Market Blog #7, 21/06/2018: ICBC & BoC Certified Bonds in record month for
Certification: 1st GB from pension fund: 1st Chinese Hydro ABS
Highlights:••••

China giants ICBC & BoC issue Certified Bonds in record month for Certification, year to date
Global firsts: green bond from a pension fund (Canada) and Hydro ABS (China)
6 new issuers from 5 countries to date month
Agency MBS, covered bonds, hybrids & perpetuals and other structurally diverse deals amount to
USD16.7bn in 2018 so far

Green bond deals across the globe

2018 Issued

62.0 Bn

USD Bn0387 Bn100

200

414 Bn300

400

Total Outsanding
500

Total Issued

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

At a glance
Industrial and Commercial Bank of China and Bank of China, No1 and No4 largest in the world by assets, issued
Certified Climate Bonds from their respective London Branches in June, capping off record certification volumes.
Certified issuance accounts for 52% of the USD9.5bn volume to 20 June and also includes two Norwegian coveredbonds, as well as NAB’s first SDG Green Bond.
68% of monthly issuance to date has come from Developed Markets. Debut issuers Canada Pension Plan
Investment Board (CPPIB) and DNB Boligkreditt made up almost a third of June figures so far.

Emerging Markets issuance to date this month has come solely from China. China is also leading country issuancefor the month at this stage (32%), with ICBC’s and Bank of China’s offshore issuance accounting for 84% of thenation’s green bonds. With an additional dual-currency green bond from ICBC Asia already in the market, China iswell positioned to stay high in the rankings.
EUR and USD-denominated issuance prevails at 74% so far this month, partly driven by Chinese offshore deals,
followed by CAD-denominated green bonds at 12%.

Bond diversity increasing
Senior unsecured bonds continue to dominate the green bond market, but bond structures are becoming
increasingly diverse. So far in 2018 we have tracked USD16.7bn of structurally diverse deals. Agency MBS are themost popular format within this universe (26%), driven by Fannie Mae’s green issuance (only Q1 issuance isincluded at this stage). Covered green bond issuance come in second (21%), boosted by deals from three Nordic
mortgage banks: SpareBank 1 Boligkreditt, Landshypotek Bank and DNB Boligkreditt.

Structurally diverse bonds - 2018 year to date
8%

6%
5%

21%

5%
4%
USD
16.7bn

20%

4%
3%

14%

2%
2%
26%

Agency MBS

Hybrid / Perpetual

Covered Bond

Sukuk

PP / project bond

RMBS

MTN

PACE ABS

Recievables ABS

Subord secured

Solar ABS

Schuldschein> 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
SpareBank 1 Boligkreditt - EUR1bn (USD1.2bn), Norway, obtained post-issuance certification in June
under the Low Carbon Buildings (Residential) Criteria of the Climate Bonds Standard for its green covered bondissued in January 2018. Multiconsult provided the Post-Issuance Verification Report.
The certification complies with Climate Bonds’ newly approved proxy for the Norwegian residential market:
1. EPC C label for houses and apartments
2. Building codes 2007 (TEK07) for houses
3. Building codes 2010 (TEK10) or 2017 (TEK17) for apartments. Apartments under TEK07 do not qualify
unless they have an EPC label of C or higher.

DNB Boligkreditt (EUR1.5bn/USD1.7bn), Norway, issued a 7-year green covered bond and obtained
certification under the Low Carbon Buildings (Residential) Criteria of the Climate Bonds Standard. Proceeds will
finance new or existing residential buildings that comply with Norwegian building codes TEK10 or TEK17 andcomply with CBI’s proxy methodology for Norwegian residential buildings.
Sustainalytics provided the Pre-Issuance Verification Report.

Existing issuers with issuance under new Criteria of the Climate Bonds Standard
Bank of China (USD1bn) issued a 5-year Certified Climate Bond. The deal is also Certified against the criteriafor Marine Renewable Energy (newly added to the framework), Low Carbon Transport, Water Infrastructure andWind. The bond will finance 8 onshore and offshore wind projects in the Netherlands and Southern China, 2sewage treatment renovation projects in Eastern China and 6 metro projects in Eastern and Northern China.

EY provided the Pre-Issuance Verification Report.

ICBC (USD1bn; EUR500m/USD578m) issued its second Certified Climate Bond in a dual-currency, threetranche deal (longest dated bond: 5-year term) – more details available here. Issued by ICBC London branch, it is
the largest green bond listed on the London Stock Exchange and the first Chinese issuance on LSE’s International
Securities Market. The deal is Certified under the criteria for Solar, Wind, Marine Renewable Energy (newly added
to the framework) and Low Carbon Transport. The bond will finance 3 railways in China, onshore wind and solar
farms in China and Pakistan, and the Beatrice Offshore Windfarm project in Scotland.

Zhongcai Green Financing provided the Pre-Issuance Verification Report.

National Australia Bank (NAB) (USD750m) issued the 5-year bond under its new SDG Green Bond Framework
and as part of a wider USD1.6bn offering. The bond is Certified under the criteria for Wind, Solar, Marine
Renewable Energy (newly added), Low Carbon Transport and Low Carbon Buildings (Commercial). This is the
fourth NAB-related Certified Climate Bond. Proceeds will be allocated to offshore and onshore wind and solar
farms (Australia, New Zealand, UK, Ireland, Europe), electrified passenger rail infrastructure and rolling stock(Australia, UK), and commercial buildings (Australia).

DNV GL provided the Pre-Issuance Verification Report.
NAB’s new framework links category eligibility to the existence of Certification Criteria under the Climate Bonds
Standard AND aligns the categories to SDGs. Climate mitigation and adaptation underpin meeting the UN
Sustainable Development Goals. Green bonds can serve as a bridge to achieving SDGs.
> Climate Bonds views on the link between green bonds and SDGs will be explored in a series of briefings. The first
briefing entitled Green bonds as a bridge to the SDGs was published yesterday.

New issuers
Canada Pension Plan Investment Board (CAD1.5bn/USD1.1bn) issued a 10-year green bond, becoming thefirst pension fund to enter the market. This is also the largest green bond from a Canadian issuer. CICERO
provided a Second Party Opinion. Proceeds will be allocated to solar and wind assets, sustainable water andwastewater management, and LEED Platinum certified green buildings. CICERO notes the issuer has not
implemented a system to measure the environmental impacts of the financed projects, which has implications ontransparency.

Climate Bonds view: Pension funds have a critical role to play in mobilising capital flows towards green andclimate-related investments through their asset allocations and fixed income portfolios. CPPIB has a flexibility
many pension funds don’t in being able to issue bonds directly and is paving the way for the Canadian market.

We agree with CICERO that impact reporting is essential to provide evidence on the investment projects’ green
credentials and hope to see issuers committing to high reporting standards going forward.

Louisiana Local Government Environmental Facilities and Community Development Community(USD12m) issued a green US Muni bond with a 19.4-year tenor. The deal will finance the placement of graniterock barriers approx. 100-150 yards off the coast of the Cameron Parish Gulf Shoreline to address and prevent theeffects of coastal erosion. In the official statement, the issuer states that a Parish-specific Coastal Erosion Master
Plan was developed by the Corps of Engineers in 2017. They found that several locations are experiencing
significant erosion rates and around 1.5 to 2 miles of structural protection is needed to provide critical coastal
defence.

Climate Bonds view: This is the first green bond from Louisiana and is also one of the few bonds with proceeds
allocated towards resilience projects/assets.
Vacse (SEK500m/USD58m), Sweden, issued a 4-year green bond which benefits from a CICERO SPO. The deal
will finance green buildings, solar or geothermal energy and clean transportation infrastructure. The minimum
eligibility criteria for properties are: i) green building certification of LEED Gold, BREEAM-SE Excellent or
Miljöbyggnad Silver for new buildings, and BREEAM-In use Very Good or Miljöbyggnad Silver for existing buildings,
and ii) at least 20% lower energy usage for new and 25% for existing properties than is required by the Swedish
National Building Code. Other assets/projects related to improving the energy performance of existing buildings –such as LED lighting, geothermal heating/cooling and ventilation system upgrades – are also eligible.

Climate Bonds view: Combining high green building certification levels with a minimum energy usage
improvement threshold provides a better assurance of the energy performance levels of the financed properties.

Macquarie Group(GBP500m/USD669m), Australia, issued a GBP2bn loan facility which includes two GBP250m
green tranches: a 3-year revolver and a 5-year term loan. This is the first green loan deal from an Australian asset
manager. Proceeds will be allocated to:• renewable energy (solar, wind, tidal, sustainable biomass),• waste management (recycling, solid waste incineration, organic waste treatment, power generation,
landfill gas collection),• clean transportation and• green buildings with at least a GBCA 6 star, BREEAM Excellent, LEED Gold certification or an equivalentregional standard.

Investments in technology, products or systems which enhance the energy performance of assets within thesecategories are also eligible. Projects directly related to fossil fuels, nuclear and biomass suitable for foodproduction are explicitly excluded from the Green Bond Framework.

Climate Bonds view: The list of indicators that will be used in the issuer’s Impact Report includes “additionalenergy saving or operational performance data” under the green building category. This will provide moretransparency around the actual environmental sustainability and mitigation benefits of the financed projects.
For waste-related projects, we are starting to see the need for more information to ensure that the financed
projects and assets are compliant with a low-carbon transition. In this case, we would like to see details related tolandfill gas collection projects to ensure that this process is not used to extend the lifetime of a landfill facility.
Climate Bonds is in the process of developing more stringent eligibility requirements for including waste-relatedbonds in its database.
> Climate Bonds Criteria for recycling and waste management sectors are under development. Our next
newsletter due out in July will have an update.

Chouzhou Commercial Bank (CNY1.5bn/USD235m), China, issued a 3-year green bond which benefits froman EY assurance report. The proceeds will be allocated to 3 major areas under PBOC’s green bond catalogue:
resource conservation and recycling, low-carbon transport, and ecological protection and adaptation. More than
50% of the proceeds will finance ecological protection and adaptation. In the bond prospectus, the issuer gives
two examples of eligible projects: a wastewater treatment project, which is expected to improve regional
biodiversity and a land rehabilitation project, converting abandoned limestone mines into sustainable agriculturalland by filling the pits with earth and water.

Climate Bonds view: Specifying if agricultural land would be used for crops or livestock would help assess thelevel of environmental benefit better. In any event, though, we support issuance that aims to renew local
resource use, address the environmental impact of disused land and assets and increase climate resilience. The
issuer has made the promise to implement a stringent due diligence process, which we strongly support andwould hope to see detailed environmental impact reporting on the back of this.

Hengan Electrical Engineering Co., Ltd (CNY400m/USD63m), China, issued a 9-year, two-tranche green
ABS, with two subsidiaries as originators. The deal is secured by 9 years worth of feed-in tariff receivables from 5hydropower stations owned by the two subsidiaries. The proceeds are to be used for hydro power generation in
the Yunnan region. CECEP provided an external review for this deal and disclosed the expected climate impact ofthe projects to be financed, including the avoidance of 111.1K tce and the reduction of 187.5K tons of CO2.

Climate Bonds view: In spite of the limited details available due to the deal being a private placement, we
believe in its green credentials as both the underlying asset and use of proceeds are green.

Repeat issuers: June 6th – June 20th••

MTR: HKD200m/USD25m
Jernhusen AB: SEK150m/USD17m

TrendsMonthly issuance volume
20

USD Billions

15
10
5
0
Jan

Feb
CBI certifiedMar
CBI defined

Apr

May

Jun

ExcludedPending 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 allocatedto social goals needs to be no more than 5% for inclusion in our database.

Issuer Name

Amount issued

Issue date

Basque Government

EUR500m

15/06/2018

Reason for exclusion/
pending
Sustainability/Social bondIle de France

EUR500m/USD584m

14/03/2017

Sustainability/Social bondIle de France

EUR500m

20/06/2018

Sustainability/Social bond

Huzhou Municipal Construction
Investment Group
Xinjiang Tianye (Group) Co.,Ltd.

CNY500m/USD80m

03/04/2018

Insufficient information

CNY220m/USD35m

19/04/2018

Not aligned

Guangdong Guangye Group
Co.,Ltd.
Region Skåne

CNY900m/USD142m

28/04/2018

Working capital

SEK700m/USD81m

12/06/2018

Pending

Region Skåne

SEK300m/USD35m

12/06/2018

Pending

TMB Bank

USD60m07/06/2018

Pending

Green bonds in the market
•
•
•
•
•
•

ICBC (Asia): closing 21 June
Alexandria Real Estate Equities: closing 21 June
Renew Financial: closing 22 June
IFC (private placement Philippines): closing 22 June
Mitsubishi Estate: closing 26 June
Auckland Council: closing 27 June

Investing News
37 of the largest European banks launched a new green mortgage scheme aimed at testing the World Green
Building Council's new European energy efficiency criteria.
The ClimateWise Insurance advisory council launched a tool to help investors and regulators quantify thepotential financial impact of the transition to a low-carbon economy.
The Monetary Authority of Singapore (MAS) and IFC signed a Memorandum of Understanding to grow the Asian
green bond market.
The Shanghai Stock Exchange and Luxembourg Stock Exchange launched the Green Bond Channel, enabling
international investors to access information on Chinese domestic green bonds listed in Shanghai.
The Securities and Exchange Commission of Nigeria is preparing to launch guidelines to facilitate the issuance ofgreen bonds.
UBS Global Wealth Management has partnered with Hermes Investment Management to develop an SDG fund as
part of what is expected to be the UK’s first 100% sustainable portfolio.
Wilmar International signed a USD200m loan with the Oversea-Chinese Banking Corporation that pegs its interest
rates to its sustainability performance, the second deal of the kind from the Singapore-based agribusinesscompany. The meeting of the targets will be assessed annually by Sustainalytics.
Michigan company CMS Energy entered into syndicated sustainability-linked revolving credit facilities this week,with interest rates mainly linked to the company’s renewable energy generation targets.

Green Bond Gossip
North American Development Bank has arranged meetings with investors on 25 June to discuss a debut Swiss
franc green bond.
LBBW has mandated lead managers for its first green Pfandbrief secured on green mortgages.
Korea East-Power established a Sustainability Bond Framework in preparation of its debut sustainability bond.
Hong Kong MTR’s new Green Finance Framework expands the scope of their green bond program to include
green revolving and term loans. The company is discussing with HSBC the arrangement of a debut green loan.
Société Générale obtained approval from Taiwan’s Financial Supervisory Commission to issue Taiwan dollardenominated green bonds.
Nigeria’s Debt Management Office plans to issue a second sovereign green bond by the end of the year.
In a digital poll at Environmental Finance’s Fixed Income Conference in London this week, 33% of participants said
they believed that the green bond market will grow to between USD200bn to USD225bn this year. A further 40%of the market expected annual issuance of more than USD225bn. The audience polls also revealed that 56%
consider green bonds as being an "additional" form of finance.

Reading and Reports
PRI’s “ESG, Credit Risk and Ratings: Part 2 – Exploring the Disconnects” reports the findings of roundtablediscussions between investors and credit rating agencies focused on the role of ESG factors in credit risk analysis.
The Nature Conservancy and Climate Bonds Initiative have published a paper on sustainable land bonds entitled“Sustainable Land Bonds: How governments can finance climate commitments and strengthen rural economies”.
The International Capital Market Association (ICMA) released guidelines to help issuers and investors identify how
green, social and sustainability bonds contribute to the Sustainable Development Goals.
Don’t miss this ESG podcast where the Securities Commission Malaysia outlines plans for green Islamic finance(part 2).

Moving Pictures
Take 1:12min to find out about Microsoft’s underwater data centre which uses zero energy to cool servers.
Take 1:19min to discover the 10 rivers responsible for 90% of plastic in the world’s oceans. And then you may
want to watch this experiment demonstrating the impact of environmental degradation (4:20min).

‘Till next time,
Climate Bonds
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