OVERVIEW – USD 35.4bn green bonds issued in H1

Jul 18, 2016 15:07 CEST by Tsvetomira Tsanova

July 18 – Roughly USD 35.4 billion (EUR 32bn) of green bonds have been issued in the first half (H1) of 2016, according to data by the Climate Bonds Initiative (CBI).

The figure compares to less than USD 20 billion issued in H1 2015 and, in several weeks, year-to-date green bonds issuance could surpass the result for the whole of 2015.

Annual green bond issuance rose from USD 11.5 billion in 2013 to USD 37 billion in 2014 and to USD 41.8 billion in 2015. The CBI’s target for 2016 is USD 100 billion.

The long-term forecast is even more positive. Bloomberg recently cited Citi banker Michael Eckhart as saying he expects green bonds to reach annual issuance of hundreds of billions post-2020 and eventually become a trillion-dollar market.

The potential, too, is huge. In the fifth “Bonds and Climate Change: State of the Market in 2016” report, the CBI says the climate-aligned bonds universe now amounts to USD 694 billion outstanding, including USD 576 billion of unlabelled bonds and USD 118 billion of labelled green bonds. Low carbon transport accounts for USD 464 billion, or 67% of the total, and clean energy follows with a 19% share of the pie, equal to USD 130 billion.

“This report shows that the large scale harnessing of bonds and other forms of debt based capital towards climate and carbon goals is within reach,” says Climate Bonds CEO Sean Kidney.

“Green bond based capital to fund infrastructure projects are now an established model. As countries look to turn their INDC commitments into climate plans the report shows that green and climate resilient transport, urban development, water and energy projects are already being financed by green bonds and can be scaled up.”

“The biggest challenge now is for policy makers and investors to develop models that simply accelerate the flow of investment.”

RECENT BONDS FOR RENEWABLES

Several large green bonds, the proceeds of which (in full or in part) will support renewable energy projects, were issued in the second quarter of 2016.

Axis Bank Ltd (BOM:532215) of India’s USD-500-million green bond will go to finance and refinance “high quality green assets”. These include wind and solar projects, low carbon buildings and low carbon transport.

Netherlands-based transmission system operator (TSO) TenneT Holding BV issued a EUR-500-million (USD 570m) inaugural Green Schuldschein that supports investment in three offshore wind transmission projects in Germany.

TenneT also launched and priced a EUR-1-billion dual tranche green bond issue, again to finance offshore wind transmission projects in Germany.

Dutch state-owned financial institution ABN AMRO Bank NV issued a EUR-500-million certified green bond. Proceeds will finance mortgages of highly energy-efficient homes, loans for solar and/or energy improvement upgrades for existing homes and sustainable commercial property.

The AUD-500-million (USD 380m/EUR 344m) “Westpac Climate Bond” by Aussie bank Westpac Banking Corp (ASX:WBC) will finance renewables and low carbon commercial buildings.

US utility Southern Power issued EUR 1.1 billion worth of senior notes to finance wind and solar photovoltaic (PV) projects.

Westar Energy Inc (NYSE:WR), Kansas’ biggest electric utility, issued USD 350 million of bonds for the 280-MW Western Plains Wind Farm, which is under construction.

The Nordic Investment Bank issued a EUR-500-million environmental bond, the French region Ile de France issued a EUR-650-million sustainability bond and Turkey’s development and investment bank Turkiye Sinai Kalkinma Bankasi (TSKB) issued a USD-300-million sustainability bond.

In Sweden, the City of Gothenburg and forestry cooperative Soedra each issued a SEK-1-billion green bond for climate change-related and environmental projects. Property company Wallenstam issued a SEK-400-million green bond to refinance wind projects.

We just reported that the New Development Bank (NDB) is issuing a CNY-3-billion (USD 448m/EUR 405m) green bond to finance projects in the BRICS countries.

Also in July, Bank of China (HKG:3988) raised USD 3 billion by issuing five tranches of green bonds in different currencies.

Italian utility Alperia issued EUR 225 million in green bonds to support the South Tyrol-focused energy company’s green investments, including to refinance its buy of several hydropower plants (HPPs).

(USD 1 = EUR 0.905)

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