. Golden Credit provided the Assurance report.

Climate Bonds view: Although we see metro or light rail as preferable to buses for urban transit, the issuer’s detailed disclosure on the intended allocation and expected impact is encouraging. We agree on the positive climate impact that will be delivered by the 36 public buses, including providing 4.3m passenger trips and avoiding 4132t coal equivalent and a carbon emissions reduction of 10166t.
 

Aguas Andinas (CLF1.5m/USD68m), Chile’s largest water utility, issued a 7-year Green and Social Bond in mid-March, becoming the first Chilean green bond issuer from the water sector. The bond is listed on the Green and Social segment of the Santiago Stock Exchange and benefits from an SPO from Vigeo Eiris. Proceeds will be allocated to financing water supply, resilient infrastructure and sanitation projects in the City and Metropolitan region of Santiago.

Climate Bonds view: Improving the efficiency of water and wastewater infrastructure is a key aspect in ensuring a region’s resilience to climate change. We’d like to see to see more water and wastewater companies adopting robust reporting metrics. We note that ICMA published its Suggested Reporting Metrics for Sustainable Water and Wastewater Management Projects in 2017.
 

ACS SE (EUR750m/USD922.4m), a Spanish infrastructure company, issued an 8-year green bond and was awarded an E1/83 Green Evaluation from S&P Global Ratings. 59% of proceeds will be allocated to renewable energy, 20% to energy distribution, 12% to water management (including desalination) and 9% to lighting upgrades. Funded projects and assets are located across North America, South America, Asia and Africa.

Climate Bonds view: We are aware that desalinisation projects can be energy intensive and efforts to reduce energy consumption or the amount of water treated is important to limit emissions. However, as noted by S&P in the Green Evaluation, these projects will lead to system improvements in Africa, Peru and the UAE which are high water stress regions.
 

Star Energy Geothermal (Wayang Windu) Ltd (USD580m) issued a 15-year green bond, becoming the third Indonesian green bond issuer and the first from the geothermal energy sector. The deal benefits from Carbon Trusts’ Second Party Opinion. Proceeds will be used to finance the Wayang Windu Geothermal power plant and specifically assets with emissions of less than 100g CO2 per kWh estimated carbon intensity. Carbon Trust notes that this compares favourably to the Indonesian national average emission factor for electricity of over 730g CO2 per kWh.

Climate Bonds view: The carbon intensity threshold set by the issuer is aligned with the Geothermal Criteria of the Climate Bonds Standard, which demonstrates a high level of ambition.

Previously treated as excluded, pending or unlabelled

During our screening process, green bonds that are not aligned with the Climate Bonds Taxonomy are excluded from our green bond database. If satisfactory information to the contrary is provided by the issuer, arranger, underwriter or external reviewer, the bond will be reclassified as included. Where available information on a deal’s use of proceeds is insufficient to determine whether the bond should be included or excluded, it is marked as “Pending” and further work is undertaken to obtain or clarify information. Bonds that have a green bond assessment, green evaluation or other form of green rating are now uniformly treated as labelled green bonds.

At the end of each quarter we review unlabelled, pending and excluded deals to determine which ones should be reclassified as included. Deals from new issuers from 2017 and Q1 2018 that have been reclassified in our latest quarterly review are described below.
 

Hitachi Capital Management China (USD100m) issued a 5-year green bond in December 2017. The second party opinion provided by DNV GL reflects proposed allocations to water treatment and water use efficiency upgrades, solar PV, construction and upgrades of BEAM certified green buildings, and circular economy adapted production technologies and processes.

Climate Bonds view: The bond had been excluded from our database in January due to lack of clarity on circular economy related projects. Information provided by Mizuho, Green Structuring Agent and sole underwriter of the deal, confirms that the issuer has already invested over USD100m in projects under the water, renewables and green buildings categories of the green bond framework. Based on this information we have reassessed the bond and are satisfied that the proceed allocation is aligned with the Climate Bonds Taxonomy.
 

Hong Kong & China Gas (JPY2bn/USD18m) issued a 10-year green bond in November 2017. The deal was issued to finance wastewater treatment, waste treatment, landfill gas conversion to natural gas, biomass conversion to biofuels and other projects related to renewable energy production and energy performance improvements. The Green Bond Framework states that nuclear energy and energy efficiency improvements related to fossil fuel technologies are excluded from the eligible projects. The bond benefits from an SPO by Sustainalytics.

Climate Bonds view: The deal had previously been classified as pending due to insufficient information on proceed allocation. We have now reassessed the deal taking into account the Green Bond Framework and SPO and can confirm that the eligibility categories are aligned with the Climate Bonds Taxonomy.
 

Greater Orlando Aviation Authority (USD924m), Florida, issued a US muni bond in October 2017 and achieved a Green Evaluation score of E1/78 from S&P Global Ratings. The bond was issued to finance the construction of five new buildings (including additional terminal space and car park extension) and enabling works, and part of the South Terminal Complex project at Orlando International Airport. The buildings will be built to comply with the LEED Version 4 standards and are expected to obtain the Certified level of LEED ratings, which is the lowest of four levels. The issuer aims at achieving a 20% energy efficiency improvement compared to existing buildings.

Climate Bonds view: Targeting minimum levels of LEED certification is unambitious, especially in comparison to Mexico City Airport which is targeting LEED Gold and Platinum certification levels for the upgrades funded by its two green bonds. The additional energy efficiency target provides some assurance on the energy performance credentials of the buildings, but is on the low side: we prefer to see 25-30% or higher targets.

Market best practice is now set on the higher end of the scale for building certification. Climate Bonds is in the process of developing more stringent eligibility requirements for including building-related bonds in its database.
 

Capital Region Water (USD44m), Pennsylvania, issued a US muni bond in May 2017 and it was awarded an E1/87 Green Evaluation by S&P Global Ratings. Proceeds will refinance 2014 revenue bonds mainly funding the Advanced Wastewater Treatment Facility (AWTF) Improvement Project, as well as other improvements to water and storm water management, wastewater treatment and water quality improvements.

Climate Bonds view: It’s good to see water and wastewater mitigation, adaptation related projects leading to improvements in the efficiency of the system and increased water quality.
 

Argo Infrastructure Partners (USD120m), New York, issued an unlabelled bond in August 2015 to fund part of the acquisition of the Cross-Sound Cable project. In May 2017, the deal obtained an E1/87 Green Evaluation from S&P Global Ratings. The project consists of an undersea cable transmitting power generated from renewable energy sources (mainly wind and hydro) from New England to Long Island and enhancing grid stability. S&P noted that the issuer has not set a timeline for reporting emissions reductions, but had engaged market consultant ESAI who calculated that the project’s carbon savings are equivalent to around 600MW of wind capacity.

Climate Bonds view: Grid infrastructure connecting renewables and substituting fossil fuel energy sources are essential assets to achieve decarbonisation. We hope to see regular and robust reporting.
 

Brookfield Power NY Finance (USD305m), Canada, issued a 23-year bond in December 2017 and obtained an E1/91 Green Evaluation from S&P Global Ratings. The deal was issued to refinance a portfolio of 78 hydroelectric facilities located in New York, Pennsylvania, Maryland, and West Virginia with a total installed capacity of 872MW. Two thirds of the proceeds were allocated to refinancing small hydro.

Climate Bonds view: Refinancing hydro is in line with our current database eligibility criteria, but we would like to see issuers reporting power density and emissions values.
 

Ence Energia (EUR220m/USD258m), Spain, issued a project finance loan in December 2017 with the benefit of a Green Evaluation score of E1/79 from S&P Global Ratings. Proceeds will be used to refinance existing debt and finance the expansion of the issuer’s biomass energy business. Part of the loan will finance the acquisition of a biomass complex with a combined generation capacity of 27MW in Andalucía.

Climate Bonds view: The issuer is committed to sourcing only sustainable biomass, which aligns to our taxonomy.

Repeat issuers

• Atrium Ljungberg: SEK500m/USD59.5m
• Bazalgette Finance:  GBP150m/USD213.6
• Berlin Hyp: EUR500m/USD620.5m
• BNP Paribas: EUR500m/USD620.5m
• Fabege AB: SEK500m/USD59.8, SEK200m/USD54.4m
• IFC: SEK500m/USD60m
• New York State Housing Finance Agency: USD68.9 (Certified Climate Bond)
• Republic of France: EUR1.2bn/USD1.3bn (tap)
• Solar Mosaic: ABS, USD235m
• Swedbank: SEK2bn/USD244m
• Vasakronan: SEK1bn/USD118m
• Yiwu State-Owned Capital Operation: CNY700m/USD112m
• Fannie Mae published their Green MBS numbers for Q1 2018 last week: DUS MBS USD4.3bn, Credit Facility USD147m (not included in repeat issuers chart below)

Q1 trends comparison

Pending and excluded bonds

We only include bonds with at least 95% proceeds dedicated to green projects that are aligned with the Climate Bonds Taxonomy in our green bond database. Though we support the Sustainable Development Goals (SDG) overall and see many links between green bond finance and specific SDGs, the proportion of proceeds allocated to social goals needs to be no more than 5% for inclusion in our database.

Green bonds in the market

• Rhode Island Infrastructure Bank – closing 25^th April
• District of Columbia Water -closing 30^th April
• EIB – closing 25^th April
• World Bank – closing 26^th April
• City of Tampa, Florida – closing 26^th April
• Zuricher Kantonalbank – closing 8^th May

Investing News

Luxembourg Stock Exchange and Shanghai Clearing House have agreed on a mechanism that will enable international investors easier access China’s green bond market.

Fiji lists its first international green bond on the LSE.

Abu Dhabi hosted the world’s first Green Business Summit.

BNP plans an emerging markets green bond fund.

Gecina concludes first sustainability performance-linked loan indexed on its GRESB Rating.

Copenhagen Infrastructure III (CI III) fund closes at USD3.5bn.

Lots of Green Gossip

Lithuania’s government announces plan to issue a sovereign green bond.

Hanover City plans to launch a Green Schuldschein – it would be the first German city to issue a green bond.

City of Toronto has obtained a Sustainalytics' second party opinion to looks set to bring a green bond to market.

Japanese company Nippon Yusen Kaisha (NYK) to plans to issue the first green bond where proceeds will be allocated to projects/assets in the shipping industry.

Taipower aims to return to market with more green bonds in mid-May.

Mendoza Province is set to issue green bonds, becoming the third Argentinian province to come to market.

Empresa de Energía del Pacífico is planning to issue green bonds.

Caisse Francaise de Financement Local and La Banque Postable state their intention to issue green bonds in 2019.

Kenyan fund plans to issue a USD15m green bond to finance water projects.

Barclays plans to launch UK’s first green mortgage.

Reading and Reports

The UNEP Enquiry into the Design of a Sustainable Financial System has released its final report. Don’t miss “Making Waves”.

The UK Green Finance Taskforce has published its latest report.

United Nations International Maritime Organisation adopted an initial strategy to curb emissions from international shipping.

Climate Landscape for Aotearoa New Zealand is another pointer to the growing interest in green finance from the Shaky Isles.

Our CEO Sean Kidney makes an impression in Mexico:

Inversionistas cierran filas ante cambio climático

México, el ausente en bonos soberanos verdes

Moving Pictures

More annual conference interviews now on our YouTube Channel:

• Choose your future: “My mum works at a bank & she issues green bonds” O: 30secs
• Choose your future: “My aunt helps people make buildings for the cities of the future” 0:31secs
• Ruurd Brewer from TCX: “Emerging markets, currency risk & hedging.”2:33secs.
• Christiana Figures: “Green Bond Pledge, the 2020 Milestone and green infrastructure” 3:08secs.  

‘Till next time,

Climate Bonds

Disclosure: Organisations named or linked to in this post are Climate Bonds Partners. A full list of Partners can be found here. 

Business leaders gather in São Paulo to set green finance agenda

What’s it all about?

Executive level members of the Brazil Green Finance Initiative (BGFI) gathered yesterday at BNDES headquarters in São Paulo to set the 2018 agenda for the group, with a focus on development of Brazil’s green investment pipeline, mobilizing the investor community and building strategic international partnerships on green finance.

Also present at the meeting was the Lord Mayor of London, Charles Bowman, who’s been visiting Latin American countries accompanied by a business delegation with the aim of strengthening investment links with the City of London.

During the meeting, members of the Initiative highlighted the enormous potential of the Brazilian market for the development of green finance (that has already exceeded the mark of 11 billion reais since June 2015). However, it’s been stressed the need of capacity building when talking about investors, who should be armed with more instruments in order to attract a larger number of green projects.

Originally launched by the secretariats of CEBDS and the Climate Bonds Initiative in 2016 as a market development group, the BGFI is comprised of 27 representatives from domestic pension funds, insurance companies, banks, major industry sectors and investors, working cooperatively to strengthen the development of a local green finance market and attract international capital flows to fund the development of Brazil’s future economy.

Who’s saying what?

Justine Leigh-Bell, Director Climate Bonds Initiative

“Brazil has an extraordinary opportunity to be a champion of low carbon economic development and a global exporter of sustainable agriculture and forestry products at scale. We need to build engagement with local and international investors, while working with with domestic stakeholders to develop long term infrastructure and sector investment pipelines that contribute to these twin goals.”

“International partnerships will be vital to Brazil achieving its climate and development objectives. The UK has shown a continuing commitment to supporting the Brazilian green finance market and increasing investment opportunities. The BGFI will be looking to build on this support during 2018.”

Charles Bowman, the Lord Mayor of the City of London

“I’ve just landed in São Paulo and I’m so excited to be here. One of my primary objectives here is to promote London’s leadership in green finance and make the partnership that already exists between the UK and Brazil taking one step further.”

“We’ve had a phenomenal dialogue in relation to this agenda today and its clear there is appetite for it, desire for it. Lots of low hanging fruit, lots of ideas. The trick is now stitching them all together with this complex agenda that we have. Very exciting.”

Marina Grossi, CEBDS President

“It’s exciting to see so many ideas in order to develop the green finance market in Brazil. What we should do now, and this is a challenge, is to accelerate these sophisticated initiatives, bringing together investors and companies and stimulate their conversation on the benefits of the low carbon market.”

“There’s no doubt we need a much bigger investment volume in order to achieve the 1 trillion market goal. We’ve heard a lot about green bonds and international partnerships and initiatives today and this is only the beginning.”

André Salcedo, Head of Capital Markets Division, BNDES

“Today we’ve heard about the potential of the Brazilian market and how much the national green finance sector can grow with greater engagement with international partners. The Brazilian potential is enormous indeed, but still little explored.”

 “Promoting the green finance agenda is one of the BGFI’s priorities for 2018 and I’m sure we’ll be soon celebrating the good results of it.”

Marcus Peixoto Botafogo, Investor Relations, Vinci Partners

“There is a very significant potential for green financing in Brazil in the coming years, something around 11bi reais just for solar, wind and transmission lines. In order to achieve that we need to improve the approach with institutional investors by showing them that the green bonds have lower risk (so, may offer a bit lower yields than similar issues and still be more compelling) and also improving the regulatory design for green emissions to make them even more attractive (that is, allowing pension funds to buy issues from SPEs – project level issues).”

The Last Word

Our main focus in Brazil at the moment is developing green investment pipelines and mobilising investor engagement. We’ll identify the best opportunities in key sectors and work together to unlock the potential of these portfolios.

We’ll mobilize pension funds and institutional investors whilst attracting, supporting and re-engaging investors in Brazil. International partnerships are also a priority for us this year.

We believe Brazil will thrive in 2018.

‘Till next time,

Climate Bonds

Check out the green bond issuers, trends and market developments of the world’s second largest green market

Our new China Green Bond Market Newsletter is now available with the latest bond issuance, market developments and updates.

Full versions in both English & Chinese can be found here.

In the first quarter, total green bond issuance from China went up to USD4.4bn (RMB28bn), a 50% increase year on year, bolstered by strong momentum from non-financial corporates and surge in offshore issuance, with issuers from a more diversified sector base.  In addition to repeat green bond issuer Modern Land, Tianjin Rail Transit, Beijing Capital and Century Concord Wind Power issued their first offshore green bonds, raising USD1.6bn. 92% of issuance, that is aligned to international green definitions, received second party reviews.

In this edition, we take a closer look at the growing trend of Green Securitisation in China and provide three case studies of Chinese green ABS to showcase the variety of collateral and how it is used to secure the deals.  The first Chinese green ABS were issued in 2016. To date, there have been 15 ABS deals totaling USD2.6bn. The proportion of green ABS increased from 1.7% of total green bond issuance in 2016 to 5.9% in 2017.  However, green securitisations remain a small proportion of the green bond market, and the potential for growth is huge.

Read the full Quarterly Newsletter here.

We hope you’ll enjoy it!

'Till next time,

Climate Bonds Initiative

最新一期中国绿色债券市场季报现已发布，它介绍了近期绿色债券发行、市场发展与政策更新。

第一季度绿色债券发行的详细分类请参见季报全文。

2018年第一季度，来自中国发行人的绿色债券发行总量增至44亿美元，相比去年同期增长50%, 主要由于来自非金融企业的动力强劲，以及第一季度离岸发行量骤增，多样行业的发行人开始在离岸市场发行绿色债券。除了已发行过绿色债券的当代置业，包括天津轨道交通集团，首创集团及协合风电都发行了其首个离岸绿色债券，总募集资金达16亿美元。92%的符合国际绿色定义的发行拥有外部核查。

在本期季报中，我们探讨了中国绿色资产证券化市场，并提供了三只绿色ABS的结构和基础资产分析案例。第一只来自中国的绿色ABS在2016年发行。截止目前为止，已有15笔（合计26亿美元）的发行。绿色ABS在中国绿色债券市场占比也从2016年的1.7%增长到2017年的5.9%。然而绿色资产证券化市场在中国绿色债券市场中占有份额较小，但是其增长的潜力巨大。

 点此下载英文和中文季报

祝阅读愉快！

气候债券倡议组织

Our expert instructors will be running green bond training courses throughout 2018. New York will be followed by Boot Camps in Sydney, Copenhagen and Paris this summer. More to come!

What’s it all about?

As the bond market hits the headlines once again and expectations run high anticipating repricing of risk, Climate Bonds is hosting a green bond training just in time to clear your doubts and get you ready for the all the action.

The Green Bond Boot Camp will be an immersive learning experience for finance sector professionals who want to be part of the growing green bond market, worth over USD155bn in 2017.

With 2018 growth projections ranging up to USD250bn, Climate Bonds is hosting a brand new training program on what you need to know on green bond markets, pricing and best practice, all delivered by our expert instructors armed with the latest in market data, trends and directions.  

The two-day course includes five learning modules - as well as practical case studies and ‘tales from the tranches’ – on green bond issuance.

Our first Green Bond Boot Camp will be in New York City on the 21^st and 22^nd of May, don’t miss it!

Tell me more

The Boot Camp will be two days of intense group training for 20-25 motivated participants committed to expanding the green bond market.

Each participant will receive a full set of exclusive course materials. Laptops, mobile phones and tablets will not be used during the camp.

All meals are included, and participants are encouraged to stay in the recommended hotel or precinct to extend the discussions among the group after dinner on Day 1, maximizing networking and the learning experience.

Who should attend

If you’re a market professional involved in underwriting, issuing, DCM management or sustainable investment the Boot Camp is for you!

Apply now!

The Green Bond Boot Camp is GBP 2000 / EUR 2250 / USD 2750 per participant.

Please contact us at bootcamp@climatebonds.netif you also want to tap into the exhilarating world of green bonds.

Places are limited!

The Last Word

CBI Green Bond Boot Camp will be coming to a city near you this year training a brigade of Climate Bonds Warriors. 

Camps are already scheduled for Sydney in July, Copenhagen in August, Paris in September and other locations across the second half of 2018 and into 2019. Watch this space!

Register here& see you in the Big Apple!

‘Till next time,

Climate Bonds

CBI to launch Indonesia Green Infrastructure Report at Jakarta Green Finance Summit

On May 9^th, 2018, the Climate Bonds Initiative will co-host Indonesia's first ever Green Finance Summit in Jakarta at the Indonesian Stock Exchange, with local consulting firm PT. EBA Indonesia. The Summit will promote green bonds and asset-backed securities for the development of national green infrastructure projects.

Honourable guest and speakers will include:

• The Honourable Lord Mayor Charles Bowman, Mayor of London
• The Minister of National Development Planning of Indonesia, the Honourable Bambang Ambang Brodjonegoro
• The Chairman of the Financial Services Authority (OJK), Wimboh Santoso
• The President Director of Indonesian Stocks Exchange, Tito Sulistio
• Vinod Kothari, internationally recognized author and financial specialist
• Sean Kidney, CEO, Climate Bonds Initiative

Indonesia green infrastructure report launch

The Summit will include the launch of the inaugural Green Infrastructure Investment Opportunities (GIIO) report, developed in partnership with Pembiayaan Investasi Non-Anggaran Pemerintah (PINA), an initiative of the National Development Planning Agency (BAPPENAS), and PT. EBA Indonesia. The report explores a wide variety of green investment opportunities in Indonesia and highlights a sample green infrastructure pipeline.

Projects aligned with international definitions of “green” in Indonesia include low-carbon transport, renewable energy, sustainable water and waste management and green buildings. The report aims to facilitate engagement on this topic between project owners and developers, and investors.

Indonesia is making progress on transitioning to a more sustainable and inclusive society. With strong political support, a facilitative policy framework, and improving macroeconomic conditions, the opportunities for green infrastructure investments are increasing.

Who’s saying what?

Yudhi Ismail, President Director, PT. EBA Indonesia: 

“Indonesia shares the same infrastructure challenges as many other nations in ensuring all new infrastructure is green and matching investors to the many opportunities that exist.” 

The Last Word

Climate Bonds Initiative will develop a series of reports investigating green infrastructure investment opportunities in countries and regions around the world. The GIIO Indonesia report is another step in our efforts to build climate finance and green investment markets in emerging and developing economies. 

See you at the Summit! Please see all details of the event online, at: http://eba-indonesia.co.id/summit/

'Till next time,

Climate Bonds

Opened from May ‘till July, contribute and send us your feedback!

What’s it all about?

Bioenergy has the potential to be a key mitigation technology due to its flexibility as a generation technology as a well as a form of solid, liquid or gaseous fuel.

However, in some cases, it has a negative impact on ecosystems and high levels of greenhouse gas (GHG) emissions. The Bioenergy Criteria under the Climate Bonds Standard aims to provide a clear and robust screening process to define low carbon and climate resilient bioenergy investments that are aligned with the Paris Accord targets.

The Criteria

The Bioenergy Criteria provides a science based assessment process to  the low carbon and climate resilient credentials of bioenergy assets and project investments.

Developed with the guidance and expertise of our Bioenergy Technical Working Group (TWG) and an Industry Working Group (IWG), these Criteria outline the requirements that bioenergy assets and projects funded by green bonds must meet to be eligible for Climate Bonds Certification.

How long is the consultation period open for?

Public Consultation will run for 60 days closing on 12:00PM GMT Thursday 1^st July 2018. Please send your comments to Lily Dai.

What will follow the consultation period?

Once public consultation is complete, the TWG will review the Criteria considering the feedback received, to then submit a final proposal to the Climate Bonds Standard Board for approval.

Once the Criteria have Board approval, issuers of green bonds financing bioenergy assets and projects will be able to seek Climate Bonds Certification.

Types of Projects

The Bioenergy Criteria cover facilities producing biofuel/biomass; energy generation facilities including electricity, heating/cooling and cogeneration facilities; and dedicated supporting infrastructure.

They aim to:

1. Certify bioenergy assets and projects that are compatible with a 2°C trajectory;
2. Ensure these assets and the surrounding ecosystem are adaptive and resilient to a changing climate;
3. Raise the level of transparency in green bonds.

What are the requirements to be Climate Bonds Certified?

To understand the requirements though you’ll need a bit more detail than is above.

Information Suite:

There are 3 options depending on how much detail you’d like:

1. Brochure - Brief summary of the Criteria
2. Criteria Document - full requirements of the Criteria
3. Background Paper - background information and discussions on arguments and the rationale for determining the Criteria

Learn more!

Two Webinars will introduce the Criteria and answer your questions, get your diaries:

Webinar 1:

Date: Wednesday, 16th May

Time: 10.00 - 11.00 AM GMT 

Register here.

Webinar 2:

Date: Wednesday, 6th June

Time: 15.00 - 16.00 PM GMT

Register here.

The Last Word - Expansion of the Standards Scheme in 2018

As more Criteria are launched and the reach of our international standard scheme expands, market confidence and transparency will increase, matching the growth of global green bond markets.

We’ve seen ABN Amro issue the first Certified Climate Bond under our new Marine Renewables Criteria and the near future we’ll be rolling out the new Water Criteria incorporating an increase scope for Water assets. Consultation will also be opening in mid-May on Forestry and further development is coming on Waste Management, Low Carbon Buildings and energy grids.

Look for updates in our next Quarterly Newsletter.

Bioenergy is a further step for diversification of green investments. Do contribute with your expertise and send us your feedback. Please send your submissions and comments to Lily Dai (lily@climatebonds.net).

Last but not least…

We would like to extend our gratitude and sincerely thank all TWG and IWG members and their constituent organisations for their invaluable support and guidance in developing the Bioenergy Criteria. Put a face to a Group here.

‘Till next time,

Climate Bonds

Climate Bonds publishes first comprehensive overview of Europe’s green bond market highlighting opportunities 

What’s it all about?

The Climate Bonds Initiative just released a new report examining the latest green bond market developments in Europe both at a regional and country level.

Sponsored by White & Case, the report was launched at a joint event between Climate Bonds and White & Case in Frankfurt yesterday. The report presentation launch was followed by a panel discussion of financial, corporate, technical and legal experts, including our Director of Investor Outreach, Manuel Adamini. In case you missed it, there will be a launch event in London on the 22 May. An event in Paris in June (date TBC) completes the European launch.

Sponsored by White & Case, the report is the latest in the new 2018 series of Overview and Opportunities-based analysis following the Green Bond Opportunities in France report published in April.

Download the full report here.

Europe at the forefront of green bond issuance

The first green bond issuance was issued in 2007 by the European Investment Bank (EIB) to raise funding for climate-related projects. Europe has remained a cornerstone of the global green bond market, with cumulative issuance totalling EUR122bn, representing the largest regional market.

European issuers span the continent and the spectrum of issuer types. 145 entities have come to market, or around a third of the global total. They have issued in a variety of debt formats, currencies and tenors. Sector diversity has grown over time. 98% of issuance benefits from external reviews and reporting standards are high.

The European green bond market is diverse

Issuers as of end of Q1 2018 include 48 companies in the energy sector, 35 financial institutions, 23 property companies, 17 local governments and three sovereigns. The 7 debut issuers from 2018 and 48 from 2017 have already contributed over EUR34bn to the market: half of that linked to sovereign issues from France and Belgium.

Diversification to date is a big accomplishment but it would be good to see more corporate issuance, especially from nations with large economies and highly-developed and active bond markets including the UK, Germany and France.

Energy at top spot for allocations, but Buildings and Transport rising

European issuers have always allocated a substantial part of green bond proceeds to the energy sector. However, the share of Energy in the overall mix has dropped in recent years as the amounts channelled towards Buildings and Transport have risen.

Belgium’s green sovereign OLO allocates 85% of proceeds to rail investments, echoing a 2017 trend: French, Spanish and Italian government-backed rail companies tapping the green bond market in size. With big plans to upgrade rail transport across Europe, we would expect to see Transport pull further ahead.
 

The Last Word

Europe has spearheaded the development of the green bond market, fostering engagement at a global scale. The sample of identified potential green bond issuers spanning the climate-aligned sectors in our taxonomy proves that the region is still far from reaching its full potential.

As the market keeps expanding, we expect to see the corporate and banking sector taking on a bigger role, with green bond deals diversifying further.

Strong political impetus is expected to continue driving market evolution and improvement, such as through the adoption of a common EU green asset taxonomy in 2019 as part of the Commission action plan on sustainable finance, banks implementing the reporting recommendations set out by the Financial Stability Board’s Taskforce for Climate-related Financial Disclosure and starting to green-tag loans.  

Initiatives around energy efficiency such as EeMap for mortgages and the development of European Property Assessment programme (E-PACE) should provide further support.

Don't forget: Join us and White & Case in London on May 22ndfor more on the European green bond market. We'll update you soon on the launch event in Paris.

‘Till next time,

Climate Bonds

Climate Bonds Launches Indonesia Green Infrastructure Investment Opportunities Report

Inaugural Jakarta Green Finance Summit Backdrop for New Analysis

The Climate Bonds Initiative has launched the Green Infrastructure Investment Opportunities (GIIO) Indonesia reportat Indonesia's first ever Green Finance Summit at the Indonesian Stock Exchange in Jakarta today.  

Published by the Climate Bonds Initiative, the report was sponsored by the Climate Works Foundation and developed in partnership with Pembiayaan Investasi Non-Anggaran Pemerintah (PINA), a project of the National Development Planning Agency (BAPPENAS), and PT. EBA Indonesia. Contributors to the report included the ADB, GGGI and EDGE.

Green Bonds & Greeen Sukuk could fund new infrastructure 

The report explores a wide variety of green investment opportunities in Indonesia. It has been prepared to support Indonesia’s mission to develop low carbon and climate resilient infrastructure; and aims to facilitate engagement on this topic between project owners and developers, and investors.

It highlights investments that could be funded with green bonds and green sukuk.

Projects aligned with international definitions of ‘green’ in Indonesia include low carbon transport, renewable energy, sustainable water and waste management and low carbon buildings. Infrastructure opportunities are explored based on these sectors.

Infrastructure investment at scale is crucial for Indonesia to successfully maintain economic growth and deal with domestic challenges, such as rapid urbanization. Ensuring that infrastructure is sustainable, low-carbon and climate-resilient is essential to meet the severe climate impacts Indonesia faces as well as meeting national climate change goals.

Who's saying what?

Yudhi Ismail, President Director, PT. EBA Indonesia:  

“The infrastructure challenge we face is common to many emerging economies.  We must ensure all new infrastructure is green and resilient, supports national development directions and helps meet Indonesia’s climate and emissions commitments. The GIIO Indonesia report identifies a project pipeline that meets this mix of goals. Our challenge is to now match domestic and international investors with the long-term opportunities highlighted by the report.”

Sean Kidney, CEO, Climate Bonds Initiative:

“Key to addressing climate change at a national level is government policy support for new infrastructure, financial commitment and a long tail pipeline of low carbon project opportunities, open to institutional investors. The GIIO Indonesia report clearly demonstrates these conditions exist. New international partnerships and reorientation of global capital flows towards these vital investments is the next stage.”

The Last Word 

We'd like to thank our reporrt sponsor, report partners and the organisations who kindly contributed to the content. You can find them at the head of this Blog.

The Green Infrastructure Investment Opportunities (GIIO) Indonesia report is the first what will be a series of reports investigating green infrastructure investment opportunities in countries around the world. The report is available for download now.

Meanwhile you can find the latest on Climate Bonds activities in Indonesia here. 

'Till next time, 

Climate Bonds

Líderes do Mercado de finanças verdes se reúnem em São Paulo para estabelecer agenda de trabalho para o ano

Falamos de quê?

Membros executivos da Iniciativa Brasileira de Finanças Verdes (IBFV) se reuniram semana passada na sede do BNDES em São Paulo para definir a agenda de 2018 para o grupo. O foco este ano será no desenvolvimento do portfólio de investimentos verdes do Brasil, mobilizando a comunidade de investidores e construindo parcerias internacionais estratégicas em finanças verdes.

Também presente na reunião estava o Lord Mayor de Londres, Charles Bowman, que realiza um tour em países da América Latina acompanhado por uma delegação empresarial com o objetivo de fortalecer parcerias de negócios com a cidade de Londres.

Durante a reunião, membros da Iniciativa destacaram o enorme potencial do mercado brasileiro para o desenvolvimento de finanças verdes (que já superam a marca de 14 bilhões de reais desde junho de 2015). Ressaltou-se, no entanto, a necessidade de capacitação quando se fala em investidores, que devem estar armados com mais instrumentos para atrair um número maior de projetos verdes.

Originalmente lançado pelo CEBDS e pela Climate Bonds Initiative em 2016 como um grupo de desenvolvimento de mercado, a IBFV é composta por 27 representantes de fundos de pensão domésticos, seguradoras, bancos e investidores. Todos os membros trabalham cooperativamente para fortalecer o desenvolvimento de um mercado financeiro verde local e atrair fluxos internacionais de capital para financiar o desenvolvimento da futura economia do Brasil.

Quem está falando?

Justine Leigh-Bell, Diretora Climate Bonds Initiative

“O Brasil tem uma oportunidade extraordinária de ser um exemplo no desenvolvimento econômico do mercado de baixo carbono e um exportador global de agricultura sustentável e produtos florestais em escala. Precisamos criar engajamento com investidores locais e internacionais, ao mesmo tempo em que trabalhamos com as partes locais interessadas no desenvolvimento de infraestrutura de longo prazo e portfólios de investimento setoriais que contribuam para esses objetivos.

Parcerias internacionais serão vitais para o Brasil atingir seus objetivos de clima e desenvolvimento. O Reino Unido demonstrou um compromisso contínuo de apoiar o mercado brasileiro de finanças verdes e aumentar as oportunidades de investimento. A IBFV fortalecerá essa ideia em 2018.”

Charles Bowman, Lord Mayor of the City of London

"Acabei de chegar a São Paulo e estou muito feliz por estar aqui. Um dos meus principais objetivos na cidade é promover a liderança de Londres em finanças verdes e fazer com que a parceria que já existe entre o Reino Unido e o Brasil dê um passo adiante.

Hoje tivemos um diálogo fenomenal em relação a essa agenda e é claro que há apetite por ela, desejo por ela. Muitas oportunidades possíveis para já. O truque agora é costurar tudo isso com essa agenda complexa que temos. É muito animador."

Marina Grossi, Presidente CEBDS

“É emocionante ver tantas ideias para desenvolver o mercado de finanças verdes no Brasil. O que devemos fazer agora, e isso é um desafio, é acelerar essas iniciativas sofisticadas, reunindo investidores e empresas, estimulando esse diálogo.

Não há dúvida de que precisamos de um volume de investimento muito maior para atingir a meta de 1 trilhão de mercado. Ouvimos muito sobre títulos verdes e parcerias internacionais hoje e isso é apenas o começo.”

André Salcedo, Chefe Divisão Mercado de Capitais, BNDES

“Hoje ouvimos sobre o potencial do mercado brasileiro e sobre o quanto o setor financeiro verde pode crescer com um maior envolvimento de parceiros internacionais. O potencial brasileiro é enorme, mas ainda é pouco explorado.

Promover a agenda financeira verde é uma das prioridades da IBFV para 2018 e tenho certeza que logo celebraremos os bons resultados."

Marcus Peixoto Botafogo, Relações com Investidores, Vinci Partners

“Há um potencial muito significativo de financiamento verde no Brasil nos próximos anos, algo em torno de 11bi reais apenas para as linhas solar, eólica e de transmissão. Para conseguir isso, precisamos melhorar a abordagem com investidores institucionais, mostrando-lhes que os títulos verdes têm menor risco e também melhorar o projeto regulatório para emissões verdes para torná-las ainda mais atraentes”.

E por último…

Nossos principais focos no Brasil no momento é o desenvolvimento de pipelines de investimentos verdes e a mobilização do investidor. Identificaremos as melhores oportunidades em setores-chave e trabalharemos juntos para liberar o potencial desses portfólios. Vamos mobilizar fundos de pensão e investidores institucionais, atraindo, apoiando e reengajando investidores no Brasil. Parcerias internacionais também são uma prioridade para nós neste ano. Acreditamos que o Brasil irá prosperar em 2018.

Até a próxima,

Climate Bonds

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Five Big Events in May 

17^th – Amsterdam: 5th Annual Green Bond Rountable (Thursday)

18^th – Webinar: Indonesia Green Infrastructure (Friday)

22^nd – London: European Green Finance Forum (Tuesday)

30^th – Stockholm: Green Finance Breakfast (Wednesday)

31^st – Helsinki: Sustainable Bond Market Launch (Thursday)

Webinar to explore new Indonesia green infrastructure investment 

If you missed the launch of the Green Infrastructure Investment Opportunities Indonesia report on May 9 in Jakarta, not to worry! 

Simply register to join our webinar on 18 May to discuss the report's content in detail. 

Developed by the Climate Bonds Initiative in association with the government's Centre for Private Investment (PINA), an Initiative of Indonesia's Ministry of National Development Planning (BAPPENAS), and PT.EBA Indonesia. Green Infrastructure Investment Opportunities Indonesia explores the current policy settings and project pipeline 

It is the first in a new suite of Climate Bonds Initiative's reports aiming to highlight investment opportunities in green infrastructure projects in key countries and regions, aimed at all facilitating engagement between project owners and developers, and investors.- with our target of $1tr of green bonds by 2020 always in mind. 

Date: 18^th May - Friday 

Time: 10:00 BST, 16:00 WIB

Speakers: 

Sean Kidney, CEO, Climate Bonds Initiative

Yudhi Ismail, President Director, PT.EBA Indonesia 

Kristiane Davidson, Lead Researcher, Climate Bonds Initiative

Registration: Please register here. 

The webinar will take place on Webex, which you can download here.

17^th - Rabobank’s 5^th Annual Green Bond Round Table 

The key theme of the Roundtable which includes an ‘investor-issuer speed dating’ session in the morning, is‘Green Finance to Curb Climate Change’, with debates involving the effect of climate change on cities and water systems, the role of Green Bonds and Green Loans, challenges and latest on best practice.

Key note speakers and moderators:

David van Raalten, European Director Water Management at Arcadis Europe and Programme Leader for Climate Adaptation at Arcadis Netherlands

Sean Kidney, CEO, Climate Bonds

Jens Hellerup, Senior Director, Head of Funding and Investor Relations, Nordic Investment Bank

Wilfried Bolt, Senior Investment Manager, PGGM Investments

Tom Meeuwissen, General Manager Treasury, Netherlands Water Bank

Heather Lang, Executive Director, Sustainalytics

Arnold Gast, Chief Investment Officer, Actiam

Date: 17^th May - Thursday

Time: 11:00 – 18:30 (local time)

Venue: Muziekgebouw aan ‘t IJ

Piet Heinkade 1, 1019 BR Amsterdam

Registration: Please email greenbondroundtable@rabobank.com

22^nd - European Green Finance Forum in London 

Financing the Green Renaissance – Developments in European Green Finance Markets

In a joint event with White and Case LLP, we will hold the London launch of the Green Bond Market in Europe report which covers recent market developments and a vision for the future of European Green Finance markets.

The report launch will be followed by a panel discussion, led by industry experts from issuers, banks, S&P and White & Case lawyers, on the development of this market, with a particular focus on securitisation solutions for clean energy loans, mortgages and auto-loans. 

Date: 22^nd May - Tuesday

Timetable: 

17:30 Registration
17:45 Event begins
19:00 Drinks and canapés

Venue: White & Case LLP, 5 Old Broad Street, EC2N 1AD, London

Registration: RSVP

30^th - Green Finance Breakfast Event in Stockholm 

At our joint event with Nasdaq Stockholm and White and Case LLP, we will launch the Green Bond Market in Europe report - which covers recent market developments and a vision for the future of European Green Finance markets, followed by discussions with Nordic and International financial, corporate, technical and legal experts.

Date: 30^th May - Wednesday

Time: Breakfast will be served at 8:30am (local time)

Venue: Grand Hôtel

Södra Blasieholmshamnen 8

103 27 Stockholm

Registration:Please follow this link. 

31^st - Nasdaq Helsinki Sustainable Bond Market Launch &1/2 Day Sustainable Finance Seminar in Helsinki 

Another joint event with our Partners White and Case and Nasdaq, that will see the launch the Nasdaq Helsinki Sustainable Bond Market and welcome MuniFin as the first green bond issuer in Helsinki, including our special guest to ring the Opening Bell for the new market. 

Date: 31^st May - Thursday

Time: 9:00-13:00 (local time) 

Venue: Hotel Kämp, Pohjoisesplanadi 29, Helsinki

Registration: Please email Nasdaq.Helsinki@nasdaq.com

The Last Word

Don't miss our Director of Investor Outreach, Manuel Adamini at the London and Scandinavian events, and Sean Kidney in Amsterdam.

See you there!

'Till next time,

Climate Bonds

Disclosure: Organisations named or linked to in this post are Climate Bonds Partners. A full list of Partners can be found here.

Latest Q4 2017 report completes two years of data observations examining green bond behaviour in primary markets

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What’s it all about?

Climate Bonds Initiative has released the fourth “Green Bond Pricing in the Primary Market” report analysing the performance of green bonds issued in the period October-December 2017. This is the last quarterly report; future publications will be produced semi-annually allowing a more longtitudinal analysis as the market expands.

The Q4 2017 report covers USD15.1bn or almost 40% of the face value of labelled green bonds issued in Q4. 15 EUR and 8 USD labelled green bonds are analysed in the report.

The detailed methodology is outlined below.

Highlights from Q4 2017:

• 14 out of 22 issuers are first time green bond issuers
• USD green bonds again had larger oversubscriptions and achieved larger spread tightening during book building than vanilla equivalents. EUR green bonds are similar to the market
• 44% of green bonds were allocated to green investors.  Non-mandated investors continue to support the market
• The greenium: new issue premiums are not a given for buyers of green bonds​

​

Detailed Findings:

With a full two-year period of data observations, we have seen evidence of green bonds benefiting both issuers and investors.

Diversity within the pool of qualifying bonds remains limited, with corporate bond issuance coming from utility, real estate, and financial sectors. However, with market growth projections for 2018 set at USD250-300bn, we hope to start capturing sector diversification in our future reports.

In Q4 2017 we observed the following:

• USD green bonds were more oversubscribed than vanilla equivalents.  EUR green bonds achieved similar book cover to vanilla equivalents.  In both cases, this observation has held true for the last three quarterly reports, for which we have used comparable data.
   
• USD green bonds tightened, on average, more during the book building process than vanilla equivalents.  Again, this has remained consistent for the last three quarters.  Results for EUR green bonds have shown more variation. 
   
• Half of the green bonds in our, albeit limited, sample did not exhibit a new issue premium.  We have built yield curves for 42 green bonds issued during the last 24 months.  More do not exhibit a new issue premium, than do.  Evidence of a greenium is mounting.
   
• 44% of green bonds were allocated to green bond investors, a slight decline on the prior quarter (47%).  Green bonds continue to attract a broad range of investors.
   
• Just over half of the EUR green bonds in our sample tightened by a larger percentage than the corresponding index after 7 and 28 days.  These numbers are lower than in prior quarters.  USD green bonds continue to lag in the immediate secondary market.

​

Report methodology

105 green bonds were issued during Q4 and their combined face value totals USD39.7bn. The report covers 23 labelled green bonds, with a total volume of USD15.1bn, or around 40% of the quarterly total.

The sample is restricted is restricted by currency, not domicile of issuer, and includes green bonds from developed, emerging and frontier market countries. We have included all labelled green bonds which meet a set of parameters designed to capture the most liquid portion of the market, while trying not to limit diversity of issuer type.

Who’s saying what?

Peer Stein, Global Head of Climate Finance, Financial Institutions Group IFC:

“IFC sees green bonds as critical to filling the financing gap for climate mitigation and adaptation in emerging markets.  The most recent findings of our joint pricing publications for green bonds continue to add hard evidence to the discussion about issuer and investor benefits for green bonds.”

Tony Trzcinka, CFA.  SVP and Portfolio Manager, Impax Investment Management LLC:

“The latest Greenium report confirms the pricing and demand dynamics that we see every day.  There is continued strong demand for green bonds.  It is also reassuring to see that Treasurers are “consistently happy with how green bonds place”.  We hope this analysis encourages potential issuers of green bonds.”

Max Bronzwaer, Treasurer, Obvion NV:

“The continuing increase in the number of new entrants and returning issuers to the green bond market, shows that the green bond market keeps growing and is getting more mature. In following studies, it would be interesting to see whether green bonds behave differently than vanilla bonds in times when market volatility increases.” 
 

Sean Kidney, CEO of Climate Bonds Initiative:

“Climate Bonds tracking and analysing of the performance of green bonds against vanilla bonds extends for more than one year now as we continue to gather market data, examining the benefits of green bonds for both issuers and investors.

Our ongoing research will benefit from growing market diversity. After this initial year of quarterly reporting we are moving to a semi-annual reporting cycle to provide a longer-term perspective in what is a rapidly developing market.” 

What’s the back story?

The report is a continuation of our ongoing assessment of green bonds pricing.  A preliminary Snapshot briefing paper examining Q4 of 2016 was produced for the 2017 Climate Bonds Annual Conference.

The first Green Bond Pricing Report examining eligible green bonds from 2016 and Q1 of 2017 was released in August.  In November 2017, we published a report covering Q2 2017, and in February 2018, the report for Q3 2017.

The Last Word

Downward pressure on yields in the past two years have made it challenging to identify to what degree bond performance is linked to it being green or otherwise. As economic measures begin to improve, we expect to see investor preferences becoming more starkly observable, with potential for green bonds to bifurcate from vanilla counterparts.

Download the full report here.

‘Till next time,

Climate Bonds

Partner Disclosure: Several organisations named in this communication are Climate Bonds Partners. A full list of Partners can be found here.

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Highlights:

• Lithuania is 4^th Sovereign to issue in 2018
• 18 green bonds totalling USD6.7bn for May so far
• Volkswagen Immobilien issues Certified Climate Bond for Low Carbon Buildings
• Lebanon’s green bond market launched via a Fransabank private placement 
• Market firsts from Spanish bank BBVA, Swiss bank Zürcher Kantonalbank, Brazilian gridco ISA CTEEP and Korean company K-Water

Go here to see the full list of new and repeat issuers in April

At a glance

May marks the fourth month in a row we have seen a sovereign green bond on the market with the Lithuanian issuance of EUR20m, the first tranche of a EUR68m programme.

We forecast continuing development of green sovereigns way back in January in our Super Trends for 2018 and would be happy to record a new nation stepping up every month for the remainder of the year.

As of 17 May, financial corporates are driving green bond issuance for the month, with debut issuer BBVA and repeat issuer Bank of America accounting for 52% of the USD6.7bn volume.

Over 80% of issuance volume has been denominated in EUR and USD. Amongst the USD deals is South Korean K-Water’s debut green bond. Manulife’s second green bond made the Canadian dollar the third most popular currency.

Green bond issuance in April surged 14.3% above 2017’s monthly figures, and Fannie Mae issuance is not included in figures yet. The EIB, Republic of France and ABN AMRO topped the ranks with the largest deals.

April issuance from developed markets this year was higher than in 2017 – 68% compared to 47%. China accounted for only 6% of volumes, down from 40% last year. While other emerging markets still represent a small share of total volume (10%), we are seeing an increasing geographical diversity.

Emerging Vs Developed countries comparison

>The full list of new and repeat issuers here.

>Click on the issuer name to access the new issuer deal sheet in the online bond library.

Certified Climate Bonds

Volkswagen Immobilien (EUR107m/USD128m) issued a Certified Climate Bond comprised of five tranches with terms from 5 to 15 years (71.5% by issue amount falls in 10-15 year range). The bond is Certified under the Low Carbon Buildings (Residential) Criteria of the Climate Bonds Standard. Proceeds will be allocated to residential buildings which have obtained an EPC rating of B or above. Eligible categories within the Green Bond Framework also include office and logistics buildings, but these asset classes have not been included in this deal or the certification. ISS-oekom provided the Pre-Issuance Verification Report.

New issuers

The Republic of Lithuania (EUR20m/USD24m) issued a 10-year sovereign bond, the first tranche of a EUR68m programme. This is the first green sovereign from Lithuania and second in the CEE region! The 10-year bond will finance a loan to its Public Investment Development Agency to fund renovations to improve energy efficiency and reduce heating costs in 156 multi-apartment buildings.

Climate Bonds view: Market best practice for energy performance improvements in buildings is set at 20-30%. It would be good to see energy efficiency performance thresholds set out in the eligibility criteria.

BBVA (EUR1bn/USD1.2bn) become the first Spanish bank to enter the green bond market with a 7-year deal. The bond is issued under BBVA’s SDG Framework, which distinguishes between green and social eligibility criteria and allows the issuer to classify a bond as “green”, “social” or “sustainability” depending on the use of proceeds.

The EUR1bn deal will finance projects under the green eligibility categories of renewable energy (83%), energy efficiency (4%), sustainable transport (8%), water and waste management (5%). For energy efficiency, performance improvements of at least 30% apply both to retrofits/upgrades of assets and to new technologies. Buildings that have obtained a green building certification of at least LEED Silver, BREEAM Good, HQE Good, DNGB Silver España – VERDE or equivalent. The deal benefits from DNV GL’s Green Bond Eligibility Assessment.

Climate Bonds view: BBVA’s innovative SDGs Framework enables the issuer to keep a clear distinction between bonds that finance environmental projects and social projects. This makes it easier for investors with a dedicated mandate to identify bonds that comply with their investment criteria.

We also note that the SDG Framework BBVA has adopted for green bonds mirrors five of the six SDG goals Climate Bonds has identified (SDGs 6,7,9,11 & 13) that have direct benefits from increased green issuance.

Lastly, we note that the green building certificate thresholds are not on the high-end of the scale and hope to see this eligibility criteria tightening in the future to align with market best practice.

China Jushi (CNY200m/USD31m) issued a 3-year green bond. All the proceeds will be allocated to the construction of the 12-ton Melt Glass Fibre Production Line project. It includes purchasing manufacturing equipment, constructing plant infrastructure and building facilities.

Climate Bonds view: The melt glass fibre production line will use pure nitrogen gas to replace air for combustion leading to a reduction of 80% in air pollution and 99% of NOx emissions. By implementing more energy efficient equipment, it could potentially improve energy efficiency in production processes by approximately 27%. Overall the new production line creates significantly less pollution.

City of Tampa, Florida, (USD84.6m) issued a 23-tranche green US Muni deal (longest dated bond: 28-year term). The deal will finance projects related to improving the City’s storm water management system and reducing surface and ground water pollution. More details on the specific projects can be found in the prospectus.

Climate Bonds view:  This is the first Florida US Muni issuing a green bond this year. For future deals, it would be good to see US Muni issuers adhering to best practice by seeking external reviews.

We’re hoping to see US states and cities gradually sign up to the Green Bond Pledge launched in March and begin to discuss how they can green up infrastructure borrowing programs.

Fransabank SAL (USD60m) became the first Lebanese issuer to debut in the green bond market with a 7-year private placement funded by the IFC (75%) and EBRD (25%). The bond is the first tranche of a USD150m green medium-term note programme and will finance renewable energy and energy efficiency for green buildings projects. Moody’s assigned a GB1 Green Bond Assessment to the deal.

Climate Bonds view: Although this is a private placement deal – and, in this case, we take comfort in the fact that both the IFC and EBRD have strong criteria for green bond investing – it would be good practice for private placement issuers to provide more transparency by making their green bond frameworks publicly available.

Hua Nan Commercial Bank (TWD1bn/USD33.5m), Taiwan, issued a 3-year green bond. Proceeds will be allocated to eligible low carbon and adaption projects including renewable energy development and technologies, such as solar and wind farms; industrial energy efficiency improvement; water savings, recycling; and pollution control projects. KPMG provided the Assurance report (not publicly available).

Climate Bonds view: Taipei Exchange, with oversight from Taiwan’s Financial Supervisory Commission, issued guidelines in 2017 endorsing the Climate Bonds Standard and Green Bond Principles (GBP). Although this bond has only disclosed broad categories of eligible assets, we agree on its green credentials as it has met Taipei Exchange’s green bond guidelines and international definitions.

ISA CTEEP (BRL621m/USD179m) is the first Brazilian energy transmission company to enter the green bond market, with a 7-year green bond. Sitawi provided the Second Party Opinion. The financed projects will contribute to distributing electricity produced by renewable energy sources.

Climate Bonds view: Grid infrastructure is essential in the low carbon transition. Sitawi notes that the issuer cannot ensure the transmission systems will transport solely electricity generated from renewables, but that developing robust grids will enhance renewables integration, as well as reduce losses and congestion. We agree.

Climate Bonds will be starting work on additional criteria in 2018, including energy distribution grids and networks.

K-Water (USD300m) issued a 5-year green bond and is the first South Korean issuer from the water & wastewater sector to come to market. The deal benefits from a Sustainalytics’ Second Party Opinion. Proceeds will be allocated to adaptation, water supply infrastructure improvement and wastewater treatment, as well as solar, tidal and hydro energy projects and assets. Examples of adaptation projects include reinforcing or constructing embankments and improvements of existing waterway structures.

Sustainalytics states that the issuer conducted an internal risk study that underlines the importance of financing this infrastructure to enhance flood protection and waterways management.

Climate Bonds view: Basing adaptation eligibility criteria on climate risk assessments provides a higher assurance of the validity of the selected adaptation measures.

Landsea Green Group (USD150m), Hong Kong, issued a 2-year green bond. Proceeds will be allocated to new and existing green buildings in China. To be eligible, the assets must have 2 Star Chinese Green Building Label or an equivalent building certification standard, while projects must target energy efficiency improvements of 15-30% for new buildings and at least 40-60% for existing buildings. The issuer also allows for 10% of the proceeds to be allocated to R&D for energy efficiency design and technology related to housing and construction. The bond was assigned an E1/84 Green Evaluation by S&P Global Ratings.

Climate Bonds view: We haven’t come across the “Three Star System” Chinese Green Building Label a lot, so let’s have a recap.  

The system is based on six categories:

• land efficiency,
• energy efficiency,
• water efficiency,
• resource efficiency,
• environmental quality and
• operational management.

Each category has both regular and premium items. The scheme has three rating categories – 1 star, 2 stars and 3 stars – and is based on a credit scoring system. The rating level is determined by the minimum score in each component.

We note that, as for other green building certification systems, targeting the highest rating level would provide a stronger assurance on a building’s energy performance credentials.

Mingyang Smart Energy (CNY500m/USD78.4m), China, issued a 3-year green bond. The deal benefits from an external review by Lianhe Equitor (not publicly available). All the proceeds will be allocated to 3 onshore wind farms in China. Half the proceeds will be used to purchase wind turbine components and the remainder will be applied towards refinancing. The wind farms have installed capacity of 49.5MW, 100MW and 50MW respectively and they are expected to deliver a positive climate impact by avoiding a total of 168.3K tons of carbon equivalent per year. 

Climate Bonds view: The main business of the issuer is R&D into large scale wind turbines and core components, as well as manufacture and maintenance of wind turbines. The issuer has been approved by the regulator to raise CNY1bn green bonds in total, so we expect to see more green bonds from MingYang coming to market.

UiTM Solar Power Sdn Bhd (MYR222.3m/USD56.8m), Malaysia, issued a green SRI sukuk comprised of 17-tranches, the longest with an 18-year term. UiTM Solar Power is a commercial arm of Universiti Teknologi MARA and is the first green sukuk issued worldwide by a University. The deal will finance a 50MW utility solar power plant in Gambang, Pahang, Malaysia. The plant is expected to become operational in November 2018.

Climate Bonds view: It’s encouraging to see the pool of green sukuk issuers expanding and Malaysia again taking a lead amongst ASEAN nations.
 

Yangzhou Traffic Industry Group (RMB500m/USD78m), China, issued a 5-year green bond. The deal benefits from an external review from Lianhe Equitor (not publicly available). Proceeds are to be allocated to clean public transportation in Yangzhou, China, including electric and hybrid vehicles. It will be used to fund clean transport procurement (87%) and capital for maintenance and replacement of worn out parts (13%). The aim is to fully replace diesel-fuelled public transport with cleaner substitutes. This would improve fuel efficiency and reduce air pollution by lowering emissions of CO2, NOx and PM10.

Climate Bonds view: We observe a strong commitment by the local government to support clean transport. The investment has a positive impact to reduce GHG emissions and air pollution associated with transport.

Zhongyuan Bank (CNY1.5Bn/USD240m), Hong Kong, issued a 3-year green bond to finance four wastewater treatment projects in China. The facilities could potentially treat up to 1130 tons of wastewater per day, which would significantly decrease water pollution and improve water availability in the region. More broadly, the framework includes four eligible categories: clean transportation (29%), pollution and waste control (28%), ecological protection and climate change adaptation (24%) and energy efficiency (19%).

Climate Bonds view: We welcome that Zhongyuan Bank has provided estimated percentage allocations per category for its green bond program. While there may be slight differences in actual allocations, the disclosed expectations provide a reference point for investors and an indicator for funding priorities.

Zürcher Kantonalbank (CHF210m/USD209m and CHF115/USD115) issued a 7-year green bond with an initial close and immediate tap and has thus become the first Swiss bank to come to market. The deal was assigned a GB1 Green Bond Assessment by Moody’s. Proceeds will be allocated to a portfolio of green loans for energy efficient buildings made up of private mortgage loans (61%), commercial real estate (25%) and housing cooperatives (14%).

To be eligible, new buildings must have obtained a Minergie certificate, a 2000-Watt Area certificate, or at least an “A” in the Swiss energy performance certificate GEAK. Refurbished buildings must have obtained a Minergie certificate for refurbishments, a GEAK Plus energy efficiency class “C”, or measures to improve energy efficiency.  Moody’s GBA notes that 90% of loans qualify under the Minergie standards and that buildings with a 2000-Watt Area certificate have not yet been included in the green pool.

Climate Bonds view: The Minergie certification scheme is based on reaching a threshold level in its three performance criteria: energy efficiency, materials and comfort. This ensures a high link between certificate level and energy efficiency of the building. The GEAK standard is the official Swiss building energy certificate, which reflects the efficiency of the building’s envelope and energy usage. The certificate’s classes go from “A” to “G”, where “A” is the most efficient.

Repeat issuers - 24th April to 18th May

• Rhode Island Infrastructure Bank: USD17.7m

• EIB: USD1.5bn

• World Bank (IBRD): HKD1bn/USD127m

• Ygrene Energy Fund (GoodGreen): USD340.5m (PACE ABS)

• District of Columbia Water: USD100m

• Kommuninvest: SEK3bn/USD343m

• NIB: EUR500m/USD598m

• Adif Alta Velocidad: EUR600m/USD717m

• Manulife Financial: CAD600m/USD464m

• Massachusetts Water Resources Authority: USD22m

• Vasakronan: NOK150/USD18m

• Bazalgette Finance: GBP175m/USD236m

• EIB (tap): AUD150m/USD112m

• New York State Housing Finance Agency (Certified Climate Bond): USD99m

• FlexiGroup (Certified Climate Bond): AUD81.3m/USD60.7m

• Bank of America: USD2.3bn

April trends

Pending and excluded bonds

We only include bonds with at least 95% proceeds dedicated to green projects that are aligned with the Climate Bonds Taxonomy in our green bond database. Though we support the Sustainable Development Goals (SDG) overall and see many links between green bond finance and specific SDGs, the proportion of proceeds allocated to social goals needs to be no more than 5% for inclusion in our database.

Green bonds in the market

• New Jersey Environmental Infrastructure Trust – closing 22^nd May

• California Statewide Communities Development Authority – closing 23^rd May

• Renovate America/Hero Funding – closing 23^rd May (PACE ABS)

• African Development Bank – closing 24^th May (social bond)

• Landshypotek Bank – closing 25^th May

• Japan Retail Fund Investment Corp – closing 25^th May

• Obvion STORM 2018-GRN – closing 30^th May (RMBS)

• City of Palo Alto – closing 5^th June

Investing News

Sixty major institutional investors representing both asset owners and managers have written an open letter, published in the Financial Times, to the oil and gas sector calling for faster action to reduce their emissions and ‘clarify how they see their future in a low-carbon world.’

Morgan Stanley commits to financing USD250bn in low carbon solutions by 2030.

Solactive joins forces with UBS to launch a range of development bank bond indices.

Barclays launched new loans product to help businesses meet working capital needs related to green projects.

Costa Rica bids to abolish fossil fuels and become the world’s first decarbonised country.

California conducts first state-wide US insurance investment climate risk study.

Lloyds Banking Group launched GBP2bn scheme offering discounted financing to commercial bank clients investing in a low carbon future.

Newton Investment Management launches its first sustainable fixed income fund.

Green Bond Gossip

The Basque government is planning to issue a 10-year sustainability bond.

Stora Enso recently launched its Green Bond Framework with eligible categories including sustainable forest management, energy efficiency, renewable energy and waste management.

Eolica Mesa La Paz proposed green bonds to finance an onshore wind farm in Mexico have been assigned an E1/91 Green Evaluation Rating by S&P Global Ratings.

Bancoldex has obtained a Second Party Opinion from Sustainalytics for its Social Bond Framework. The issuer is preparing to launch its debut social bond on the Colombian Stock Exchange. The bank has also announced it will no longer finance public transport vehicles that operate on diesel and will seek to stimulate and finance cleaner energy options. 

Reading and Reports

The International Renewable Energy Agency (IRENA) published its “Global Energy Transformation: A Roadmap to 2050” report, which states that renewable energy needs to be scaled up at least six times faster if the world is to meet the Paris Agreement goals.

Legal firm White and Case have just published a paper on sustainable and green securitisation. At six pages, a compact summary.

The ADB has released Promoting Green Local Currency Bonds for Infrastructure Development in ASEAN+3. Available here.

Climate Bonds Reports:

"The Green Bond Market in Europe" report examining the latest green bond market developments in Europe both at a regional and country level.

“Green Infrastructure Investment Opportunities Indonesia” report, launched at Indonesia’s Green Finance Summit, highlights infrastructure investments that could be funded with green bonds and green sukuk.Sponsored by the Climate Works Foundation and developed in partnership with Pembiayaan Investasi Non-Anggaran Pemerintah (PINA), a project of the National Development Planning Agency (BAPPENAS), and PT. EBA Indonesia, this one is not to be missed.

Moving Pictures

Watch how American cities are taking advantage of an untapped energy supply.

Here’s how Ethiopia’s new Reppie Facility turns waste into energy, clean water and bricks.

Watch Alstom’s Coradia iLint - the world’s first hydrogen electric powered commuter train currently being tested in Germany.

Climate Bonds has released the 2^nd in our “Choose your Future” series of of 30 sec video clips. Don’t miss it.

‘Till next time,

Climate Bonds
 

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Disclosure: Some organisations named or linked to in this blog post are Climate Bonds Partners. A full list of Partners can be found here.