Highlights:

• Certification issuance at monthly record high: USD6bn
• Debut Certified Climate Bonds from Auckland Council, KBC and NAB’s Low Carbon Shared Portfolio platform
• Largest solar securitisation to date issued by Vivint Solar (US)
• 18 debut issuers from 9 countries in June
• Fannie Mae published Green MBS deals for April and May: USD3.7bn

Stop Press! Webinar - The Green Bond Pledge– Joint US Briefing with CDP. What Issuers, cities and Municipalities need to know. Thursday 26th July. 12:00 PM EDT/09:00 AM PDT/17:00 PM BST Register here.
 

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

June at a glance

Green bond issuance in June totalled USD14.9bn, bringing year to date volume to almost USD80bn or half of the record 2017 issuance of USD161bn. The monthly issuance represents a 12% increase year-on-year, and Fannie Mae’s Green MBS deals from June have yet to be included.

Certified issuance reached a new monthly high at USD6bn – 40% of June volumes – with debut Certified Climate Bonds coming from Auckland Council (New Zealand), KBC (Belgium) and NAB Trust Services Limited (Australia). Sustainalytics verified the majority of deals (40%), followed by Zhongcai Green Financing (26%). Overall, 89% of June deals benefited from an external review, and 73% of the reviews included a Second Party Opinion.

Over half the issuance came from financial corporates. Top issuer was the world’s No.1 bank, ICBC from China, accounting for 16% of monthly volume, followed by DNB Boligkreditt (12%) and TenneT Holdings (10%). Energy keeps topping use of proceeds allocations at 48%, with Buildings and Transport at 26% and 14% respectively.

China has continued to lead the country rankings, representing 26% of monthly issuance compared to 8% in 2017. The remaining issuance came from Developed Markets, with over a third of volumes coming from the US, Norway and Australia combined.

> 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

Auckland Council (NZD200m/USD136m), New Zealand, issued a debut senior secured green bond – the first green bond from New Zealand local government and second in short order from the Shaky Isles following a Certified transaction from Contact Energy.  

The Auckland retail bond is also New Zealand’s first green bond to obtain a Pre-Issuance Certification under the Climate Bonds Standard. It is secured by a charge over all current and future rates revenues of the Council, on a pari pasu basis with other Council bonds.

The bond proceeds will be used for rail infrastructure electrification, particularly passenger trains, that meet the Climate Bonds Standard Low Carbon Transport Criteria. However, the Green Bond Framework includes a wider range of eligible sectors, including renewable energy, low carbon buildings and upgrades meeting at least standards such as NABERSNZ excellent, low carbon transport (buses, bus rapid transit, commuter rail, hybrid cars with a GHG emissions threshold of 75 gCO2/passenger), water and waste management, sustainable forestry, adaptation and energy efficiency projects related to the categories.

EY provided the Pre-Issuance Verification Report.

Auckland Council’s bond takes New Zealand’s green bond market total to USD1.5bn, with 100% Certified issuance.

KBC (EUR500m/USD582m), Belgium, issued a 5-year Certified Climate Bond, becoming the first Belgian financial corporate to enter the green bond market. The inaugural deal obtained certification under the Solar, Wind, Marine Renewable Energy, Low Carbon Buildings (Residential) Criteria of the Climate Bonds Standard. Proceeds will finance solar, onshore and offshore wind, as well as loans for new residential properties in the Flemish region. To be eligible, properties must comply with the requirements of the Flemish Region’s building code from 2014 or later (specifically, E-level ≤ 60) and the first loan drawdown must have occurred after 1 January 2016.

In Belgium, new or renovated buildings have to fulfil Energy Performance requirements and the most important requirement is the E-Level. This is defined as the annual primary energy consumption of the property divided by a reference consumption. The lower the E-Level, the more efficient the property. The minimum required by law in Belgium is E-Level<100, so an E-Level of <60 is quite efficient.

Eligible categories under the Green Bond Framework include geothermal energy, sustainable biomass and waste to energy, low carbon transport, waste management and recycling, water management and sustainable land use. On the property side, it allows for green energy loans for retail clients, where at least 50% of home improvements enhance energy performance, and for loans on commercial real estate, where the property is in the top 15% in terms of energy performance for the country, or buildings have obtained at least LEED Gold, REEAM Very Good or HQE Excellent certification.

Sustainalytics provided the Pre-Issuance Verification Report.

NAB Trust Services Limited (AUD200m/USD148m), Australia, issued notes secured on the NAB Low Carbon Shared Portfolio. The closed-end investment vehicle holds up to 70-75% of a pool of eight AUD-denominated loans. The loans were originated by NAB to fund seven existing wind and large-scale solar projects in Australia and partially sold down to the investment vehicle. The underlying assets are eligible projects under the Climate Bonds Standard Solar and Wind Criteria and were verified for inclusion in the NAB Climate Bond portfolio. NAB retains and has committed to hold the remaining portion of the loans to ensure alignment of interest with investors.

The underlying assets backing the NAB LCSP Notes were verified by DNV GL, who provided the Pre-Issuance Verification Report.

NAB has continued the best international practice approach of 100% Climate Bonds Certification that characterises multiple green bond issuance from Australia’s banking sector. Well done!  

New issuers

Alexandria Real Estate Equities (USD450m), a US REIT, issued a debut senior unsecured green bond with a 5.6-year tenor. Proceeds will finance new, existing or upgraded buildings that have are expected or have obtained a minimum LEED Gold certification.

Climate Bonds view: Obtaining external reviews and establishing a reporting process is best practice in the market and it would be good to see issuers measuring up.

Huneng Tiancheng Financial Leasing (CNY400m/USD62m), China, issued a 3-year green private placement. Proceeds will be used to finance and refinance purchases of wind turbines which are going to be leased to several wind farm operators in China.

Climate Bonds view: Financial leases are often used by businesses for expensive equipment, providing a finance solution for small and medium sized companies operating large scale low carbon projects. We support the use of green bonds by financial leasing companies to fund the purchase of green assets such as wind turbines or solar panels in their arrangements with actual operators (lessees).

Kunshan Public Transport (CNY280m/USD42m), China, issued a 4-tranche debut green ABS (longest dated bond: 3 years). The deal features three senior tranches totalling CNY260m and a subordinated tranche of CNY20m. China Chengxin Credit Rating Company awarded the deal a G-1 green rating (review not publicly available). The issuer will use bus fare receivables from more than 200 routes as underlying collateral for the deal and all proceeds will be allocated to the purchase of low carbon emission buses and fleet operations.

Climate Bonds view: This is the 3^rd green ABS issued by a bus operator in China. Wuxi Communication Industry Group and Guiyang Public Transportation issued the same type of deal to upgrade local fleets.

Mitsubishi Estate (JPY10bn/USD91m), Japan, issued a 5-year green bond, which benefits from a Sustainalytics Second Party Opinion and achieved a GA1 Green Bond Assessment from R&I (Japan). Proceeds will finance the construction of the Tokyo Tokiwabashi Project Tower-A, which will comprise mainly offices, stores and parking. The project is expected to receive a 4 or 5 star rating under the DBJ Green Building Certification.

Climate Bonds view: A 4-star DBJ Green Building Certification is on the high end of the certification scale. Targeting top-level energy performance would be a further benefit.

Nacka Kommun (SEK500m/USD57m), Sweden, issued a 4-year green bond, which benefits from a CICERO Second Party Opinion (not publicly available). The municipality’s Green Bond Framework lists a range of eligible categories including renewable energy assets, clean transport, waste and water management, adaptation and energy efficiency measures that reduce energy consumption by at least 25%. For new buildings, the eligibility criteria are: certification of at least Miljöbyggnad Silver, BREEAM/BREEAM in-use Very Good or the Nordic Swan Ecolabel, or at least 25% lower energy consumption per m² compared to current regulations. Building upgrades need to target at least 35% reduction in energy consumption KWh/m²/year to qualify.

Climate Bonds view: This is the second Swedish municipality to enter the green bond market in 2018. Local governments now account for USD2.5bn or 17% of the country’s total green bond issuance.

Ontario Power Generation (CAD450m/USD339m), Canada, issued a 30-year debut green bond, which benefits from a Sustainalytics Second Party Opinion. The deal will finance the construction of new run-of-river hydro projects or upgrades/modernisations/maintenance of existing hydro.

Specific eligible projects identified by the issuer include:

• Refinancing the construction of the Peter Sutherland Sr. Generating Station – 28 MW hydroelectric station on New Post Creek (Ontario);
• Refurbishing the Ranney Falls Generating Station to add a 10MW unit, expected to become operational in Q4 2019.

The Green Bond Framework also includes solar and wind under the renewable energy category, transportation efficiency and electrification, industrial efficiency eco-efficient products. Nuclear technologies and fossil fuel-based power generation are explicitly excluded from the eligibility criteria.

Climate Bonds view: The power density and GHG emissions for the new Peter Sutherland Sr. Generating Station have not been disclosed at this stage. We will keep monitoring the impact reporting for this information in the future.

Placer County Public Financing Authority (USD40m), California, issued a two-tranche USD35m green US Muni bond and a USD5m green private placement, all with a 20.3-year tenor. According to the prospectus, bond proceeds will be used to refinance outstanding loans and revenue bonds financing the County’s mPower Placer Program. The program is the equivalent of a PACE program and aims at financing renewable energy, energy efficiency and water conservation improvements in residential and commercial buildings.

Climate Bonds view: This is the first US Muni using green bonds to finance its PACE program. We hope to see more municipalities following suit to scale up PACE loan availability.

Svenska Handelsbanken (EUR500m/USD583m), Sweden, issued a 5-year senior unsecured green bond, which benefits from a CICERO Second Party Opinion. Proceeds can be allocated to renewable energy, clean transport, waste and water management, green buildings or sustainable forestry. Green buildings can qualify if certified at Miljöbyggna Silver, BREEAM-SE Very Good, BREEAM-in-use Very Good, LEED Gold, Svaven or better, or if they have 15% lower energy use than required by the applicable national building code. The eligibility requirement for large-scale forestry (>1500ha) is FSC or PEFC certification, while small-scale forestry (50-1500ha) needs to be compliant with the Swedish Forestry Act.

Climate Bonds view: For forestry related assets, we take into account the sustainability of both small and large holdings. The Climate Bonds Forestry Criteria– still in public consultation – acknowledge that smallholders may not be able afford an external certification and set out specific requirements to demonstrate compliance with the mitigation and resilience components of the Criteria.

The Forestry Stewardship Council (FSC) definition of small and low intensity managed forests (SLIMF) in Sweden is holdings of up to 1000 hectares. The issuer’s definition of small forestry holder exceeds this threshold. However, the Swedish Forestry Act provides us with sufficient assurance of the sustainable management of the holdings. In the future, we would like to see eligibility criteria for smallholders without FSC/PEFC certifications including specific requirements on soil health, water management, fire management, riparian areas protection, biodiversity management, species selection and chemical use, as set out in the public consultation document of the Forestry Criteria.

Vivint Solar (USD811m)​, USA, issued a two-tranche USD466m solar ABS backed by a portfolio of 47,860 leases and PPAs. The portfolio consists of 95% Power Purchase Agreements (PPA) and 5% lease agreements by aggregate discount solar asset balance (ADSAB) of Host Customer Solar Assets. On the same day, the issuer issued USD345m privately placed solar asset-backed notes.

Climate Bonds view: This is the largest solar securitisation to date. Solar ABS issuance in 2018 to date already represents 80% of 2017 volumes. We hope to see more solar deals coming to market.

Deals issued before June 2018

BKS Bank (EUR3m/USD3.2m), Austria, issued a debut green bond with a 6.2-year tenor in February 2017. This makes it the first Austrian commercial bank to enter the green bond market.

The bond proceeds were earmarked for a loan from BKS Bank to power company Hasslacher Energie GmbH to finance the replacement of an existing small hydropower plant on the Liesser river in the state of Carinthia, Austria. The new plant increased the power output from 1MWh to 1.8MWh and has a higher energy performance. It became operational in 2017 and generates around 10GWh annually. According to RUF’s SPO, Hasslacher Energie has also implemented measures to minimize the environmental impacts of the project, such as management of erosion risk, residual water flow and biodiversity conservation.

Climate Bonds view: Modernising existing hydropower assets has lower potential of triggering negative environmental impacts compared to the construction of new assets. The SPO provides some assurance on the measures undertaken by Hasslacher Energie to limit environmental risks. However, the issuer does not set out a reporting process aimed at disclosing the actual impacts of the projects. In the future, we would like to see more details regarding the power density or emissions (gCO2/kWh) of the asset.

Envision Energy Overseas Capital Co. Ltd. (USD300m), China, issued a 3-year green bond in April 2018. There is limited information describing the use of proceeds. However, Envision Energy is the 2^nd largest Chinese wind turbine manufacturer, so the assumption is the proceeds will be used for wind turbines.

Climate Bonds view: We include this issuance in our database based on the assumption that proceeds will be allocated to relevant green assets. However, we will keep looking for more details on allocations.

Greenworks Lending (USD75m), USA, issued a C-PACE ABS in September 2017. The privately placed securitisation is exclusively backed by US commercial PACE assets. C-PACE programs allow financing of energy efficiency improvements for a variety of property types, including office buildings, manufacturing facilities and hospitals. The improvements include a mix of energy-efficiency and renewal energy upgrades, including solar-panel installations.

Climate Bonds view: This is the first, and so far only, C-PACE securitisation. PACE take up has been mainly for residential.

Nanjing Metro (CNY1.2bn/USD188m), China, issued an 11-tranche green ABS in May 2018. Lianhe Equator provided the Assurance report (not publicly available). The originator, Nanjing Metro Resources Development Co., is wholly owned by Nanjing Metro and operates as a property developer and manager. The ABS is secured on rents and receivables from commercial properties along the metro lines and from shops and advertisements in stations. All proceeds will be used to finance metro construction in Nanjing City.

Climate Bonds view: We are happy to see the first metro operator from mainland China using a land value capture model to finance the metro projects. It follows Hong Kong’s MTR Rail + Property model where MTR receives exclusive property development rights around stations/lines and is able to finance rail and public finance projects by leasing or selling the land at an enhanced value.

Sogn Og Fjordane Energi (SEK500m/USD62m), Norway, issued a 10-year green bond in May 2018. CICERO provided the Second Party Opinion. Proceeds are slated to finance hydro, wind and related infrastructure, as well as energy efficiency enhancements to grid infrastructure, including connection of renewable energy to distribution networks, upgrades to the national distribution networks and smart grids. As noted in CICERO’s SPO, since renewable energy makes up 98% of Norway’s electricity mix, investing in grid infrastructure does not raise the risk of fossil fuel lock-in.

Climate Bonds view: We agree with CICERO in regard to grid-related investments. For hydro assets, it would be good to see examples of identified eligible projects and their power density ratio or emissions (gCO2/kWh).

> Climate Bonds has convened a Technical Working Group to develop low energy transmission, distribution and storage criteria for green bond investment. More information available here. 

June repeat issuers

• EIB: AUD250m/USD186m
• Iberdrola: EUR750m/USD867m
• IFC: PHP4.8bn/USD90m
• ICBC: HKD2.6bn/USD331m; USD400m (two tranches)
• Kungsleden AB: SEK200m/USD23m
• LBBW Landesbank Baden-Wuerttemberg: EUR500m/USD581m
• New York State Housing Finance Agency (Certified Climate Bond): USD117m
• NRW.BANK: EUR500m/USD580m
• Renew Financial: USD152m (two tranches)
• Republic of France (tap): EUR4bn/USD4.7bn
• Solar Mosaic (four tranches): USD318m
• Vasakronan: SEK300m/USD34m
• Vellinge Municipality: SEK150m/USD17m

Repeat deals prior to June 2018

• Asian Development Bank: HKD100m/USD13m (30 April 2018)
• Atrium Ljungberg: SEK250m/USD28m (3 May 2018)
• Deutsche Hypo: EUR50m/USD62m (30 January 2018)
• Fannie Mae: USD3.7bn (April-May 2018)
• Humlegarden Fastigheter AB: SEK700m/USD79m (28 May 2018)
• Jernhusen AB: SEK1bn/USD119m (17 April 2018)
• Mitsubishi UFG: JPY10bn/USD93m (17 April 2018)

June 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

• KommuneKredit: closing 5 July
• Raiffeisen Bank International AG: closing 5 July
• Province of Quebec: closing 6 July
• Sarana Multi Infrastruktur (SMI): closing 6 July
• Lietuvos Energija: closing 10 July
• North American Development Bank: closing 24 July

Investing News

Colombia’s Supreme Court has ruled that Colombia's Amazon is an "entity subject of rights", which means that the rainforest has been granted the same legal rights as a human being.

Following the recommendations of the Green Finance Taskforce, the UK will set up a Green Finance Institute in London.

Egypt’s Financial Regulatory Authority and IFC started a formal dialogue on green bond guidelines to develop the country’s green bond market.

In early June, the IFC and Bank of Lao PDR, the central bank of Laos, introduced concepts on credit policy aiming to support the development of the country’s sustainable finance.

Fidelity Investments rolled out its Fidelity Sustainability Bond Index fund.

Macquarie Capital is launching the Green Investment Group in North America with the aim of financing the development of renewable energy schemes and pooling together smaller projects to attract investments from institutional investors.

The United Nations aviation agency approved new standards needed to implement the 2016 global agreement to limit emissions from international flights.

Green Bond Gossip

Ireland is looking into issuing sovereign green bonds later this year.

Kenya Pooled Water Fund is planning a green bond this year to fund Kenyan water utilities. 

Encevo Group published a Green Schuldschein Framework and it benefits from Sustainalytics’ Second Party Opinion.

Microsoft is working with Greenwich Financial to structure a whole new breed of renewable energy financing.

The Fiduciary Duty in the 21^st Century programme will collaborate with the PRI and Finance for Tomorrow to develop a French roadmap for sustainable finance, which will be published in November 2018 at the UNEP FI's Global Round-Table and Finance for Tomorrow's Climate Finance Day.

Reading and Reports

Mckinsey’s article “The new rules of competition in energy storage” estimates the potential cost reductions in energy storage and explores opportunities for the energy market.

MSCI’s analysis suggests that the “E” and “S” aspects in ESG hold an important role in differentiating performers among companies with robust financial traits.

Commerzbank published a white paper “The Belt & Road Initiative: Changing the behaviour and perceptions of corporate China”, which examines how China’s Belt and Road Initiative is influencing trends in Chinese outbound M&A, exports, financing and risk management.

Liz Farmer writing in Governing gives a good run down of green developments in the US muni scene.

Speaking in Da-Nang at GEF-6 Vietnamese Prime Minister Nguyễn Xuân Phúc has emphasized Vietnam’s commitment to achieving both Paris NDC goals and the SDG 2030 Agenda as part of national development plans.

Moving Pictures

Catch up with our recent Indonesia Green Infrastructure Investment Opportunities report - presentation and audio are available - don't miss it! 
 

Innovations in energy generation – a selection from LinkedIn

Take 45 seconds to have a look at the world’s first electric jet.

Watch how Coppe Subsea’s machine turns waves into energy.

This vertical turbine in Istanbul generates energy by harnessing wind created by passing vehicles.

See how Pavegen’s tiles turn footsteps into electricity.

Learn how skyscrapers could soon be generating power with see-through solar cells.

‘Till next time,

Climate Bonds

Bloomberg reports new issuance via London Branch of giant Indian bank

State Bank of India, India’s largest banking institution has announced plans to issue an inaugural USD benchmark green bond in the Reg S market. Green Banking and Sustainability have long been areas of priority for the lender and in an early delineation of this approach, SBI had enunciated its Green Banking Policy a decade back. 

The green bonds are in alignment with the pre-issuance requirements of the Climate Bonds Standard Version 2.1 issued by the Climate Bonds Initiative. KPMG India has issued an independent limited assurance statement and CBI has Certified that the issue of the bonds will meet the relevant criteria set by the Climate Bonds Standard Board, in each case with respect to the SBI's Green Bond Framework.

The proceeds from the issuance of the Notes will be applied towards investment in Eligible Green Projects as per the SBI’s Green Bond Framework.

The bank has appointed Bank of America Merrill Lynch, BNP PARIBAS, Citigroup, Crédit Agricole CIB, HSBC, SBICAP and Standard Chartered Bank to manage the issuance.

We understand global investor calls are being scheduled for the planned issuance to reach out to potential investors.

More to come,

Climate Bonds

India is turning green

Next week in London, Climate Bonds is holding a forum on the huge green finance opportunities opening up as India’s national energy and climate plans develop.

Driving the Next Stage of Green Finance: India-UK Dialogue 2018 takes place on Monday 16 July in the City of London, at the offices of Willis Towers Watson (51 Lime Street, EC3M 7DQ), from 10:00-13:30 BST followed by lunch.

Who should attend?

Emerging Markets managers and investors, DCM, Infrastructure and Infrastructure Debt Specialists, ESG and Sustainable Portfolio Managers, Direct Investment Specialists, Underwriters and Project Finance specialists...

Is this you?

Who’s behind it all?

Driving the Next Stage of Green Finance: India-UK Dialogue 2018 is organized by the Climate Bonds Initiative in partnership with the Federation of Indian Chambers of Commerce & Industry (FICCI) and the City of London's Green Finance Initiative (GFI), with the support of the Foreign & Commonwealth Office (FCO) and the India Green Bonds Council.

It’s the culmination of six months of work within India this year including roundtables, seminars and close cooperation with local stakeholders.

How do I Register:

Spaces are limited but registrations are still open for the two-hour event.

For the agenda and more details visit the event website.

Presenters include senior representatives from:

• State Bank of India
• Indian Renewable Energy Development Agency
• Rural Electrification Commission of India
• Hinduja Group
• NABARD, the National Bank for Agriculture & Rural Development in India
• CLP (India)
• Dewan Housing Finance Limited

Keynote Speakers:

• Arun Kumar Verma, Joint Secretary at the India Ministry of Power
• Rita Roy Choudhury, Vice-President at the Federation of Indian Chambers of Commerce & Industry (FICCI)
• Arunabha Ghosh, CEO of the Council for Energy, Environment and Water (CEEW)
• Rob Ward, Deputy Director, Global Financial Markets & Member FSTIB, HM Treasury
• Sean Kidney CEO, Climate Bonds Initiative

The Last Word

There’s no doubt that financial cooperation is increasing between the UK and India and that green finance is firmly on the agenda. If you would like to be part of India’s green transformation, register for the event and don’t miss the chance to learn about the increasing investment opportunities in India.

Register now.

See you next Monday,

Climate Bonds

H1 highlights:

• USD74.6bn of issuance
• 670 green bond issues with 491 from the USA, 36 from Sweden and 35 from China
• 156 issuers from 31 countries
• 81 market entrants from 25 countries bring the total number of green bond issuers to 499
• 48 green bond markets reached, including three H1 additions: Indonesia, Iceland and Lebanon
• Lithuania brings the number of sovereign green bond issuers to 7
• June issuance was strong with 44 deals in 14 countries and 19 new issuers

See notes at the end of the blog for further details.

Download the full report here.
 

H1 at a glance

Green bonds for the first half of 2018 came from 156 issuers and totalled USD74.6bn, representing a 4% increase versus H1 2017.

Certified Climate Bonds accounted for 13% of volumes, up from 9% in H1 2017. June saw a new record for monthly certification issuance at USD6bn, with Certified deals coming from Australia, Belgium, China, New Zealand and Norway.

H1 2018 also saw a surge in covered bond issuance: new deals accounted for over 70% of cumulative covered bond figures. To date, 85% of green covered bonds finance low carbon buildings. In Q2 2018, Landshypothek Bank issued the first green covered bond secured on FSC-certified forest assets.

China drove Q2 issuance from emerging markets at 80%, followed by Indonesia and South Korea at 7% each. Overall, emerging market green bonds (including supranationals) represent 28% of H1 volumes, versus 25% in 2017.

We welcomed sovereign issuance for four months in a row, with the latest debut sovereign green bond coming from the Republic of Lithuania. July has started with yet another re-opening of France’s sovereign Green OAT for an additional EUR4bn.

Local government green bond H1 volume decreased as US Muni issuance fell

Green bonds from local governments totalled USD2.1bn in H1, or 3% of issuance, down from 9% in 2017. H1 deals came from 17 issuers from four countries, with new entrants accounting for 30% of volumes.

Since US Muni bonds account for over 70% of worldwide cumulative local government green bond issuance to date, the drop in H1 2018 volume inspired us to conduct some further analysis.
 

*2012 through 30 June 2018

Scaling up US Muni green bond issuance

US Muni green bond issuance dropped in H1 2018. This is in line with a wider trend in US Muni issuance. The passing of the Tax Cuts and Jobs Acts of 2017 by Congress in December 2017 resulted in a major alteration to US tax law. This has impacted the issuance of refunding bonds in particular, according to SIFMA monthly data.
 

We conducted a scoping exercise to identify climate-aligned US municipal entities in the water, waste, transport, land use and renewable energy sectors, i.e. in key sectors from the Climate Bonds Taxonomy. 1,436 issuers with USD264bn in bonds outstanding were identified.

Water is the largest climate-aligned theme, but resilience financing, waste management and land use could all add diversity to the green bond market.

> Climate Bonds will soon publish its first US Muni briefing with a sector analysis outlining potential issuers which could help boost issuance, particularly in several climate-aligned categories - watch this space.

Underwriters league tables

Q2 league table shows Bank of America Merrill Lynch (BAML), Crédit Agricole CIB and Citi in the first three spots.
 

Listing venue league table

From Q2 2018, Climate Bonds Initiative will issue a listing venue league table for green bonds on a quarterly basis. As of H1 2018, USD260bn worth of green bonds have been listed on stock exchanges, accounting for 60% of the overall green bond market.
 

Download the full report here.

‘Till next time,

Climate Bonds

Notes:All charts and analysis are based on preliminary figures for H1 2018 issuance volume and number of deals, pending the inclusion of Fannie Mae Green MBS June deals and twelve deals still under assessment for inclusion in the CBI green bond database. Hong Kong is counted as a separate country as it is classified as a developed country according to MSCI’s Market Classification whereas China is classified as an emerging market.

REGISTER NOW at http://greenindia-uk.climatebonds.net/register

Join us on Monday (16 July) at Willis Towers Watson (51 Lime St, London, EC3M7DQ)

The line-up ---------

10:00               Registration (free tea and coffee courtesy of WTW - too good to miss)

10:25-10:45     Intros

Sean Kidney, CEO, Climate Bonds Initiative – moderator (yes, you get me as a free bonus!)

John Collier, Divisional Director, Willis Towers Watson

10:45-11:05     Financing India’s Green Transition: Challenges; Options for Scaling Up

Arunabha Ghosh, CEO, Council for Energy, Environment and Water. (He's a guru!)

11:05-11:25     Industry and government

Arun Kumar Verma, Joint Secretary, Indian Ministry of Power – policy that is delivering (they are beating their humungous national renewable energy targets)

Param Shah, Federation of Indian Chambers of Commerce and Industry (FICCI) – organizing Indian enterprise to scale up

Rob Ward, HM Treasury – how the UK can make it all happen

11:25-11:30   State of the Indian Green Bonds Market

                               Karthik Iyer, Climate Bonds Initiative

11:30-13:00    Green debt opportunities in India (the real stars of the day):

State Bank of India

National Bank for Agriculture and Rural Development (NABARD)

Hinduja Power Projects

Indian Renewable Energy Development Agency (IREDA)

Rural Electrification Commission

India Infrastructure Finance Company Limited (IIFCL)

13:00-14:00     Lunch - where you get to have intimate conversations with green bond issuers

See you there,

Sean

There is only 7 days left to comment on the Climate Bonds Standard Forestry Criteria.

Public consultation closes on Friday 20^th July.

These Criteria have been developed through extensive consultation with our Forestry Technical Working Group (TWG) and Industry Working Group (IWG).  We welcome any feedback or comments you have.

Which documents can I review?

Here are the resources that you can look at:

1. Forestry Criteria Summary – 2 page, high level summary of the Criteria
2. Forestry Criteria Document – full detail of the Criteria
3. Forestry Criteria Background Paper – full detail of the Criteria and rationale for the decisions made

Webinars were held during public consultation, which you can still re-watch online here:

Public consultation ends on the Friday 20^th July 2018, so make sure you take the chance to give your valuable feedback!

‘Till next time,

Climate Bonds

Guest Post by Michael Paparian, former California Deputy State Treasurer and long term environmental policy and environmental finance advocate. Mike is Climate Bonds representative in California.

As I write this, I’m breathing the smoke from yet another intense California fire. Although I’m over 50 miles away, we’ve been warned to stay indoors to avoid health problems. This fire is approaching 100,000 acres burned; a milestone that has been met all too often in recent years.

Our California fire season used to be mainly in the late summer and fall, after a dry spell. It’s now approaching year-round, as California becomes hotter and drier due to climate change.

It’s no coincidence that 2017 was the second warmest year in California’s record. 43 people lost their lives in California in 2017 due to fires which consumed over 1.3 million acres and resulted in $180 billion in suppression, insurance and recovery costs. Very large fires used to happen rarely, but now happen with regularity. Fifteen of the twenty largest California fires since 1930 have happened after 1999.

As California builds and finances the infrastructure for the future, new fire stations are clearly an essential part of the mix and with the state embracing green finance principles; it’s no surprise that the latest local financing for fire stations was accomplished with green bonds.

This is a small, real economy example of green bonds financing the infrastructure needed in a climate challenged world. 

Sub-national Action on the Global Agenda

Sub-national government use of green bonds is increasing dramatically and so is their recognition of the link between infrastructure finance, climate resilience and adaptation.

The Green Bond Pledge launched in March by ex-UN climate chief, Christiana Figures, is a way to demonstrate local commitment to discussing and addressing climate impacts on infrastructure while assuring that project financing uses green bonds where applicable.

It’s another step for cities and municipalities in connecting their climate action conversations with their capital raising strategies and balance sheets.

This is already happening in California where state and local government agencies issued more than $4.15 billion in green bonds last year; surpassing all previous years. The bonds are helping finance everything from sustainable water, fire stations and mass transit projects to energy efficient hospitals, green schools and climate-resilient infrastructure.

Overall a record USD12bn of green municipal bonds were issued across U.S. in 2017 with New York State finishing the year ahead of California in the Top 10 list out of the 20 states who issued green.  They stand out among the lower 48 states.

Yet, green bond leadership at the local level, particularly in U.S. with its huge muni bond market, isn’t woven more broadly into local climate action agendas.

The Global Green Bond Surge

2017 saw a wider global surge in green bonds. For the first time, close to $160 billion in green bonds were issued globally.

But, is the growth fast enough to tackle our climate needs? Not yet, though there is hope. 

Gothenburg, Sweden received awards as a trail-blazing early issuer of green bonds for green projects. Cape Town is using green bonds for clean water and electric buses. Mexico City issued a green bond for various sustainability projects, hence, local governmental leadership examples are emerging country by country.

At the COP23 Climate Summit in Germany last fall, mayors and city representatives from local governments came together to show world leaders their commitment to accelerating climate solutions. Several federations of local agencies have been facilitating these efforts, with not-so-catchy acronyms like: R20, ICLEI, C40, Under-2 Coalition, Compact of Mayors, UCLG and more.

These groups showcased innovative steps to reduce fossil fuel use, create sustainable cities and accelerate their national climate agendas. From the U.S. the “We are Still In” Coalition showed that actions at the local and state level can make up for the present lack of national leadership.

"We can draw from the power and enthusiasm of local and regional leaders in the mission to tackle climate change.” said Prime Minister of Fiji and COP23 President Frank Bainimarama, speaking to local leaders at the COP23 Summit.  “So many of you have already demonstrated how to make decisions and implement them."

Resilience and adaptation at a local level

What’s common at many sub-national levels is a growing realization of the need for resilience in both local communities and their infrastructure.

For some communities, water quality, scarcity and efficiency have come to the fore, in others, flood mitigation, storm surge and ocean rise is a growing threat. Transport, sustainable development and clean energy are common themes in almost every city.

What’s lagging in many of the local activities is a connection and commitment to green finance.

The critical link is finding the right pathways to aligning balance sheets and infrastructure investment with climate action outcomes.  

Why a Green Bond Pledge?

Just as many local governments have committed to 100% renewable energy, 100% green buildings and other measures over time, local governments can increasingly link their climate ambition with investment via a commitment to issuing more of their bonds as green bonds.

This is the space that the Green Bond Pledge is designed to open up.

The Pledge helps bring the political and climate policy objectives of cities and municipalities closer to financial and investment areas.

The Pledge allows local governments to demonstrate to investors and the financial markets that they are committed to best practice related to their infrastructure projects.

This is a change that can be made fairly easily. With a staged, progressive and prudent implementation into capital raising policies, it is possible, overtime, to integrate local capital allocation and investment decisions with climate goals.  

The Last Word

Local governments are well positioned to lead their peers, national governments, corporations and the finance community by committing to a broad green bond policy objective for their infrastructure.

Supporting the development of green finance is consistent with the stance global leaders are taking with regards to international finance, banking sector and big pension and sovereign wealth funds.

If the green pipeline grows wider and longer, investors will respond.

Local governments have demonstrated their influence in terms of moving the marketplace for clean energy, clean transportation, green buildings and more. 

These local governments can also now urge the financial markets to shift more rapidly towards climate solutions by saying “yes” to the Green Bond Pledge.

In March Christiana Figueres from M2020 placed a challenge before all bond issuers: city, corporates and banks, to begin the green transition in their borrowing programs, by committing to the Pledge and start a new a new green finance conversation.  

The Global Climate Action Summit, (GCAS) in San Francisco in September provides an ideal platform for city and municipal governments to announce their support for the Pledge before an audience of the world’s biggest investment funds.

I can’t think of a better time to respond.

Mike Paparian

Want to know more?

Webinar: 26th July, 2018

12:00 PM EDT/09:00 AM PDT/17:00 PM BST

This webinar, co-hosted by CDP and Climate Bonds Initiative, will introduce the Green Bond Pledge. Speakers will outline the Green Bond Pledge’s role to foster debate around finance for low carbon, climate resilient urban infrastructure as a part of cities’ plans to help the US to meet its Paris Accord emissions goals.

We will also share information on the upcoming GCAS and Green Bond Pledge announcements in support of maintaining climate momentum across states and cities.

Webinar Registration is here.

The Green Bond Pledge will also be highlighted as a major commitment local governments can make to the Global Climate Action Summit Sept. 13-14 in San Francisco. For information on the Climate Action Summit, see www.globalclimateactionsummit.org

First Climate Bonds US muni briefing paper identifies USD264bn outstanding bonds from climate-aligned municipalities

Substantial opportunities to expand US muni green bond market

What’s it all about?

Climate Bonds Initiative has conducted a scoping exercise to identify potential US Muni green bond issuers. We looked at specialised municipal entities which operate in climate aligned sectors: water, waste, transport, renewable energy and land use. These are key sectors under the Climate Bonds Taxonomy. We also consdiered the upcoming bond maturities of these entities. 

We acknowledge that there are many municipal entities issuing bonds for climate-aligned projects but for the purpose of this scoping exercise, we honed in on those specialised agencies focussed on climate solutions. (pure-plays).

The analysis reveals USD250bn of outstanding bonds from specialised US municipal issuers, which are climate-aligned, but not labelled ‘green’. 

Refinancing needs from these issuers offer an opportunity to label bonds as green, improve discoverability for investors and consolidate US municipals’ position in the green bond market. USD14bn has already been issued by climate-aligned US Muni entities in green bond format.

Download the full briefing here.

US Muni bond issuance plummeted in H1 2018

Thirty one US states have issued green bonds to date. The top 3 states account for 64% of US Muni green bond issuance: New York ranks first (USD7.2bn issued as of end Q2 2018), followed closely by California (USD6.9bn). The third largest is the pioneering Commonwealth of Massachusetts (USD2.9bn), the first state to issue a green bond in 2013. 

However, overall US Muni green bond issuance dropped in H1 2018 compared to 2017. This is in line with a wider trend in US Muni issuance. The passing of the Tax Cuts and Jobs Acts of 2017 by Congress in December 2017 resulted in a major alteration to US tax law, and this has negatively impacted the issuance of refunding bonds in particular, according to SIFMA monthly data.

SIFMA data shows a very clear trend: US Muni issuance decreased 22% from Jan-May 2017 (USD162bn) to Jan-May 2018 (USD127bn). While issuance of new capital bonds has increased 19%, refunding bond issuance has plummeted by 58%, dragging overall numbers down. The trend is even more apparent for Q1 2018: refunding bond issuance was 65% below the Q1 2017 level.

Green bond growth opportunities

1,436 climate-aligned issuers were identified with USD264bn in bonds outstanding (these include USD14bn in green bonds outstanding already issued by 23 pure-plays). Over half the volume (54%) is attributable to 50 pure-plays with USD1-10bn of outstanding bonds.

Issuers from the transport and water sectors account for most of the related bonds. The two issuers with outstanding debt exceeding USD10bn are also from these sectors and account for a quarter of volume. The smaller issuers are primarily from the water industry.

At USD170bn, water accounts for 64% of the identified climate-aligned bond universe. It also features the highest number of climate-aligned issuers: 1,141 pure-plays. Transport comes in second with USD78.5bn outstanding (30%), with the remaining 6% (USD18.5bn) split between waste, energy and land use. Transport sector climate-aligned issuers have, on average, the largest amount of bonds outstanding (USD1.5bn), while water sector pure-plays have, on average, USD149m of bonds outstanding.
 

The Last Word & the Green Bond Pledge 

This research uncovers many avenues for municipals to become a more dynamic sector in the overall US green bond market, especially in the areas of water, waste, energy and land use where the market has not yet seen regular green bond issuance.

Whilst several US municipals have issued green bonds in all these sectors, entities identified in this study could build on their peers’ early work to grow the market. These issuers could also seize the opportunity to join the Green Bond Pledge signatories and demonstrate their commitment to financing environmentally beneficial and climate-resilient projects. 

You can find our latest opinion piece on the Green Bond Pledge A Climate Finance Framework for Cities & Sub-nationals – Linking action agendas to financing strategies here. 

It is worth noting that these sectors are also being financed by municipalities that fund a variety of projects without setting up dedicated authorities, departments and similar divisions. Green labelling could be even more beneficial for them to signal their climate-conscious policies and programmes.

Download the full briefing here.

‘Till next time,

Climate Bonds

MARKET NEWS

Financial Times, French green debt fetches a premium from investors

Research conduced by the Association for Financial Markets showed that investors paid a premium for the French sovereign green bond in a latest sign that ‘a pricing differential is emerging’ for the GB market.

The green bonds were sold at maturities of 21 and 22 years but fetched yields that were comparable to conventional 16-year French debt, AFME found.

South China Morning Post, French asset manager Amundi to create high-yield green bond market through US$1.42 billion fund, Georgina Lee

World’s largest targeted green bond fund focused on emerging markets has an ambition to boost allocation to green bonds by 100% by bringing into the market a new class of high-yield green bonds.

[…] Today, most of the green bonds are either triple, or double-A rated, offering low yields. By bringing emerging market issuers we will deepen the green bond market, and in turn attract more investors,” Jean-Marie Masse, chief investment officer at IFC.

Governing, Green Gold Rush, Liz Farmer

The story of the US muni green bonds market in a magazine widely read by state and local government officials in the USA.

(…) the [green] bonds have the potential to attract a fresh set of investors at a time when tax reform has created fewer incentives for banks and insurance companies to buy municipal bonds. Some even think that green bonds will someday be cheaper for states and localities to issue than general obligation debt.

AM Watch, VIDEO: Interview with Climate Bonds Initiatives' Sean Kidney

In an video-interview with AM Watch Sean Kidney talks about grim future world faces because of the cumulative effects of climate change and lists actions that need to be undertaken to stand a change of tempering the worst of it. The question of “how do we engineer this” brings the conversation to green bonds, that as Kindey says, have to be a “hop, skip and jump story”.

Global Capital, European sovereign DMOs not convinced by green bonds, Jon Hay

Still only few countries issued a sovereign green bond. Government officials discussed the matter at the Euromoney Global Borrowers and Bond Investors’ Forum in London.

Among large banks, issuing green bond now seems almost de rigueur, but that is certainly not the case for governments.

The Market Mogul, Green Bonds: too much of a good thing?, Flavia Micilotta

Author outlines discussions that took place at the Environmental Finance’s Fixed Income & ESG and Green Bonds Europe Conference where an official from Belgian Debt Agency suggested a creation of green credit rating for sovereigns to facilitate the issuance process.

Providing a clear ‘green’ rating alongside a country rating would also stimulate countries to continuously improve their performance, Leclercq suggests. Capitalising on the positive message green bonds give today, linking concrete policy dynamics with sustainability objectives of corporates and governmental administrations, creates a clear virtuous circle.

The Edge Markets, Bonds: Renewable energy sector performing well despite setbacks, Kuek Ser Kwang Zhe

Sean Kidney in an interview with The Edge Markets’ journalist explained reasons for slow down in green bonds issuances in the first half of the year and talked about possible impact of Trump administration’s actions on the global renewable energy sector.

Kidney, however, does not think Trump’s actions will have a significant impact on the global renewable energy sector. Even in the US, several states have continued to pump in more efforts in their cities to prepare for the future.

The Asset, ESG Podcast: Guidance needed to nurture the green bond market

Rahul Ghosh, senior vice-president, ESG and green bonds, Moody’s Investors Service, explains why government policy is key to spurring growth

Environmental Finance, Green bond market to break $200bn barrier in 2018

40% of EF’s Fixed Income Conference attendees that participated in a digital poll believe that green bond market will grow above USD225bn this year.

And 88% of respondents said the green bond market needed to eventually converge around a single standard

Global Capital, Green covered bond supply expected to rise, Bill Thornhill

Findings of latest Standards & Poor report in Global Capitals.

The proportion of green covered bonds in the market could rise substantially as regulators push for greener finance and banks focus increasingly on financing of green assets according to report published this week by Standards & Poor.

GreenBiz, How common standards could spur growth in green finance, Leonie Schreve

Author, Head of Sustainable Finance at ING, makes a case for common standards in the green bonds market.

While issuers and investors have managed admirably with a voluntary patchwork of existing frameworks to date, a new set of commonly adopted standards is key to the continued expansion of green markets. If these standards put the emphasis on process over content, it should create better conditions for green markets to thrive in future.

Renewables Now, Work starts on green bond criteria for low-carbon grids

In June, Electrical Grid Technical Working Group under Climate Bonds Standard started work on developing low energy transmission, distribution and storage criteria for green bond investment.

The aim of the criteria will be to help determine when grid infrastructure projects and assets are consistent with the Paris goal of keeping warming below 2 degrees C and are eligible to be certified under the Climate Bonds Standard.

ASIA NEWS

Euromoney, China fuels green bond take-off, Allen Cheng

A captivating story of the green finance innovation in China intermingled with ‘behind the scenes’ of China green finance. We get an insight into work of ICBC’s research team performing mathematical modeling on the impact of green finance on China’s economy or E&Y’s 70 green finance accreditation and verification experts.

Chinese authorities have not only set up a national financial system for issuing green finance but have also worked with industry to establish mechanisms of accreditation and verification to ensure that green-bond issuers are keeping their promises by implementing their environmental pledges, particularly the reduction of carbon emissions and pollutants.

The Business Times, Can green bonds help power emerging Asia's fixed income markets?, Monish Mahurkar

Author of the article remarks that only few Asian countries outside of China issued green bonds and lists steps necessary to undertake to start up this market in “emerging Asia”.  He also argues for “a systematic adoption of ESG factors and scoring frameworks by investors.”

(…) incorporation of environmental, social and governance (ESG) factors through consistent scoring frameworks is the next frontier in mainstreaming sustainability across the fixed income space. This represents an opportunity for both issuers and investors in the Asian bond markets.

Nikkei Asian Review, Green bonds take root in Asia, Takeshi Kihara

Nikkei looks briefly at Asian nations’ efforts to finance transition to a low carbon economy and points to local investors’ craving for reliable green finance products.

They [green bonds] are finding a receptive audience. A survey by the United Nations-backed Principles for Responsible Investment found that institutional and other investors named climate change as the greatest long-term challenge driving their decisions, more so than resource depletion and population shifts.

Live Mint, Building India’s green finance ecosystem, Kaku Nakhate

Author, Bank’s of America India country head, says that green infrastructure in India needs to be funded by innovative financial instruments such as green bonds and lists a specific recommendations for regulatory change that would allow this market to flourish.

[…] the current regulatory restrictions allow insurance companies and pension funds to invest only in AAA-rated bonds. This regulatory framework should change in order to provide a fillip for green bond issuances. To deepen the green bonds markes in India, the government should actively consider making them tax-free.

Global Trade Review, Lenders eye potential of Asia’s sustainable finance market, Finbarr Bermingham

Following his conversations with industry experts, author of the article shares a number of interesting insights into the green finance landscape in Asia Pacific.

Meanwhile, Agrocorp, another trader, is monitoring the market closely. “Something that’s of interest to us is that certain players have been able to obtain discounted financing by making commitments to sustainable sourcing, ensuring practices comply with environmental standards. That’s something we’re looking to see if we can do ourselves,” Vishal Vijay, head of business development, tells GTR.

The Strait Times, Demand for green bonds set to soar in Asia

The publication cities the Singaporean government executive stressing the importance of standards to boost the investor confidence in the green bonds market.

But while the demand is evident, more clarity is needed in the standards of debt instruments - called green bonds - to boost investor confidence, added Mr Ng, MAS' assistant managing director, development and international group.

COUNTRY NEWS

NIGERIA

In an effort to support the development of a domestic green bond market in Nigeria, CBI alongside FMDQ OTC and the Financial Sector Deepening Africa launched the Nigeria Green Bond Market Development Programme– an event widely covered by media outlets in Nigeria and beyond.

FTSE Global Markets, Nigeria launches green bond market development programme

The Nigeria Green Bond Market Development Programme (NGBMD) was launched today, aimed at the development of a domestic green bond market in Nigeria and fostering the issuance of corporate/non-sovereign green bonds

CPI Financial, Nigeria Green Bond Market Development Programme lauches to boost African Green Finance, Matthew Amlôt

The Programme is part of a wider cooperative partnership between FMDQ OTC, Financial Sector Deepening Africa (FSD Africa) and Climate Bonds Initiative to grow sustainable and green investment within the Nigerian debt capital markets.

The Guardian Nigeria, Ambode seeks more OPS involvement in fight against climate change, Helen Oji

He [Lagos state Governor, Akinwunmi Ambode] said that the green bond programme if well articulated and implemented would unlock the potentials of the Nigerian renewable energy sector and put it on a sustainable growth trajectory.

Business Day, FMDQ, CBI, FSD Africa launch Green Bond programme, Endurance Okafor

The Programme will support the development of guidelines and listing requirements for green bonds in Nigeria, develop a pool of Nigeria-based licensed verifiers to support issuers, facilitate engagement with extant and potential issuers and investors (…).

ProShare Intelligent Investing, FMDQ Partners FSD, Climate Bonds to Launch Nigeria’s Pioneer Green Bond Market Development Programme

According to her [The Director, Climate Bonds Initiative Justine Leigh-Bell] “ We are very excited about this significant milestone. Working with FMDQ and FSD Africa will provide a platform to open up the Nigerian economy to a wider investor universe as we commence our journey to the local capital markets by entrenching financial instruments such as Green Bonds”. 

SINGAPORE

The Monetary Authority of Singapore (MAS) and IFC signed a Memorandum of Understanding in which they committed to work together to grow the green bonds market in Asia.

The Straits Times, MAS partners IFC to spur green bond market in Asia, Jamie Lee

In a memorandum of understanding signed on Thursday, the two agencies said that would encourage green bond issuances by financial institutions in Asia by raising awareness and knowledge of finance professionals on green finance issues.

The Asset, Singapore partners with IFC to accelerate growth of Asian green bonds

“We believe Singapore, as the rising financial hub of Asia, is well placed to catalyze the funding of low carbon investment and financing in the region and be at the forefront of this growing asset class." says Vivek Pathak, IFC's director for East Asia and the Pacific in a joint media statement.

LeapRate.com, IFC and MAS to accelerate growth of green bond asset class in Asia, Valentina Kirilova

Mr. Ng Yao Loong, Assistant Managing Director, Development & International Group, MAS, added: “Green bonds are gaining traction in Asia. The region now contributes about a quarter of global green bond issuances annually. MAS is pleased to partner IFC to help promote Asia’s green bond journey.(…)”

HONG KONG
 

Xinhua, Hong Kong's gateway role particularly important in green finance: monetary authority, Xiang Bo

Hong Kong role in channeling the finance from international investors to China’s mainland stressed in a report released by Hong Kong Monetary Authority.

Hong Kong has always been the gateway between the Chinese mainland and the rest of the world, serving as the preferred location for international investment in the Chinese mainland bond market as well as for mainland issuers to raise bond financing, and the same applies when it comes to green bonds, said a report (…)

The Asset, ‘From experience’ green adds to long-term asset value, says HKMA

Chief executive of one of the world's largest asset owners (HKMA) urged attendees to the 2018 Green and Social Bond Principles annual conference to get involved in green finance saying that investing in green is a driver of long-term value.

"Contrary to some perception that investing in green undermines return, our experience shows that many green investments that are good for the environment can also be good for investors over the long term," 

South China Morning Post, Hong Kong’s dim sum bond market to pivot towards eco-friendly fundraising, Georgina Lee

With the decline in the dim sum market, Hong Kong government continues to emphasize that its banking sector welcomes issuers from China interesting in bringing Chinese green bonds to foreign investors.

Earlier this year, the government introduced a HK$800,000 per issue subsidy for issuers that use its third-party verification “green finance certification scheme” run by the government-owned Hong Kong Quality Assurance Agency (HKQAA).

COVERAGE OF CHOSEN MAY’S GREEN BOND ISSUANCES

CPPIB – FIRST GREEN BOND FROM A PENSION FUND

World’s first green bond from a pension fund issued by Canadian CPPIB was a focus of media attention in June.

Financial Times, CCPIB to become first pension fund to issue green bond, Jennifer Thompson

The CPPIB plans to invest more than C$3bn in renewable energy and said wind and solar, sustainable water and waste management projects as well as buildings designated ‘green’ would be eligible to receive investment from whatever the eventual bond raised.

Bloomberg, Canada Pension Sells $1.2 Billion Green Bond in Global First, Maciej Onoszko

The pension fund, which boasts the highest credit score at the three largest rating firms, priced C$1.5 billion ($1.15 billion) of green bonds Wednesday in what it called the first green bond sold by a pension fund globally.

BNN Bloomberg, CPPIB breaks record with green bond offering, Maciej Onoszko

CPPIB’s new debt will dethrone Ontario’s securities due 2025 as the country’s largest green bond in Canadian dollars.

City A.M, CPPIB becomes world's first pension fund to issue green bonds, Josh Mines

CPPIB, which handles a total of $356.1bn assets, says the sale will put more than C$3bn into the renewable energy sector through environmentally friendly products.

International Financing Review, CPPIB branches out into Green territory

Investments & Pensions Europe, CPPIB to increase investments in renewables via green bonds issue

Poul Winslow, a senior managing director and global head of capital markets and factor investing, said: “The issuance of Green Bonds is a logical next step to CPPIB’s investment-focused approach to climate change, and we are pleased to be a pioneer amongst pension funds in this regard.

Pensions & Investments, Canada Pension Plan Investment Board to issue green bonds, James Comtois

The sale of the bonds will provide CPPIB with additional funding as it plans to increase its holdings in the renewable energy sector and energy-efficient buildings.

Global Capital, CPPIB lines up for green debut, Lewis McLellan

The Canadian agency has mandated CIBC Capital Markets and RBC Capital Markets to run the books for a fixed rate Reg S Canadian dollar denominated green bond.

PV Magazine, Canada Pension Plan Investment Board world’s first to issue Green Bonds, Marian Willuhn

The growing acceptance for renewable energy assets from sovereign wealth funds indicates a solid and healthy business climate for renewable energy, and could have positive effects for the industry in the future.

ICBC CERTIFIED BOND

Global Capital Asia, ICBC follows bank FRN trend for green deal, Morgan Davies

Industrial and Commercial Bank of China’s London branch issued a $1.5bn-equivalent green bond on Tuesday becoming the third big Chinese bank to hit the offshore debt market with floating rate notes in less than a week.

The Financial, ICBC London Lists $1.58bn Equivalent Green Bond

The green bond, part of ICBC’s $10 billion MTN programme, is the largest ever green bond listing on London Stock Exchange and the first Chinese issuance on ISM.

The Asset, ICBC prints second green bonds in dual currency FRNs, Chito Santiago

The offering has obtained a Climate Bond Initiative certification from the Climate Bonds Standard Board on 28 May 2018.

Renewables Now, London Stock Exchange welcomes its biggest green bond from China's ICBC

"The record size and London listing from ICBC is a pointer for large institutional investors to the scale of green finance opportunities increasingly evident in China & now appearing throughout Asia as emerging economies address their climate, green infrastructure and sustainable development challenges," said Sean Kidney, chief executive of the Climate Bonds Initiative.

AUCKLAND COUNCIL CERTIFIED BOND

Scoop Business, Auckland Council to launch $200m green bond offer to fund electric trains, Sophie Boot

Auckland Council will open a $200 million green bond offer next week, which it says will be used to buy more electric trains and equipment and refinance existing debt from electric trains.

The SpinOff, Auckland Council wants you to help them buy new trains, DonRowe

The bonds offered by Auckland Council are Climate Bond Certified, which is a Fair Trade-like labelling scheme for bonds consistent with the 2 degrees Celsius warming limit in the Paris Agreement.

TMB BANK – FIRST GREEN BOND FROM THAILAND

PV Tech, Thai bank issues country’s first green bond raising US$60 million for renewables, Tom Kenning

Major Thailand-based financier TMB Bank has issued the country’s first green bond, with the World Bank's IFC as the sole investor of the US$60 million bond, the funds of which will be used exclusively to finance climate-smart projects, particularly renewable energy.

The Asset, TMB Bank issues Thailand’s first green bond, Chito Santiago

The pioneering green bond offering, announced on 7 June, will expand funding for private sector investments that help address climate change and will provide an alternative source of long-term green finance in the country

Dealstreet Asia, IFC invests $60m in green bonds issued by Thai lender TMB, Mars Woo

The subscription forms part of IFC’s proposed $150-million financing in the Bangkok-based bank, which was established in 1957 as Thai Military Bank.

IFC’S MABUHAY BOND – FIRST PESO-DENOMINATED GB 

Business World, IFC raises $90M via first peso green bond issue

The International Finance Corporation (IFC) has issued $90 million worth of peso-denominated green bonds called the “Mabuhay Bond,” marking its first foray into the peso debt market.

Business Inquirer, IFC issues Mabuhay bonds, Ronnel W. Domingo

“Adding pesos as a new green bond currency supports our goal to strengthen this important asset class,” IFC vice president and treasurer Jingdong Hua said in a statement.

Dealstreet Asia, IFC issues $90m worth of first peso-denominated green bonds, Mars Woo

The green bonds have a 15-year maturity and the IFC said it will use the proceeds to finance the capital expenditure program of the Energy Development Corporation (EDC), an integrated geothermal steam and electric power producer in the Philippines.

Special Webinar Event!  Green Bond Pledge – A briefing for Cities.

Thursday 26^th July 12:00 PM EDT/09:00 AM PDT/17:00 PM BST co-hosted by CDP and Climate Bonds Initiative

Info and Registration here.

Highlights:

• Atlas Renewable Energy issues first Uruguayan green bond
• USD8.9bn green bonds in July so far
• New issuers from Austria, Indonesia, Uruguay and the US

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

At a glance

As of mid-July 2018, monthly green bond issuance totalled USD8.9bn. 27% of deals by count came from emerging markets, including the first green bond from a Uruguayan issuer.

After a two-month absence, sovereign issuance made its comeback with France’s Green OAT fourth re-opening of EUR4bn, accounting for over half of monthly issuance to date.

Government-backed issuance also kept a high pace at 22%, with deals coming from repeat issuers KommuneKredit (Denmark), Lietuvos Energija (Latvia) and NRW.BANK (Germany) and new issuer PT Sarana Multi Infrastruktur (Indonesia).

> 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.

New issuers

Atlas Renewable Energy (USD108.4m)  issued a two-tranche green private placement (longest dated bond: 24 years). The deal achieved GB1 Green Bond Assessment from Moody’s. Proceeds will be allocated to refinancing two solar projects, El Naranjal (50MW) and Del Litoral (16MW), in Uruguay with an off-take arrangement with Administración Nacional de Usinas y Trasmisiones Eléctricas, the state-owned Uruguayan electricity company.

The issuer is committed to reporting annually on the actual generation of the solar plants and CO2 emissions avoided compared to a baseline emissions factor that adjusts over time as the country's grid composition changes.

Climate Bonds view: We welcome the first green bond from a Uruguayan issuer! It’s good to see impact reporting practices adhering to market standards.

Public Service Company of Colorado (USD700m), a US utility company, issued a senior secured bond in two tranches (longest dated bond: 30 years), labelled as “First Mortgage Bonds” and identified as a green bond in the prospectus. The deal is secured by a first mortgage lien on the issuer’s electric utility properties. The prospectus sets out a framework defining eligible green expenditures, management of proceeds and reporting of both proceed allocation and key environmental features of the financed green expenditures. The deal will fund the development, construction and operation of a 600 MW wind generation facility in Colorado at Rush Creek, as well as the related transmission infrastructure.

Climate Bonds view: As the proceeds of the bond are used exclusively to finance eligible green assets, labelling it more prominently as green would have enhanced its visibility. An external review would provide another layer of assurance on the green credentials of the financed projects.

PT Sarana Multi Infrastruktur (IDR355bn/USD25m), State backed Indonesian infrastructure financier SMI, issued a two-tranche green bond (longest dated bond: 5 years). The deal benefits from a CICERO Second Party Opinion. Proceeds will be allocated to refinancing three light rail transit projects, two mini hydro power plants, a water treatment plant and irrigation systems. A new co-power generation power plant has also been proposed for financing under this debut issuance.

Eligible categories under the Green Bond Framework include renewable energy, transport, land use, water, waste and energy efficiency infrastructure improvements targeting at least 10% energy consumption reduction compared to the national average. Energy generation from fossil fuels is explicitly excluded from the framework. The land use category does not set out any eligibility requirements for irrigation systems, and in its SPO, CICERO raises concerns over how irrigation systems may “overdraw water fresh supplies, thereby threatening drinking water sources and fragile ecosystems” and assigns this category a “medium green” score.

Climate Bonds view: We agree with CICERO on the concerns related to irrigation systems and would like to see more details on the types of financed irrigation systems, as well as on the use of the irrigated land. We will keep monitoring this deal’s proceed allocation to ensure that all financed projects are aligned with the Climate Bonds Taxonomy. In particular, if the co-generation facility turns out to be fossil fuel powered the bond may be excluded from our database.

This is the third green issuance in short order from Indonesia following their world first Sovereign Green Sukuk in February. You can find out more in our recent Green Infrastructure Investment Opportunities Indonesia Report. 

Raiffeisen Bank International AG (EUR500m/USD584m), Austria, issued a 3-year green bond, which benefits from a Sustainalytics Second Party Opinion. The bond will finance/refinance existing and future loans in Central and Eastern Europe that fund renewable energy, green buildings, clean transport, water management and related energy efficiency projects/assets. Geothermal projects must have direct emissions below 100gCO2/kWh, while only sustainable biomass sources that do not deplete carbon pools, biodiversity, nor compete with food sources are eligible. Hydropower assets of up to 20MW are also eligible.

Green buildings are required to either have obtained a LEED Gold, BREEAM very good or DGBN/ÖGNI Gold certification, or belong to the country’s top 15% most efficient buildings according to local building codes, building years and EPC certificates. Refurbished buildings must either lead to a twostep improvement in the energy label or a 30% increase in energy efficiency (kWh/m²). Energy efficiency improvements of fossil fuel technologies are explicitly excluded.

Climate Bonds view: The framework defines detailed eligibility criteria for each category, setting a high standard for the green credentials of the financed projects. We would like to see green bond frameworks aiming for a similar level of specific requirements going forward. For hydropower, it would be good to see issuers reporting on power density ratio or annual emissions (gCO2/kWh) of the asset.

New issuers - deals issued prior to 2018

China Power Clean Energy Development Co (CNY800bm/USD116m) issued a 3-year green panda bond in May 2017. CCXI provided the Second Party Opinion (not publicly available). The funds raised were earmarked for the construction and operation of energy-saving and clean-up projects aimed at improving energy conservation and emissions reduction, as well as energy supply infrastructure. The projects will support solar energy development and agroforestry. 

Compared with traditional coal-fired stations, the proposed projects are expected to save around 0.5 million tons of standard coal per year and reduce 0.86 million tons of CO2, as well as reducing nitrogen oxides and sulphur dioxide emissions by 1357.6 tons and 2560.3 tons respectively.

Climate Bonds view: The issuer has the expertise in clean energy generation and we are pleased to see detailed expected environmental impacts of the projects. We encourage issuance that promote clean energy and reduce carbon emissions. However, we would like to see more information on the proposed projects. We also hope that the issuer will keep a close eye on the use of proceeds and put in place a comprehensive reporting regime.

Major West Coast Utility Goes to Global Market with Climate Bonds Certified USD402m Green Municipal Offering First "Put Option" for a Muni Green Bond

What's it all about?

Repeat green bond issuer San Francisco Public Utilities Commission (SFPUC) is seeking both domestic and international interest for its new tranches of Climate Bonds Certified green municipal bonds, of approximately USD402m. 

A Preliminary Official Statement (POS) issued by the West Coast utility provides details regarding USD221.9m Series A and USD180m Series C 2018 of Wastewater Revenue green bonds.

Proceeds will be used to fund selected projects as part of the SFPUC Sewer System Improvement Project (SSIP), including stormwater, flood resilience, sewage treatment, wastewater, and associated control system infrastructure upgrades and is intended to address ageing infrastructure, seismic reliability, combined sewer discharges, rising sea levels and localized flooding. 

Both Series A and Series C bonds have been Certified by Climate Bonds Initiative under the Water Infrastructure Criteria. 

Series A Underwriters are JP Morgan (Senior Manager) and Goldman Sachs & Co. and Siebert Cisneros Shank & Co. as Co-Managers. Series C Underwriters are Citi (Senior Manager), Morgan Stanley and Piper Jaffray & Co. as Co-Managers. 

Certification under the Climate Bonds Water Criteria demonstrates to investors that the issuer has:  

1. Carried out climate vulnerability assessments considering past, present and future climate risks and environmental losses and;
2. Created resulting adaptation and/or mitigation plans.

SFPUC is one of the largest municipal green issuers in US, having previously issued more than USD1.04bn of Climate Bonds Certified green bonds since 2016 and is an early adopter of the Programmatic Certification process for multiple green issuance. 

This latest series A and C bonds will bring their cumulative green issuance to approximately USD1.44bn. SFPUC were recognised in the 2017 Green Bond Pioneer Awards for its leadership in green water bonds. 

A "put option" and international investors 

Environmental Finance reports that the bonds are the first to be marketed to offshore investors by the SFPUC, with interest from the UK, European Union, Switzerland, Indonesia, Japan, Singapore and Taiwan to go for the green 'put option.'  

Debt Manager at SFPUC Richard Morales is also quoted by Environmental Finance in more detail on the raising of the new green debt: 

“It’s our first venture into long-term variable-rate financing, which we wanted to introduce given the size of the utility’s Wastewater Enterprise capital programme [to maintain the City's wastewater infrastructure]."

“We're trying to have as many financing tools so that we can then bring down the cost of delivering the capital programme, at rates as low as possible for our rate-payers. We will be coming to market regularly and with quite some size over the next few years to fund the Wastewater Enterprise capital programme.”

Justine Leigh-Bell, Climate Bonds Director Market Development, sees the potential: 

“SFPUC have been a US leader in the green sphere with their international best practice approach on municipal green bonds. Municipal issuers will increasingly attract attention from global investors and markets with new green muni bond offerings, particularly from the water, urban transport and energy infrastructure space." 

The Last Word 

Cities are looking to replace ageing infrastructure and develop low carbon, more liveable urban communities. There is also a growing realisation that new long-life infrastructure must be both hardened and resilient to deal with the coming climate impacts. 

The latest Climate Bonds Briefing identifies areas where some US municipalities could increasingly label bonds as green, improve discoverability for investors and help consolidate the US municipal sector position in the growing green bond market.

In some municipalities the conversation is yet to get started. 

Writing in a guest post, "Green Bond Pledge -A Climate Finance Strategy for Cities and Subnationals", former California Deputy State Treasurer Mike Paparian outlines how the Green Bond Pledge can be a pathway for cities to begin to align bond issuance and investment with their climate actions. 

Every city and municipality have its own challenges around budgets, balance sheets, and infrastructure.

But they all face a common climate challenge. 

Increasingly matching climate policy ambitions, goals and targets with green finance directions is a practical response. 

'Till next time,

Climate Bonds

Want to know more?

Webinar: 26th July 2018

12:00 PM EDT/09:00 AM PDT/17:00 PM BST
 

This webinar, co-hosted by CDP and Climate Bonds Initiative, will introduce the Green Bond Pledge. Speakers will outline the Green Bond Pledge’s role to foster debate around finance for low carbon, climate resilient urban infrastructure as a part of cities’ plans to help the US to meet its Paris Accord emissions goals.

We will also share information on the upcoming GCAS and Green Bond Pledge announcements in support of maintaining climate momentum across states and cities.

Webinar Registration is here.

The Green Bond Pledge will also be highlighted as a major commitment local governments can make to the Global Climate Action Summit Sept. 13-14 in San Francisco. For information on the Climate Action Summit, see www.globalclimateactionsummit.org

A Climate Finance Framework for Cities & Subnationals 

A joint briefing for Cities from CDP & Climate Bonds Initiative introducing the Green Bond Pledge. 

Launched by Christiana Figueres at the 2018 Climate Bonds Annual Conference in March, the Pledge is a joint initiative developed and designed by international climate finance and environmental groups including Mission 2020, CDP, Ceres, Citizens Climate Lobby, California Governor's Office, California Treasurer's Office, Global Optimism, NRDC and the Climate Bonds Initiative.

Webinar presenters will outline the Green Bond Pledge role to foster debate around green finance for low carbon, climate resilient urban infrastructure as a part of city action plans to help US to meet Paris Accord emissions goals. 

Also on the agenda will be a discussion around how the Pledge can help build momentum across U.S. in the build-up towards the Global Climate Action Summit (GCAS) in California in September.

Register now!

Webinar: Briefing for Cities & Subnationals 

When:Thursday, July 26, 2018 

5:00 pm 
GMT Summer Time (London, GMT+01:00) 

12:00 pm 
Eastern Daylight Time (New York, GMT-04:00)

9:00 am
Pacific Daylight Time (San Francisco, GMT-07:00)

10:00 am
Mountain Daylight Time (Denver, GMT-06:00)

Find out more about the Green Bond Pledge in the guest post A Climate Finance Framework for Cities & Subnationals: Linking action agendas to financing strategies.

Don’t miss this special briefing.

Register today!

‘Till next time 

Climate Bonds 

The second instalment in our briefing series that explores the synergies between climate change, green bonds and the UN Sustainable Development Goals (SDGs).

What’s it all about?

Climate change action will be critical to meet the full set of the UN Sustainable Development Goals (SDGs) in a long-lasting manner.

The first instalment in this briefing series, “Green bonds as a bridge to the SDGs”, set out the basic link between climate action, the SDGs and the green bond market, highlighting the alignment of investments in green bonds with SDGs 6,7,9,11,13 and 15.

This second briefing dives deeper into the linkages between climate adaptation and resilience and achieving the SDGs.

Key takeaways:

• Integrating climate adaptation and resilience across all infrastructure investment is necessary to meet the UN SDGs.
• Green bonds and other thematic bonds can connect assets to investors. Particularly for water (SDG6), energy (SDG7), transport and buildings (SDG9), sustainable cities (SDG11), climate action (SDG13) and life on land (SDG15).
• Clear definitions and disclosure on climate adaptation and resilience is required, across all sectors and all thematic bonds - green bonds, SDG-bonds, sustainability bonds, ESG-bonds and social bonds.

Check out the full briefing here.

The Last Word

Science-based definitions for both adaptation and resilience need to be integrated into existing mitigation definitions. Clear definitions for both adaptation and resilience will allow more granularity in disclosure, enabling investors to assess to what extent the financed assets can continue to operate over their whole lifespan as the climate changes.

Fostering an understanding amongst investors that climate adaptation and resilience are essential for green and social projects and assets is crucial to achieving the SDGs.

In future briefings we will further explore the environmental, social and economic components of climate adaptation and resilience and how they relate to the SDGs and the bond market. In the meantime, read more in our briefing paper.

‘Till next time

Climate Bonds  

Challenges and Opportunities for the sector were addressed at the meeting as part of the Global Agribusiness Forum 2018, the world’s largest agri-debate arena.

What’s it all about?

The Climate Bonds Initiative and Sociedade Rural Brasileira (SRB) hosted yesterday a High-Level Executive Dialogue to address the latest opportunities and challenges faced by the sustainable agriculture in Brazil.

The event was held in São Paulo as part of the Global Agribusiness Forum 2018 agenda, with support from the Confederação da Agricultura e Pecuária do Brasil (CNA) and Ecoagro.

Gathered in the WTC Events Center, 40 high-level executives of agribusiness chain discussed new investment channels in low carbon land use practices. Clear opportunities were identified across Brazil’s coffee, sugarcane and livestock chains, where there is a pipeline of sustainable production practices. But as an extremely pulverized sector, we need to develop channeling mechanisms to allow for greater capital flows and aggregation platforms. Securitization, in its different variations, are an important part of the solution, as well as funds and other debt instruments.

Who’s saying what?

João Adrien, Diretor Executivo, Sociedade Rural Brasileira

“Yesterday’s discussion touched on important strategies for increasing financing for Brazil’s Agriculture sector, through green investments targeted towards sustainable and low carbon practices. With the implementation of the Forest Code and with best practices currently being employed by Brazilian producers, agriculture and livestock are prominent sectors for the allocation of these investments. Now we need a project pipeline.”

Thatyanne Gasparotto, Country Manager, Climate Bonds Initiative:

"Holding this event with GAF gave us the perfect platform to raise an important debate with significant representatives of the sector. Brazil has the potential to be a powerhouse for sustainable agriculture, we have the opportunity to make that attractive to investors as well. We cannot deny the challenges of the Brazilian agribusiness, but there are opportunities as well. We believe Brazil has the potential to become a world leader in green finance, especially though its agriculture industry."

The Last Word

This was an important step to strengthen the development of the Brazilian green finance market.

We are beginning to see growing appetite from local investors as well as on the international stage for green products. Brazil is ready to position itself as a green agricultural leader while fulfilling the opportunity to provide the world with sustainable food products at scale.

It’s time to attract international capital flows to fund the development of Brazil’s low-carbon economy.

There’s more to come!

‘Till next time,

Climate Bonds

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

Our China Green Bond Market Mid-Year Report 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 half of 2018, total green bond issuance from China went up to USD13bn, a 14% increase year on year, primarily driven by strong momentum from the private sector. Financial corporates’ issuance accounts for 44%, and non-financial corporates contributed 32% to the H1 total.

The proportion of green bonds that are not aligned with international green bond definitions has increased, making up 28% of the total green bond issuance from China in the first half of the year. On a very positive note, disclosure seems to be less of an issue compared to 2017, with fewer exclusions due to insufficient information on the use of proceeds.

In this report, we elaborate on the Climate Bonds green bond database screening methodology.  The Climate Bonds Initiative screens self-labelled green bonds for inclusion in the CBI Green Bond Database in three steps: first, to identify green-themed, labelled bond; second, to screen the projects or assets for alignment with the Climate Bonds Taxonomy, and third, to evaluate the use of proceeds.

The Climate Bonds Taxonomy provides broad guidance for prospective green bond and climate bond issuers and investors. The aim of the taxonomy is to encourage common definitions across global markets, in a way that supports the growth of a cohesive thematic bond market.

Read the full report here.

We hope you’ll enjoy it!

'Till next time,

Climate Bonds Initiative

气候债券倡议组织与中央结算公司联合发布中国绿色债券市场半年报2018：上半年中国绿色债券发行总额达844亿人民币

最新的中国绿色债券市场半年报现已发布，它介绍了上半年世界第二大绿色债券市场的发展趋势与政策更新。

点此下载英文和中文半年报

2018年上半年﹐中国绿色债券的总发行量为130亿美元 (844亿人民币)﹐同比增长14％，这主要得益于非金融企业的强劲势头。金融企业的绿色债券发行量占上半年中国发行总量的44％，非金融企业占上半年发行总额的32％。

不符合国际绿色债券定义的绿色债券比例有所增加，占上半年中国绿色债券发行总额的28％。从一个非常积极的方面来看，与2017年相比，债券相关信息的披露似乎不再是一个问题，由于募集资金用途的信息不足而被排除在外的情况减少。

在半年报中，我们就气候债券倡议组织中国绿色债券数据库评估方法作出了说明。气候债券倡议组织根据以下3个步骤筛选贴标绿色债券，以纳入气候债券倡议组织绿色债券数据库，包括：识别贴标绿色债券、筛选资产或项目是否与气候债券分类方案一致、评判募集资金的使用。气候债券分类方案为潜在的绿色债券和气候债券发行者和投资者提供了广泛的指导。在气候科学咨询小组的指导下，该分类的目的是鼓励全球市场上的共同定义，以支持统一的主题债券市场的发展。

点此下载英文和中文季报

祝阅读愉快！

气候债券倡议组织

免责声明: 本文所提供的信息不构成任何投资建议，气候债券倡议组织并不是投资顾问。气候债券倡议组织并没未提供任何关于投资优缺点的建议。投资决定完全取决于投资者自身。气候债券倡议组织对任何个人或机构的任何投资以及代表任何个人或机构的第三方机构的任何投资概不负责。

Public support for green bonds continues in the first half of 2018, with more sovereign green bonds, new national guidelines and incentives, green finance strategies under development and action from central banks.

Download our summary of the first half of 2018’s top 5 green bond policy developments and what to expect for the rest of the year. 

Sovereign Green Bond Growth

Sovereign issuance continues to gain momentum this year with Indonesia, Belgium and Lithuania entering the market.

Poland and France also continue their engagement in sovereign green bond issuance with a second green bond of EUR1.2bn from Poland and France tapping its green OAT again in June, totalling EUR14.8bn issued. 

Hong Kong and Kenya have both made commitments to join the list of sovereign issuers soon. 

More national guidelines for green bonds

More countries are developing green bond guidelines in line with international best practices.

This year, Latin America has been leading progress on this front, with Peru’s Green Bonds Guide and Chile’s guidelines that were published along with the launch of a “Green and Social Bond Segment” on the Santiago Exchange. 

The NSE in Kenya has been working on national guidelines as part of the Kenya Green Bond Programme. The SEC in Nigeria is also expected to finalise its regulation on green bonds by the end of the year, where the Climate Bonds Initiative has recently launched the Nigeria Green Bond Market Development Programme in partnership with FMDQ and FSD Africa. 

Map of green bond guidance

The EU Taxonomy on Sustainable Finance and Green Bond Label

The EU is also working on developing a Taxonomy and a label for green bonds. The European Commission launched a Technical Expert Group (TEG) to follow up on its Action Plan on sustainable finance announced in March, and the three legislative proposals that followed. 

We will keep you posted on progress as Sean Kidney, CEO of Climate Bonds, attends the TEG’s monthly meetings.  

Targeted green bond incentives

So far this year, we have seen the launch of a three-year “Green Bond Grant Scheme” from Hong Kong, which will provide up to HKD800,000 (USD102,000) in subsidies for issuers. 

Kenya might be next, where the Capital Markets Authority (CMA) put forward a policy proposal to the national Treasury to extend the current tax exemption for green bonds. 

Governments consults private sector on green finance strategies

Governments are initiating conversations with the private sector to set green finance agendas, often led by finance ministries. Experts have been brought together to advise on the development of green finance agendas in Sweden, UK and Canada. 

Central banks action

The People’s Bank of China has explicitly introduced green bonds in its collateral and macro-prudential policies, with a view to incentivise banks’ green lending.

At the international level, central banks have decided to coordinate action on managing climate-related risks through the Network for Greening the Financial System (NGFS). The network of central banks and supervisors, which currently counts 16 members from Europe, Asia and Africa, held its inaugural meeting in January, and set up a governance structure and work plan focused on 3 work streams: Supervision, Macrofinancial and Mainstreaming green finance.   

The Last Word

The first half of 2018 has seen green bond issuance of USD74.6bn, a 4% increase from H1 2017. The green bonds market is growing, but it needs to grow much faster to meet the 1trillion by 2020 target. 

Public sector action will be key to achieve this kind of scale in the short timeframe. During the course of the year we expect to see more sovereign issuance, subnational commitments through the Green Bond Pledge, and progress towards an international taxonomy. Committed governments will follow with targeted incentives and support schemes to accelerate the pace of growth of green finance. 

We’ll be reporting again at the end of the year. 

Download the H1 update here. 

‘Till next time, 

Climate Bonds 

Highlights:

• USD11.6bn bonds from 24 issuers in July
• First Certified Climate Bond from a Colombian issuer
• Second C-PACE securitisation worldwide
• Fannie Mae publishes Green MBS deals for June: USD2bn
• Updated H1 2018 figures: USD76.9bn
   

> Climate Bonds will release updated versions of the Climate Bonds Taxonomy and Green Bond Database Methodology in August – more details to come, so watch this space!

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

July at a glance

Fannie Mae’s USD2bn Green MBS deals for June have taken our H1 2018 figures to USD76.9bn, 9% up on H1 2017. The US leads country issuance accounting for around a quarter of volumes, followed by China (12%). Supranationals and Belgium each represent 8% of H1 volumes. Use of proceeds distribution remains largely similar for H1 2018 compared to H1 2017: Energy (35%), Buildings (30%) and Transport (16%) still occupy the top three spots for sector allocations.

Green bond issuance in July totalled USD11.6bn, a 9% increase compared to 2017’s monthly figures. Developed markets issuance prevails at 75% when accounting for deals by volume, with France’s sovereign Green OAT tap representing over 40% of the total. Considering the number of deals reveals a different story, with 52% of green bonds coming from emerging markets. China keeps the lead for EM issuance at 17%, followed by Colombia at 9% and Indonesia, Lithuania, South Korea and Uruguay at 4% each.  

For the period January through July 2018, two thirds of green bond issues have a tenor of 10 years or less, 7% up year-on-year. Financial corporates tend to issue shorter-dated deals. However, 2018 to date shows an increased appetite for medium-term debt, with 41% of issues having tenors between 5 and 10 years compared to just 19% in 2017. Sovereigns mainly issue longer-dated deals (10 years or above), but their tenor profile is also diversifying, with almost 20% of bonds having a tenor of 10 years or less in 2018.
 

> 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

Empresa de Energía del Pacífico (COP70bn/USD24m), Colombia, issued a privately placed 12-year Certified Climate Bond, becoming the first Colombian issuer to come to market with a Certified deal. Proceeds will finance the construction of 4 solar power plants across Colombia, located in Yumbo, Bolívar, Chicamocha and Valledupar. The total estimated capacity of the projects is around 200MW.

EY provided the Pre-Issuance Verification Report.

Faro Energy, UK, issued a Certified Climate Bond – deal size and tenor are confidential. The bond will be used to finance distributed solar power projects in Brazil located in Rio de Janeiro, Pernambuco, Minas Gerais and Tocantins Paraiba. The project’s total production is approximately 9,905 kWh/kWp/year.

Bureau Veritas provided the Pre-Issuance Verification Report.

New issuers

Advanced Soltech Sweden AB (SEK150m/USD17m), Sweden, issued a 5-year green bond. CICERO provided the Second Party Opinion (SPO). The deal will finance new solar power stations and/or upgrades and expansions of existing solar projects owned and managed by Soltech’s Chinese subsidiary Advanced SolTech Renewable Energy Hangzhou Co. Ltd. To be eligible, solar power stations must be installed on existing buildings in areas with poor air quality due to high levels of greenhouse gas emissions. In the SPO, CICERO notes that, although it goes beyond the requisites for obtaining a “dark green” shade, providing quantitative metrics of what is defined as “high” GHG emissions levels would provide additional transparency to the eligibility criteria.

Climate Bonds view: We agree.

CleanFund (USD104), USA, issued a debut C-PACE ABS, the second C-PACE securitisation deal worldwide. The PACE Assets are secured by an initial pool of 82 PACE Assessments of commercial properties in California (45), Connecticut (31), Missouri (3), Colorado (1), Ohio (1) and Texas (1). The PACE Assets have a weighted-average (WA) annual interest rate of 6.19% and a WA original term of 22.9 years. The presale report includes a description of the top 5 largest Assessments.

Climate Bonds view: Globally, this is the second C-PACE ABS after Greenworks Lending’s private placement in 2017. Going forward, we would like to see more disclosure relative to the whole pool of assets.

Hang Lung Properties Limited (CNY1bn/USD150m), China, issued a 3-year green bond, which benefits from a Lianhe Equator Second Party Opinion (not publicly available). Proceeds will be used to finance two of the firm’s construction projects, namely Heartland 66 and Spring City 66. Both buildings have obtained a LEED Gold pre-certification and a Green Building Label of two-star or above, which is in line with China’s Green Bond Support Project Catalogue (2015 edition). The issuer estimated detailed environmental impacts, such as reductions in CO₂, SO₂ and NO_x emissions, as well as water usage savings.

Climate Bonds view: It’s good to see that both proposed construction projects have obtained green building certifications. This issuance generates multiple environmental benefits through energy efficiency and reduced water usage. We would like to see more transparency related to the monitoring of proceed allocations and reporting system.

Korean Hydro & Nuclear Power (USD600m), South Korea, issued a 5-year green bond, which benefits from a Vigeo Eiris Second Party Opinion. Proceeds are earmarked for financing and refinancing renewable energy, clean transport and green buildings located in South Korea and overseas.

Run-of-river hydropower plants and hydropower plants with a capacity up to 20MW are eligible, as well as modernisations and upgrades of existing hydro facilities to improve their energy performance and safety. For bioenergy, biomass will be sourced from low-grade wood fibre pellets, sawdust and other wood industry by-products. Properties are required to have obtained a LEED Gold, BREEAM Very Good or an equivalent national standard, such as the Green Standard for Energy and Environmental Design (G-SEED).

Climate Bonds view: This is the second debut Korean green bond issuer to enter the market in 2018 following K-Water's USD300m green bond in May, taking the country’s total cumulative issuance to USD3.6bn. For hydropower projects, we would like to see disclosure on the power density ratios and annual emissions (gCO2/kWh) of the assets.

North American Development Bank (CHF125m/USD126m), supranational (NADB), issued an 8-year green bond, which benefits from a Sustainalytics Second Party Opinion. The deal will finance wind and solar projects, water & wastewater management, waste management and energy efficiency. Examples of potential eligible energy efficiency projects are municipal and commercial buildings upgrades, industrial equipment retrofits and public lighting. Industrial emissions reduction projects are eligible under the waste category.

Climate Bonds view: The framework does not explicitly exclude projects related to fossil fuels. Industrial equipment retrofits and industrial emissions reductions raise a red flag as they could involve the funding of fossil fuel-based technologies. We will keep monitoring the bond’s impact reporting to confirm that allocation of proceeds are aligned with the Climate Bonds Taxonomy.

Repeat issuers

• Bancolombia: COP299bn/USD104m
• CECEP Wind Power Corp: CNY700m/USD104m
• Deutsche Hypo: EUR10m/USD12m
• Fannie Mae: USD2bn (June)
• Qingdao Rural Bank: CNY2bn/USD294m
• Terna: EUR750m/USD881m

July 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

• City of Toronto: closing 1 August
• National Wildlife Federation: closing 1 August
• Industrial Development Authority of Fairfax County: closing 1 August
• San Francisco Public Utilities: closing 9 August
• South Carolina Jobs-Economic Development Authority
• State Bank of India: Certified Climate Bond

Investing News

Foresight completed the acquisition of a 2.5MW operational anaerobic digestion plant in the UK, on behalf of a pension fund.

Ontario Teacher’s Pension Fund invested CAD200m in Stem, a California based energy storage company.

Captor, a Swedish based asset manager, launched Captor Dahlia Green Bond Fund, an actively managed fixed income fund with a focus on green bonds, as well as sustainability and social bonds.

Lead portfolio manager at NN Investment Partners, Bram Boss, states there are the first signs of institutional investors showing interest in the green bond market.

Egypt approved a legal framework to issue green bonds to support the financing of renewable energy and clean transportation projects.

The UK announced a GBP343m Aerospace Sector Deal as part of the Government’s Industrial Strategy aiming at leading the transition to a low carbon aviation industry.

Green Bond Gossip

French state-owned company Société du Grand Paris has set up a Green Euro Medium Term Note program of up to EUR5bn. Proceeds will be allocated to infrastructure and project management of the Grand Paris Express metro system.

Nigeria plans to devise a green bond programme before the end of 2018.

The African Import-Export Bank (Afreximbank) has partnered with Aenergy to support the growth of green infrastructure projects. The two parties will have the capacity to issue at least USD850m worth of green bonds in the next five years.

Gussing Renewable Energy International is planning to issue its debut secured green bonds.

City of Vancouver’s Green Bond Framework received a Sustainalytics Second Party Opinion.

Moody’s assigned a Green Bond Assessment of GB1 to Monash University’s third Certified Climate Bond.

Reading and Reports

McKinsey’s published an article on “How industry can move towards a low-carbon future”.

INEP Finance Initiative published “Navigating a new climate”, the second report in a series presenting the outputs of a collaboration between 16 of the world’s leading banks to advance recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosure. 

The Council on Foreign Relations published a report on “Applying Blockchain Technology to Electric Power Systems” in part as a solution to grid complexity as a result of connecting clean energy and EV charging.

The OECD released their publication on  “Energy Efficiency and Renewable Energy Financing in Ukraine”.

Rienergia has published a series of articles exploring the current and potential future role of hydropower within the renewable energy sector, with a focus on the Italian market:

• Tecnologia: dalle mega centrali idroelettriche al mini e micro idro
• Idroelettrico, per il rilancio bisogna cambiare passo
• L’idroelecttrico ai tempi dei cambiamenti climatici
• Idroelettrico: regolazione e iter autorizzativi

Climate Bonds Reports

Don’t miss our China Green Bond Market Mid-Year Report 2018– available in English and Chinese.

We recently released the second instalment in our SDG briefing series: “Why making infrastructure climate-adapted and resilient will help meet the SDGs”.

“India Green Bond Market: Overview & Opportunities” is our latest country briefing analysing the progress of India’s green bond market and potential avenues for future growth.

Moving Pictures

These solar panels harness energy from rain to generate power by night.

Watch how this wind turbine creates 37 litres of drinking water a day out of thin air.

Take 0:47 mins to discover which country has become the first to divest completely from fossil fuel companies.

Watch how energy efficiency improvements in buildings can cut bills as well as emissions.

Take just 1 minute to discover how Norway recycles 97% of all its plastic drinks bottles.

‘Till next time,

Climate Bonds

"India offers, in the emerging world, the largest market for renewables that follows market principles." 

  Arunabha Gosh, CEO, Council for Energy, Environment & Water 

London: Backdrop for India Investment Forum 

Developing green investment pipelines, building investor confidence and growing London’s role as a centre of green capital were amongst the core issues discussed at the recent India-UK Green Finance Dialogue 2018. Issuers and investors convened to discuss the next phase of market development to meet India’s vast infrastructure, energy and national development goals.  

Attendees included India’s largest bank, the SBI, National Bank of Agriculture and Rural Development (NABARD); India’s leading DFI & agricultural policy bank and the Indian Renewable Energy Development Agency (IREDA) who were joined by London based investor groups and asset managers.  

The event also saw the launch of the India Country Briefing summarising the state of the green bond market as at July 2018 (the report can be found here).

India: Climate, Development and the Investment Challenge 

In his opening comments to the forum Arunabha Ghosh of the influential Council on Energy, Environment and Water (CEEW) put the basic challenge: 

“Money is not flowing where the sun shines the most and the wind blows the hardest.”

Outlining the scale of opportunity, he emphasized, “India offers, in the emerging world, the largest market for renewables that follows market principles.”

Ghosh also highlighted Grid Integration Guarantee (GIG) as one of the policy measures to help meet India’s ambitious 175GW by 2022 clean energy target and amplifying the Indian investment opportunity for the UK. 

Building Confidence 

Rob Ward, Deputy Director, Global Financial Markets, HM Treasury and Param Shah, Director at Federation of Indian Chambers of Commerce and Industry (FICCI-UK) provided the regulatory perspective on mobilising green finance.

Suchit Punnose, from Red Ribbon Asset Management; which has been investing in India for more than a decade, noted that by that by 2030, India could be the third largest economy in the world and with an increasingly influential voice in global and international policy.  

He was assertive about the need to change the narrative around perceived investment risk. He advocated increased engagement between investors seeking emerging market opportunities and issuers seeking long term capital. 

Denesh Srishanker, Senior Investment Advisor from GuarantCo, provided an in-depth understanding of various instruments to manage risk and lower the barriers for large scale investment in India. 

Shrishanker also stressed the opportunity in multisector bonds for the private sector. He pointed to the need to take SMEs into account, especially in the tech industry, stating that there are a large number of SMEs that can become part of the green bond market, with an emphasis on green certification.

A prominent participant, Harald Hirschhofer, Senior Advisor from TCX, addressed the importance of macroeconomic stability and having a forward-looking monetary policy. Focusing on the positive role of standardised contracts, Harald cited that standardized PPAs (Power Purchase Agreements) for solar PV or wind can help reduce legal costs, accelerate project preparation and de-risk projects substantially, leading to future aggregation as they are based on the same or similar contracts.

A Bigger Role for the City 

The day’s second half was chaired by Alderman Alison Gowman from the City of London, with contributions from Sir Roger Gifford, Chair Green Finance Initiative (GFI) and Param Shah, Director of FICCI, UK.  The Indian delegation, led by FICCI, included senior representatives from the National Institute of Public Finance and Policy, Climate Policy Initiative, CEEW, International Finance Corporation, NABARD, IREDA and SBI.

UK participants included UK Climate Investments LLP, HSBC, World Wide Generation, Agvesto Limited, HM Treasury, London Stock Exchange, Dept. for Business Energy & Industry Strategy (BEIS) and other institutional investros and hosts Willis Towers Watson.

Alderman Gowman highlighted during her keynote address that capital markets should be looking at a wider range of investment instruments to meet India’s needs. 

Barriers around, tax, regulation, definitions and role of central and state governments were explored alongside working with the smart cities program as a potential way forward. Applying green finance principles to the growing Fintech sector was also identified as a specific growth opportunity. 

Speakers highlighted the importance of diversifying investment into sectors such as agriculture, transport, green buildings, and circular economy in addition to renewable energy. 

A wide ranging discussion took place on expanding sources of capital including blended capital and bank finance in addition to supply from traditional capital markets. The day’s proceedings were brought to a close by the Rt. Hon. Mark Field, Minister of State for Asia and the Pacific at the U.K. Foreign Office and Sir Roger Gifford, Chair to Green Finance Initiative (GFI). 

The Minister stressed climate change urgency and that technology and green finance have a key role in mitigation, and Sir Roger Gifford commended CBI’s continued efforts to build green investment between the two nations. 

(We appreciate the public thank you)

The Last Word

The Indian market is an untapped opportunity for green finance. Issuers especially SBI, NABARD and IREDA are open and eager to participate in green issuances. 

We think the best characterisation comes directly from two of the key organisers of the forum:

Param Shah, Director, FICCI-UK

“Growth, green growth and India’s huge national development agenda was the backdrop for these discussions with investors. Long term investment partnerships that help build India’s low carbon development path are in the interests of both nations. Continuing dialogue with London based investors will help unlock the capital India needs to achieve these objectives.” 

"We welcome the ongoing efforts by Climate Bonds Initiative, the City of London and the UK Government to build awareness and engagement around the many market based green finance opportunities that exist in India."    

Karthik Iyer, Commercial Director, Climate Bonds Initiative:

“This event reflected many aspects of where the UK-India financial relationship needs to go. The tremendous climate and green development potential that exists in India, the value of partnerships in building long term investor confidence and the vital role of London to bridge the gaps and bring institutional capital and green infrastructure financing together were all prominent issues in the Dialogue." 

“Between now and end 2020 is the time to address these challenges, build a stronger platform for the next decade, with London playing a key role as a financial aggregator and facilitator of large scale capital investment in a green and growing India." 

'Til next time,

Climate Bonds

The India-UK Green Finance Dialogue 2018 was sponsored by Climate Bonds and Federation of Indian Commerce and Industry (FICCI), City of London and kindly hosted by Willis Towers Watson.

Double Boost as Major Green Finance Report Released by Milken Institute