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Green Bonds on London Stock Exchange Page 1 What is a Green Bond? • Green bonds are any type of bond instrument where the proceeds will be exclusively applied to finance or re-finance in part or in full new and/or existing eligible ‘green’ projects. • The key feature of green bonds is the use of proceeds, which are described in the bond’s legal documentation, separately managed within the company, as well as monitored and reported throughout the life of the instrument. • Categories of potential eligible green projects include: Page 2 renewable energy energy efficiency sustainable waste management sustainable land use biodiversity conservation clean transportation climate change adaption, etc. A growing market • With growing investor emphasis on sustainability, green bonds are one of the fastest growing market segments internationally. • $36.5bn of green bonds were issued in 2014, almost tripling 2013 total green bond issuance. • A record of $41.8bn green bonds were issued in 2015 making it the biggest year ever for green bonds. • As of April 2016, $16.8bn green bonds were issued globally1 Source: Climate Bonds Initiative 1 Source: Bloomberg Page 3 Green bonds geography • The green bond market expanded further in 2015, thanks to a wider range of issuers and types of green assets, as well as new geographies. Source: Climate Bonds Initiative Page 4 A diversified issuer base • The UK, China, Germany, Japan, the Netherlands, Norway • 2015 saw a wider range of issuers and types of green and the US have shown significant growth in green bond projects or assets. There was a widening of the type of market size last year. projects financed by green bonds with more proceeds leveraged for other green sectors outside of the renewable • Overall Europe remains the region hosting most green bonds, sustainable water. with nearly USD 18.4 billion issued in 2015 Country Amount ($) Country Amount ($) USA 10bn UK 0.7 Germany 5.6bn Denmark 0.6 Netherlands 4.1 Brazil 0.6 India 1.1 Mexico 0.5 China 1 Japan 0.5 Norway 0.9 Hong Kong 0.3 Source: Climate Bonds Initiative Page 5 energy space, in particular low carbon transport and LSEG and Green Financing • LSEG is a partner exchange of the United Nations Sustainable Stock Exchanges (SSE) initiative. • London Stock Exchange Group’s activity in green financing is focussed on two key areas: fixed income products and information services/indices. Through a range of new initiatives, LSEG intends to broaden its offering and support London in becoming the preferred listing venue for debt and equity Low Carbon Economy (LCE) financial instruments. • Through its FTSE Russell business, LSEG is looking at further opportunities to increase transparency in the green bond market, by providing issuers with a more efficient tool to report on sustainable initiatives, and offering investors a comprehensive product to assess a wide range of financial instruments against an innovative Low Carbon Economy (LCE) framework. Page 6 Green Bonds on London Stock Exchange • LSEG has welcomed 29 green bonds to its markets denominated in 7 different currencies, which have raised approximately $6 billion equivalent. • In 2015, 12 green bonds were listed on LSE – this translated to a 14.5% market share of total green bond on EEA exchanges. • London Stock Exchange has launched a range of dedicated ‘green bond’ segments, offering issuers a flexible range of market models, covering both Regulated Market (RM) and MTF segments, comprising retail and wholesale, and offering the choice of trade reporting, end-of-day and continuous quoting. • No other global exchange has such a comprehensive specialist offering for green bonds. • Issuers can benefit from the additional transparency of secondary market trading and global reach of the London markets. "Together with the London Stock Exchange, UNEP and the Cambridge Institute for Sustainability Leadership, we hope to impress upon you London's commitment to build on existing market activity to ensure that green finance sits right at the very top of the financial industry's agenda.“, Mark Boleat Policy Chairman of the City of London Page 7 Green Bonds on London Stock Exchange London Stock Exchange Green Bond milestones: • Dec 2009: first green bond listed by World Bank on London Stock Exchange’s markets • Mar 2014: International Finance Corporation (IFC) issues the first Renminbi-denominated green bond, raising RMB 500 million. This set the precedent as the first green bond issued by a multilateral institution in the offshore Chinese markets. • May 2014: London Stock Exchange Group joins UN’s Sustainable Stock Exchanges (SSE) initiative. • Apr 2015: Transport for London lists its debut green bond, raising £400 million, to improve sustainability of London transport network. • Jun 2015: London Stock Exchange expands its range of dedicated green bond segments to offer increased flexibility for issuers • Aug 2015: IFC issues the first offshore Indian Rupee denominated green bond, raising INR 3.15 bn. • Oct 2015: Agricultural Bank of China lists a $1bn triple tranche, dual currency green bond, the largest green issue on London Stock Exchange’s markets. • Nov 2015: London Stock Exchange becomes an Observer to the internationally-recognised Green Bond Principles guidelines • Jan 2016: LSEG joins the Green Infrastructure Investment Coalition (GIIC). The coalition was launched at COP21 by alliance of global investors, development banks, financial sector associations & NGOs. Its aim is to support the financing of a rapid transition to a low-carbon and climate resilient economy. • Jan 2016: LSEG joins the City of London's Green Finance Initiative run in partnership with HMT and the Department of Energy and Climate Change. Page 8 How to list Green Bonds • Green bonds have the same regulatory status of equivalent “non-green” bonds and can normally be issued through standard base prospectuses. • To admit green bonds to London Stock Exchange’s dedicated Green Bond segments, issuers are required to provide the Exchange with the relevant “second opinion” document that certifies the ‘green’ nature of the bonds. • The choice of the certification provider is up to the issuer and its advisers. London Stock Exchange has outlined guidance on a set of criteria that the certifier should meet in order for the certified instruments to be included in the relevant LSE green bond segment. Page 9 Green Bonds Certification Issuers admitting bonds to the green bond segments on London Stock Exchange must provide a third party certification that the instruments are considered “green bonds” and a written confirmation that the entity that has been appointed to conduct the green bond certification meets the following criteria: • Be a legal entity with a registered office in the European Economic Area or Switzerland and that such entity have the required financial resources to conduct the verification. • Be independent of the entity issuing the bond, its directors, senior management and advisers. In particular, the organisation providing the second opinion must not be a subsidiary or owner, either in full or in part, of the entity issuing the bond. • Be remunerated in a way that prevents any conflicts of interests arising as a result of the fee structure. • Have the required financial resources to conduct the verification. • Be an entity* specialising in assessing the framework of the bonds’ environmental objectives, with sufficient financial and marketspecific expertise to perform a comprehensive assessment of the use of proceeds. Such expertise could be demonstrated for example by: Affiliation with relevant and widely recognized industry bodies Significant and appropriate previous experience in providing second opinions on green bonds *e.g. a research organisation or a certification company, or an entity of which one of its departments offer services in the relevant certification industry Page 10 Green Bonds on London Stock Exchange Green Bonds Listed on London Stock Exchange dedicated Green Bond Segments and Sectors ISIN Issuer Name Coupon(%) Currency Amount Raised Issue Date Maturity Date Segment Sector US45950VJC19 International Finance Corporation 4.75 MXN 500,000,000 29/04/2016 29/04/2021 PSTR UIDP US45950VHX73 International Finance Corporation 2.125 USD 7,000,000 07/04/2015 07/04/2026 PSTR UIDP US45950VHE92 International Finance Corporation 1.25 USD 500,000,000 27/11/2015 27/11/2018 PSTR UIDP HK0000270386 Agricultural Bank of China 4.15 CNY 600,000,000 20/10/2015 20/10/2017 CWTU UICU XS1308276168 Agricultural Bank of China 2.125 USD 400,000,000 20/10/2015 20/10/2018 CWTU UICU XS1303791336 Agricultural Bank of China 2.75 USD 500,000,000 20/10/2015 20/10/2020 CWTU UICU US45950VGQ32 International Finance Corporation 6.45 INR 3,150,000,000 10/08/2015 10/08/2020 PSTR UIDP XS1253847815 City of Gothenburg Sweden 1.455 SEK 1,050,000,000 30/06/2015 30/06/2021 PSTR UIDP XS1238024035 Shanks Group PLC 3.65 EUR 100,000,000 16/06/2015 16/06/2022 PSTR UIDP XS1080036939 International Finance Corporation 2 CNY 500,000,000 26/06/2014 26/06/2017 PSTR UIDP XS1222743061 Transport for London 2.125 GBP 400,000,000 24/04/2015 24/04/2025 PSTR UIDP XS1048655184 Unilever PLC 2 GBP 250,000,000 26/03/2014 19/12/2018 PSTR UIDP XS1073521988 City of Gothenburg Sweden 0.132 SEK 1,500,000,000 03/06/2014 03/06/2020 PSTR UIDP XS1073488675 City of Gothenburg Sweden 2 SEK 310,000,000 03/06/2014 03/06/2020 PSTR UIDP XS0976165828 City of Gothenburg Sweden 0.279 SEK 250,000,000 03/10/2013 03/10/2019 PSTR UIDP XS0976166719 City of Gothenburg Sweden 2.915 SEK 250,000,000 03/10/2013 03/10/2019 PSTR UIDP Data as at 26th April 2016 Page 11 Green Bonds on London Stock Exchange Self-labelled Green Bonds listed on London Stock Exchange markets ISIN XS1399311064 Issuer Name Nordic Investment Bank Coupon(%) Currency Amount Raised Issue Date Maturity Date Segment Sector 0.5 SEK 700,000,000 26/04/2016 26/04/2021 CWNR EIDW XS1292474282 Nordic Investment Bank 0.375 EUR 500,000,000 17/09/2015 09/19/2022 CRNR EIDR XS1239582684 Stockholm Lans Landsting 0.12 SEK 300,000,000 28/05/2015 28/05/2021 CWNR EIDW XS1239582502 Stockholm Lans Landsting 1 SEK 1,500,000,000 28/05/2015 28/05/2021 CWNR EIDW XS1222727536 Nordic Investment Bank 0.155 SEK 1,000,000,000 23/04/2015 23/04/2020 CWNR EIDW XS1117504750 Development Bank of Japan 0.25 EUR 250,000,000 07/10/2014 06/10/2017 CWNU NIDU XS1069349089 Stockholm Lans Landsting 2.125 SEK 230,000,000 19/05/2014 19/05/2020 CWNR EIDW XS1069348941 Stockholm Lans Landsting 0.106 SEK 870,000,000 19/05/2014 19/05/2020 CWNR EIDW XS1031495929 Nordic Investment Bank Fltg EUR 40,000,000 11/02/2014 11/02/2019 CWNR EIDW XS0975173633 Nordic Investment Bank 2.413 SEK 500,000,000 27/09/2013 27/09/2018 CWNR EIDW US29874QCN25 European Bank of Reconstruction & Development 1.625 USD 250,000,000 17/09/2013 10/04/2018 CWNR EIDW XS0824127277 Nordic Investment Bank 2.75 SEK 500,000,000 07/09/2012 07/09/2032 CWNR EIDW Data as at 26th April 2016 Page 12 Green Bonds on Italian MOT Green Bonds listed on Borsa Italiana MOT markets ISIN Issuer Description Coupon (%) Currency of Issue Issue Date Maturity Market XS1233613188 IBRD Notes Linked to the Ethical Europe Equity Index due July 5, 2023 - Green Growth Bonds Floating – Index linked USD 28/07/2015 05/07/2023 MOT XS1198278175 EIB 8.50 per cent. Climate Awareness Bonds due 27th March, 2019 8.5 TRY 27/02/2015 27/03/2019 MOT XS1107247725 EIB 1.75 per cent. Eurocooperation (Ecoop) Bonds due 15th September, 2045 1.75 EUR 09/08/2014 15/09/2045 MOT XS1247736793 EIB 0.875 per cent. Eurocooperation (Ecoop) Bonds due 13 September 2024 0.875 EUR 17/06/2015 13/09/2024 MOT XS1260085037 EIB 0.125 per cent. Eurocooperation (Ecoop) Bonds due 15 June 2020 0.125 EUR 14/07/2015 15/06/2020 MOT XS1183208328 EIB 1.00 per cent. Eurocooperation (Ecoop) Bonds due 14 March 2031 0 EUR 05/02/2015 14/03/2031 MOT XS1271698612 EIB 0.375 per cent. Eurocooperation (Ecoop) Bonds due 15 March 2022 0.375 EUR 08/05/2015 15/03/2022 MOT Data as at 14th April 2016 Page 13 Case Studies Page 14 Case Study Using Green offshore rupee bond issuance to finance Indian infrastructure Company Details Company International Finance Corporation (part of World Bank Group) Market Main Market Sector Supranational Rating AAA/Aaa Company profile IFC is one of the world’s largest financiers of climate-smart projects for developing countries, investing about $11 billion in long-term financing over the last decade for renewable power, energy efficiency, sustainable agriculture, green buildings and private sector adaptation to climate change. “Addressing climate change is a priority for IFC in India. IFC’s green Masala bond demonstrates the powerful role of capital markets in mobilizing savings for climate finance—and a listing in London allows us to attract the widest possible range of international investors. Adding the rupee as a new green bond currency also supports our goals to strengthen this important asset class.” Source: IFC press release, LSEG database, August 2015 Page 15 Transaction Details Issue Date 10 Aug 2015 Issue Size INR 3.15billion Yield at issue 6.45% Maturity 5 years Debt issuance story Sole arranger: JP Morgan Proceeds from the offering used to finance a green bond issued by Yes Bank, one of India’s largest commercial banks. Yes Bank invested the proceeds of its bond in renewable energy and energy efficiency projects, mainly in the solar and wind sectors. Under its $3 billion offshore rupee Masala bond program, IFC has issued bonds worth over 103 billion rupees ($1.66 billion) in a range of tenors, building a triple-A yield curve and attracting new investors to the London offshore rupee market. Case Study Using Green offshore renminbi bond issuance to finance Chinese climate-friendly investments Company Details Company International Finance Corporation (part of World Bank Group) Market Main Market Sector Supranational Rating AAA/Aaa Company profile IFC is one of the world’s largest financiers of climate-smart projects for developing countries, investing about $11 billion in long-term financing over the last decade for renewable power, energy efficiency, sustainable agriculture, green buildings and private sector adaptation to climate change. “IFC is committed to supporting the development of China’s capital markets, which are key to creating access to finance for the private sector and especially small and medium businesses. We will continue to seek opportunities to help deepen liquidity and extend the yield curve for offshore renminbi assets. The addition of the renminbi as a new green bond currency also supports our goals to strengthen this important asset class.” Source: IFC press release, LSEG database, June 2014 Page 16 Transaction Details Issue Date 17 Jun 2014 Issue Size RMB 500 million Yield at issue 2.00% Maturity 3 years Debt issuance story Sole arranger: HSBC Proceeds from the offering to support projects to reduce greenhouse gas emissions—for example, by rehabilitating power plants and transmission facilities, installing solar and wind power, and providing financing for technology that helps generate and use energy more efficiently. In March 2014, IFC became the first multilateral institution to list renminbi-denominated bonds on LSE, raising 2 billion renminbi from international investors. IFC was also the first to set up a program to regularly issue offshore renminbidenominated discount notes. Case Study Using Green offshore dual currency bond issuance to finance green projects Company Details Company Market Agricultural Bank of China Issue Date 20 Oct 2015 Issue Size $400 million / $500 million / RMB 600 million PSM Sector Financials Rating A1/A Company profile Agricultural Bank of China is one of the top four commercial banks in China. ABC is one of the first standing members of the green finance committee of China Society for Finance and Banking. In 2013, ABC signed the green credit commitment along with other financial institutions, and formulated green credit standards and protocols. “The successful issuance and listing of ABC’s green bonds on the London Stock Exchange not only fulfils our ambition that was announced as part of the policy outcomes of the latest UK-China Economic and Financial Dialogue, but also manifests the close and fruitful cooperation between Chinese and UK financial institutions on green finance, climate change and adaption initiatives.” Page 17 Transaction Details Yield at issue 2.125% / 2.75% / 4.15% Maturity 3 years / 5 years / 2 years Debt issuance story Joint Leads: ABC, BAML, Barclays, GS HSBC, JPM, MS, SCB, Wells Fargo Based on the green bond management framework, the proceeds from the offering will support renewable energy, energy efficiency, sustainable waste management, sustainable use of land, clean transportation and sustainable water management. The listing is the first international Green Bond issue by a Chinese bank, as well as the first listed Green RMB bond for ABC on the London Stock Exchange. Case Study Using Green bond issuance to finance green Railway projects Transaction Details Company Details Transport for London Issue Date 24 Apr 2015 Market Main Market Issue Size £400 million Sector Government Yield at issue Rating AA+/Aa2/AA Maturity Company Company profile Transport for London (TfL) is the owner and operator of the largest integrated transport networks in Europe. TfL is a statutory corporation and is a functional body of the Greater London Authority (GLA) UK's leading public sector issuer of capital markets debt after the UK Government's Debt Management Office with around £8.5bn of borrowings raised from a variety of sources and a further £4.5bn borrowing requirement up to 2021 TfL was the first UK corporate to issue sterling denominated Green bonds Page 18 2.125% (G10yr+57bp) 10 years Debt issuance story Joint Lead Managers: Deutsche Bank, Bank of America Merrill Lynch (BoAML) Third Party opinion provided by DNV GL Proceeds will support the objectives of TfL’s corporate environmental framework, which includes reducing air pollution in the city, improving natural resource management and preparing for potential climate change effects Deutsche Bank also publicly announced that will invest in the bond, which the Bank will hold within its Green Liquidity Portfolio Case Study Using Green Bond issuance to tap into retail investor liquidity Company Details Transaction Details Company Shanks Group plc Issue Date 16 Jun 2015 Market Main Market (LSE) Issue Size €100 million Sector Waste & Disposal Services Rating n/a Company profile Shanks Group is a leading international waste to product business 3.65% Maturity 7 years Debt issuance story Lead Managers: BNP Paribas, KBC Bank Shanks is the first UK company to issue Green Bonds in Euros and list them on LSE The net proceeds of the issue will be used to finance Shanks' ongoing programme of investment in sustainable infrastructure. Minimum Denomination: €1000 Company was founded in 1880 as a construction company operating primarily in the West of Scotland under the name of Shanks & McEwan Listed on London Stock Exchange’s Main Market since 1988 Page 19 Yield at issue Case Study Using sustainability bond issuance to tap into ESG investors liquidity pool Transaction Details Company Details Development Bank of Japan Issue Date 21 Oct 2015 Market PSM Issue Size EUR 300 million Sector Government Rating A1/A Company Press Release “DBJ successfully took in new investors by broadening the asset classed applicable for the new issue’s use of proceeds.” Goldman Sachs “Following the issuance of the DBJ’s first Green Bond last year, this inaugural Euro denominated sustainability bond has positioned the bank as a clear leader in the rapidly growing SRI fixed income market. At the same time it enabled the bank to reach a more diversified investor base including SRI focused investors” BAML “The transaction attracted both new and existing DBJ green and sustainability investors, all while achieving a competitive pricing outcome” JPMorgan Source: DBJ press release, LSEG database Page 20 Yield at issue 0.375% Maturity 4 years Debt issuance story Joint Leads: Merrill Lynch International, Morgan Stanley & Co. International, JPMorgan Securities, Goldman Sachs International. This bond is the first sustainability bond issued by a Japanese issuer. DNJ has expanded the use of proceeds to include DBJ Environmentally Rated Loan Program in addition to DBJ Green Building Certification. On 7 Oct 2014, DBJ issued its first Green Bond on London Stock Exchange. Distribution by Investor Type Banks 61% Asset Manager 13% Insurance 11% Central Banks 7% Others 8% Geographical Distribution EMEA 97% US Offshore 3% Case Study Using Green Bonds to expand private investors product range Company Details Company Transaction Details World Bank Issue Date 29 Jun 2015 Market MOT (Borsa Italiana) Issue Size $84 million Sector Supranational Rating AAA/Aaa/AAA Company profile World Bank provides low-interest loans and grants to developing countries. These support a wide array of investments in such areas as education, health, infrastructure, and environmental and natural resource management Established in 1944, the World Bank Group is headquartered in Washington, D.C and employs more than 10,000 employees worldwide Since its first green bond launched in 2008, the World Bank has issued 100 green bonds in 18 currencies, totalling over USD 8.4 billion equivalent Page 21 Coupon Linked to Ethical Equity Index Maturity 8 years Debt issuance story Lead Manager: BNP Paribas The bonds were distributed to Italian retail investors through a network of 16 retail banks and brokers The issue is part of the World Bank’s Green Growth Bond programme for issuance of retail instruments in the US and a number of European markets Minimum denomination: $2000 Bond performance is fixed for the first two years (1.75% coupon) and then linked to the performance of the Ethical Europe Equity Index. Redemption at maturity (100) guaranteed by the World Bank Contact us Fixed Income London Stock Exchange Mail: [email protected] Tel: +44 (0)20 7797 3921 Page 22