GREEN BOND PRICING
H1
IN THE PRIMARY MARKET: (Q1-Q2)
2023

January-June 2023

Report highlights• Largest semi-annual sample to date:
111 green bonds with combined volumeof USD124.6bn• Green bonds in both EUR and USD
performed well on all metrics in the
primary market, on average• The greenium was observed for 16 bonds
in our sample• Allocations to green investors remain
stable at 66%• Three EU sovereigns returned to thegreen bond market and Israel priced its
debut deal
• Green bond ETF assets achieved net
growth of 20% on the prior period• Spotlight: Quality discernment in the
SLB market

Green Bond
Preparedby Climate
PricingBonds
in theInitiative
Primary Market H1 2023 Climate Bonds Initiative

Supported by the International Finance Corporation

11. Introduction

By the end of H1 2023, aligned green bondvolume of USD278.8bn priced in H1 had been
added to the Climate Bonds Green Bond
Database (GBDB), 33% more than the H2 2022
(USD209bn as of June 2023). This report covers
45% of the amount recorded in the Climate
Bonds GBDB for H1 that met the above
requirements, i.e., USD124.6bn split between
111 green bonds from 87 issuers, which is thelargest semi-annual sample to date in termsof both the number of bonds, and volume.
EUR was the dominant currency with 87 bonds
amounting to EUR89.9 (USD97.3bn), while
24 qualifying USD denominated bonds had a
combined issue size of USD27.4bn.

Market developments
Market sentiment was positive at the beginningof 2023 following a subdued fourth quarter but
stuttered in March as the collapse of Silicon
Valley Bank (SVB) sparked concern about broader
contagion in the banking industry. Q1 sawstrong volume, in both EUR and USD, as issuers
were prompted to secure their annual funding
requirements ahead of further interest rate
hikes demanded by the stubborn inflationary
backdrop. The collapse of Silicon Valley Bank
(SVB) on 10 March paralysed the USD newissue market, followed by the EUR market as
the implosion and subsequent rescue of Credit
Suisse unfolded. However, the market was open
again by the end of March, and a handful of
EUR issuers such as Volkswagen (VW 2026 andVW 2029), Ahold (Ahold 2028), Stadshypotek
AB (Stadshypotek 2028 (CO)), and Siemens
Energy Finance (Siemens 2026 and Siemens2029) were able to leverage the green label to getdeals done, with some obtaining strong pricing
dynamics in the primary market.
This impacted USD corporate credit spreads,
which had started the year by trending
downwards in response to strong demand butchanged course in early February as equity
valuations stumbled and credit concerns started
to materialise, reaching their highs on 15 March.

Category

EUR

USD

Sovereign

4

1

SSA

19

2

Covered

11

N/A

AA

3

1

A

16

11

BBB

34

9

Total

87

24

Sovereign green bond performance is assessed
separately in the Sovereign Green Bond Club
section of this report. Sovereigns are subject todifferent pricing dynamics than bonds from otherissuer types and their performance is addressedon an absolute basis. Israel’s 2033 deal was
priced in USD rather than its local currency (ILS)
and is included in the same section.

Report highlights:• Green bonds achieved higher bookcover and spread compression thanvanilla equivalents, on average.
See more on page 4• Overall, 66% of green bonds wereallocated to investors describing
themselves as having green or
responsible investment mandates.
See more on page 7• The greenium was observed for 16
bonds in our sample
See more on page 9• After 7 and 28 days, green bonds had
tightened by more than comparable
indices, on average.
See more on page 11• Green bond ETFs: total fund assets in
EUR and USD green bond ETFs ended
the period at almost USD3bn, a netincrease of 20% on the prior period.
See more on page 15• Sovereign Green Bond Club: Austria,
Germany, and Italy returned to themarket with new bonds while Israel
priced its debut green bond.
See more on page 16• Spotlight: Quality discernment in the
SLB market – Is there a link between
materiality of KPIs and primarymarket pricing dynamics?
See more on page 18

EUR Corporate Credit Spreads
200

AAA

AA

A

BBB

150
Asset Swap Spread

Our methodology is designed to capture themost liquid portion of the green bond market
and is thus limited to USD and EUR bonds witha minimum original issue size of USD500m.
Developed market (DM), emerging market(EM) and supranational issuers (SNAT) are
included.1 The full methodology is explainedon page 21.

Description of sample H1 2023

100
50
0
January2023

February
2023

March
2023

April
2023

May
2023

June
2023
Source: Refinitv

USD Corporate Credit Spreads
AAA

AA

A

BBB

200
150
Asset Swap Spread

This is the 16th report in our pricing series, inwhich we observe how green bonds performin the primary market. This report includes
green bonds priced in the first six months of2023 (H1 2023).

100
50
0
January2023

February
2023

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

March
2023

April
2023

May
2023

June
2023
Source: Refinitv

2

The volume of aligned green bonds recordedin Climate Bonds GBDB in H1 2023 reached
USD278.8bn, a 33% increase compared to the
USD209bn logged in H2 2022. Aligned green
bonds with volume of at least USD50bn werepriced in March and April, peaking at USD52bn inMay, bolstered by sovereign issuance.

May was the most prolific month for aligned green bonds
50
40
30
20
USDBillions

They slowly retracted to end H1 at tighter levels
than those observed in January: AAA -13%, AA-6%, A -6%, and BBB -5%. In the EUR market, thepeak came a bit later around 20 March, and at
the end of June, spreads of higher credit quality
corporates were wider compared to the startof the year with AAA and AA at +49% and +6%
respectively. A and BBB spreads ended June 2%
and 8% tighter compared to the start of the year
suggesting increased risk appetite.

100January2023

February
2023

March
2023

April
2023

May
2023

June
2023
Source: Climate Bonds GBDBGreen Bonds Captured by Climate Bonds
Bonds meeting the requirements outlined
in Climate Bonds screening methodology
qualify for inclusion in the datasets and areclassified as aligned. Labelled bonds forwhich there is not enough information todetermine eligibility for database inclusion are

Remarks:

classified as pending until sufficient disclosure
is available to decide. Bonds failing to meetthe requirements of Climate Bonds screening
methodology are classified as non-aligned andare excluded from the datasets.

Green bonds captured by Climate Bonds
AlignedPending

Non-Aligned

TotalsCumulative asof 30/6/2023

USD2.5tn

USD62bn

USD425bn

USD3tnH1 2023

USD279bn

USD54bn

USD56bn

USD389bn

H1 2023
EUR+USD

USD199bn

USD36bn

USD23.2bn

USD258.2bn

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative• Selecting bonds for vanilla baskets
was very challenging for bonds priced
in Q1 because of the extreme market
volatility. Best efforts were applied tofinding closest matches within the threemonth window.
• Seniority rankings of financial corporate
bonds are denoted using the following
abbreviations: Senior Preferred (SP),Senior Non-Preferred (SNP) and Covered(CO). As per our standard methodology,
the payment rank of the green bond ismatched when selecting vanilla bonds
with which to compare the performance.
• The methodology for the selection of thebonds included in vanilla baskets is given
on page 21.

32. Spread compression and book size: green bonds in both EUR and USD attracted larger book coverand exhibited larger spread compression than vanilla equivalents, on average• EUR: Average oversubscription was 3.2 times forgreen bonds versus 2.7 times for vanilla equivalents.
Spread compression averaged 18bps for green bonds
and 17bps for vanilla bonds.

• USD: Average oversubscription was 5.4 times forgreen bonds and 2.4 times for vanilla equivalents.
Spread compression averaged 29bps for green bondsand 23bps for vanilla bonds.

EUR Book cover

USD Book coverCategory

Vanillabasketaverage
book
cover

Green
averagebookcover

Number ofgreen bonds
beating
vanillabasketGreen
bondsampleCategory

Number ofgreen bonds
beating
vanillabasketGreen
bondsampleVanillabasketaverage
book
cover

Green
average
book
cover

SSA

18

13

4.4

3.0

SSA

1

1

6.4

3.0

Covered

11

8

2.7

1.9

AA

1

1

5.8

1.9

AA

3

2

2.3

2.1

A

9

6

5.4

2.2

A

16

9

2.5

2.2

BBB

7

4

5.2

2.7

BBB

33

19

3.1

3.0

Total

18

12.0

Total

81

51.0

Five EUR green bonds achieving largest book cover
Deal
size
EURbn

Reported
order
book
EURbn

Book
cover

Vanillabasketbook
cover

KfW 2033

3.2

34.0

11.3

3.2

SSA

ICO 2027

0.5

4.5

9.0

2.8

SSA

Ile deFranceMob. 2038

0.5

4.5

9.0

3.8

SSA

BADWUR
2033

0.7

4.9

8.2

4.0

CoveredDZ HYP
2026 (CO)

0.5

4.0

8.0

3.5

Category

Short
Name

SSA

Green bonds are oversubscribed, anddemonstrate spread tightening during the pricing
process, as do vanilla bonds. To help determine
whether investors attach any value to the greenlabel, green bonds are compared to carefully
selected vanilla equivalents (baskets).

EUR green bond pricing
EUR green bonds attracted slightly lower orderbook cover in H1 2023 (3.2 times) compared to H2
2022 (3.6 times). Vanilla bonds also experienced
diminished appetite, recording average bookcover of 2.7 times in H1 compared to threetimes in H2. Spread compression during bookbuilding also dropped compared to the priorperiod at 18.3bps against 21bps for green bonds,
and 17bps against 19bps for vanilla bonds. Thisappears to reflect the more plentiful supply oflarge green bonds in H1.
While the oversubscription rates were slightly
lower in H1 compared to the prior period,

Five USD green bonds achieving largest book cover
Short Name

Deal
size
USDbn

Reported
order
book
USDbn

Book
cover

Vanillabasket
book
cover

A

Norinchukin
Bank 2028

0.5

5

10.0

1.7

A

Gaci 2030

1.8

15.2

8.7

2.0

A

SMTB 2028

0.5

4.2

8.4

1.8

BBB

Alexandria
Real Estate
2035

0.5

4.4

8.8

1.8

BBB

SK Hynix(2033)

0.8

5.8

7.7

2.9

Category

individually, 65% of EUR green bonds achievedlarger book cover than vanilla equivalents (51 outof 79). This is a larger proportion than the priorthree observations when the percentage hasremained around the 56% level.
Meanwhile, 56% of green bonds (43 out of 77)
managed larger spread compression than theirvanilla counterparts, which is slightly lower than
the 59% observed during the prior period.
Bonds in the sample excluded from this analysis:
Book cover: Soc du Grand Paris 2043 achieved 3.5
times book cover, the same as its vanilla basket.
Ahlold 2028 achieved book cover of 5.6 times, butthere was no data for its vanilla basket.
Primary market spread compression: Kunta 2028
(2bps), Neste 2029 (37.5bps), Neste 2033 (29.5bps),
Intesa SP 2030 (SP) (25bps), Johnson Controls
2035 (27bps), and KfW 2030 (2bps) all achieved thesame spread compression as their vanilla baskets.

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

Book cover
Among the five EUR green deals with the largest
book cover were four deals from SSA issuers andone covered bond. This increased appetite fordeals from higher quality issuers is a predictable
result of rising rates, deteriorating credit quality,
volatility, and anxiety caused by the collapse of
SVB and Credit Suisse.
The two EUR deals achieving the largest book coverwere priced on the same day in early February when
the new issuance market was buoyant and reportsof credit deterioration and downwards earning
trends in equity markets began to emerge. Germanstate-owned development bank KfW is a regularissuer of large green bonds and has consistently
achieved strong pricing metrics in the EUR primarymarket. KfW priced two EUR3bn (USD3.2bn) bondsin H1 2023: a 2033 in February, and a 2030 in May.
The order book for KfW 2033 reached EUR34bn,
translating into book cover of 11.3 times which was
the largest among the EUR green bond sample.
4

Climate Bonds has only recorded one EUR SSA
green deal with larger book cover and one thatmatched it, both priced in Q2 2022 (EU 2043, 13
times, and KfW 2032 11.3 times).
Spanish state finance agency Instituto de Credito
Official (ICO) has issued one green bond annually
since 2019. Its ICO 2027 EUR500m (USD560m)
attracted book cover of nine times.
Since 2021, Ile-de-France Mobilités (Ile deFrance Mob.) has priced eight green bonds withproceeds earmarked for Low-Carbon Transport.
The most recent deal was priced in June andthe EUR500m (USD536m) Ile de France Mob.
2038 was also covered nine times. The authority
is responsible for the development of publicpassenger transport services within the region of
Île-de-France which includes Paris.
BADWUR 2033 managed the fourth of the top
five largest book covers reaching 8.2 times its
EUR600m (USD656m) deal size. The German
State of Baden Wurttemberg is rich in natural
biodiversity and includes the Black Forest
National Park. Proceeds from the deal, and thoseof its two predecessors, are earmarked to support
Low-Carbon Energy, IT, and Land Use.
DZHYP 2026 (CO) was the only non-SSA deal
in the top five and was oversubscribed by eighttimes in the primary market. The EUR500m(USD541m) deal was priced in January together
with the longer maturity DZHYP 2032 (CO) of thesame size, which achieved book cover of only 2.6
times, suggesting investor preference for shorter
duration assets in a rising rate environment.
Spread compression
The five bonds exhibiting the largest spreadcompressions in EUR were all from private
sector issuers, which occurred in the priorobservation period. This is unsurprising giventhat bonds with relatively lower credit quality
tend to price wider, hence the absolute levels of
spread tightening are larger.
The debut green bond from French BanqueStellantis 2026 (SP) scored 50bps of spreadtightening in the primary market, thentightened more than comparable baskets andcorresponding indices after both seven and
28 days. The proceeds were earmarked forrefinancing loans and leases for passenger andlight commercial vehicles compatible with LowCarbon Transport. The deal was priced in early
January on a day which Bloomberg describedas the second busiest day on record for theEuropean debt new issue market, with volume
reaching EUR39bn.2 Since 2016, Climate Bonds
has observed spread compression of at least 50bp
for just nine EUR bonds, so the magnitude of thistightening is very unusual. Prologis 2032 reachedthe zenith of 65bps with its June 2020 deal.
Four deals exhibited spread compression of
40bps, all from entities operating in the utility
sector. This is one of the easiest sectors todecarbonise because the transition pathways
are clear, and clean alternatives comprise tested
and scalable technology. Low-Carbon Energy isalso one of the most important UoP categories
to scale up because it is a contingency for the
decarbonisation of most other sectors.

USD green bond pricing
USD green bonds achieved higher book coverand more aggressive tightening than vanillabonds, on average. The H1 2023 sample obtained
an average book cover of 5.4 times, slightly morethan the five times observed in H2 2022, whilevanilla bonds book cover declined to 2.4 times
from three times in the prior period.

German energy supplier E.ON priced its tenthaligned green bond in January, together witha shorter vanilla deal. The E.ON 2034 EUR1bn(USD1.1bn) green tranche attracted bookcover of 4.2 times. E.ON’s 2021 updated green
bond framework complies with the EU Green
Bond Standard (GBS) and references the EU
Taxonomy, and proceeds from the bond were
earmarked for projects in Low-Carbon Energy,
Energy Efficiency, and Low-Carbon Transport.

Spread compression was also more aggressive
for green bonds at 29bps against 23bps for thevanilla sample. These numbers were both larger
than the H2 sample, which exhibited 25bps and18bps of tightening for the green and vanilla
samples respectively.

Belgian grid transmission system operator Elia
priced its debut green bond in January. The Elia
2034 EUR500m (USD540m) achieved an orderbook of 5.2 times and received strong support
from green investors. The Enexis 2034 waspriced in June and was the third aligned green
bond from the Dutch regional grid operator. Mostof the proceeds were earmarked for Low-Carbon
Energy, with a smaller share going towards LowCarbon Buildings.

Twelve out of 18 green bonds (67%) achievedlarger book cover than vanilla counterparts.
Thirteen out of 22 green bonds (59%)
experienced more spread compression
compared to equivalents. These percentages
were lower than those recorded for H2 2022,
which were 79% and 85% respectively.
Bonds in the sample excluded from this analysis:
Book cover: No order book data was available for
ICBAS (HK) 2026, EIB 2033, Saudi Elec. 2033, Boston
Properties 2034, or AES 2028.
Spread compression: No data was available for
Saudi Elec. 2033.

Energias de Portugal’s (EDP) EDP 2028 was
the fourth bond to obtain spread compression

EUR Spread compression (swap spreads)of 40bp in the primary market. The EUR750m(USD823m) deal was priced in the busy last
week of June attracting book cover of 6.1 times.
Climate Bonds has included five other EUR
deals from EDP in semi-annual pricing studies.
All of them have achieved a larger magnitudeof spread compression than vanilla baskets(average spread compression of 36.5bps),
and all except one have attracted larger bookcover (average book cover of 6.1 times). All
have also outperformed vanilla baskets andmatched indices in the secondary markets after
both seven and 28 days. EDP’s energy sector
decarbonisation goals have been approved by
the Science Based Targets initiative (SBTi) toreach net zero by 2040.

USD spread compression (treasury spreads)

Green
bond
sampleNumberof greenbonds
beating
vanillaequivalentGreenaveragespreadcompression

Vanillabasketaveragespreadcompression

SSA

17

12

-3.1

-1.9

AA

1

0

0.0

-15.0

Covered

11

7

-4.2

-2.9

A

10

8

-32.8

-22.6

AA

3

2

-23.3

-21.7

BBB

9

5

-30.3

-25.0

A

14

6

-25.6

-23.3

Total

22

13

BBB

32

16

-27.5

-26.6

Total

77

43

Category

Category

SSA

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

Green
bond
sampleNumber ofgreen bonds
beating
vanillaequivalentGreenaveragespreadcompression

Vanillabasketaveragespreadcompression

2

0

-17.9

-20.5

5

Book coverFour of the bonds achieving the largest orderbooks in the USD green bond market were
financial corporates, and only one of the issuers
was a US entity. Prior to H1 2023, Climate Bonds
had only recorded seven USD green bonds
covering their order books by at least eight times.
The largest of those was the Mexico City Airport
2026 transaction (later removed from the dataset)priced in 2016.

Korean chip supplier SK Hynix 2033 attracted
an order book of 7.7 times for its USD750m
January deal. The entity is the world’s second
largest manufacturer of memory chips, andthe third largest of semiconductors. Proceedsfrom the deal were earmarked for Water, Energy
Efficiency, Waste, and Land Use. SK Hynix was
the only entity in the H1 sample operating in
the technology sector and the opportunity todiversify could have heightened the interest.

This was matched by Japanese cooperativebank Norinchukin which priced its fourth aligned
green bond in June. The issuer remarked that
the USD500m Norinchuckin Bank 2028 hadreceived robust demand despite the volatile
market conditions. The proceeds were earmarked
for projects in Low-Carbon Energy, Low-Carbon
Buildings and Low-Carbon Transport

Spread compression
SK Hynix 2033 exhibited the largest spreadcompression in the USD sample in H1. Climate
Bonds historical sample includes one deal
with 55bps (Mexico City Airport 2046, priced
in 2016 and later removed), and one otherobtaining 50bp, Avangrid 2025 priced in 2020.
As mentioned above, the relative scarcity ofgreen deals originating from the technology
sector would have contributed to investor
interest in this deal.

Alexandria RE 2035 accumulated book coverof 8.8 times when it was priced in early February.
The USD500m bond was the fifth aligned deal
from the California based real estate company
with a focus on the ownership, development, andoperation of life science campuses.
Saudi Arabia’s sovereign wealth fund, the Public
Investment Fund (PIF), returned to the green bondmarket in February for the second time in fourmonths with a three-tranche deal. Gaci 2030, theshortest dated of those, attracted book cover of 8.7
times. Climate Bonds expects more green bonds
from this issuer which has committed to USD10bnof investment in renewable energy projects by 2026.
SMTB 2028 covered its USD500m early Marchtransaction 8.4 times. Proceeds from the deal
were earmarked for wind and solar projects
included in the category of Low-Carbon Energy.

ICBAS (HK) 2026 tightened by 49bps during
book building. The same issuer priced the
ICBCAS (HK) 2025 in 2022 which tightened by
47bps in primary. Proceeds from the most recent
deal were earmarked for Low-Carbon Energy,
Low-Carbon Transport, and Waste.
China Construction Bank issued its sixth aligned
green bond in May. The CCB (Sydney) 2026
USD500m deal tightened by 40bps in primary.
Proceeds were earmarked for biodiversity, forest
management and land restoration projects, allfalling into the Land Use category. Climate Bonds
historical pricing dataset confirms that shorter
dated USD green bonds from Chinese banks andtheir subsidiaries tend to achieve good pricing
metrics during book building.

Rec Ltd is an Indian government-owned company
providing financial and technical support forrural electrification projects in India. Its REC
2028 USD750m deal tightened by 37.5bps during
book building when it was announced in April.
Proceeds from this deal were earmarked for LowCarbon Transport. There is much work to do in
India which must combine economic growth withdecarbonisation to achieve its commitment to
net zero by 2070. The government began issuing
local currency sovereign green bonds in early2023. However, large USD denominated deals
such as this one offer international investors
the opportunity to support development in thiscritical emerging economy without exposing
themselves to currency risk.
Public Service Electric and Gas Co. is a US based
diversified energy company. Its USD500m PEG
2033 (SS) priced in late March as markets werereopening. The 36bps of spread tightening
contributed to almost 50% of attrition in theorder book but the reconciled order book still
covered the deal by 3.5 times. Proceeds wereallocated to Low-Carbon Energy, Low-Carbon
Transport, and Adaptation and Resilience.

Methodology notes: Baskets comprise bondsthat most closely match the green bonds and areissued during the same quarter. The baskets inthis publication include between one and sevenbonds. For an explanation of the methodology,
see page 21.

Five EUR green bonds achieving largest spread compression (swap spreads)
Category

Bond

Pricing date

IPT

Primary Spread

Compression
green bondCompression
vanilla basket

A

Enexis 2034

05/06/2023

105

65

-40

-24

BBB

Banque Stellantis 2026 (SP)10/01/2023

135

85

-50

-25

BBB

E.ON 2034

BBB

Elia 2033

05/01/2023

140

100

-40

-28

11/01/2023

125

85

-40

-30

BBB

EDP 2028

19/06/2023

105

65

-40

-35

Compression
green bondCompression
vanilla basket

Five USD green bonds achieving largest spread compression (treasury spreads)
Category

Bond

Pricing dateIPTAICBCAS (HK) 2026

11/01/2023

110

61

-49.0

-43.0

A

CCB (Sydney) 2026

23/05/2023

95

55

-40

-20.00A

PEG 2033 (SS)23/03/2023

158

122

-36.0

-20.0

BBB

SK Hynix (2033)

10/01/2023

360

310

-50.0

-25.0

BBB

REC 2028

03/04/2023

250

212.5

-37.5

-40.00

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

Primary Spread

6

3. Green allocations: 66% allocated to investors describing themselves as green
Climate Bonds invited the 83 non-sovereignissuers included in this analysis to disclose
what percentage of their deal was allocated toinvestors describing themselves as green orsocially responsible (green investors). The resultsof this outreach were as follows:• 42 issuers representing 53 bonds shared the data

Examples of investor type category descriptions
Dark green

Medium green

Light green

Article 9Strong ESG commitment

PRI signatory

Dedicated

ESG integration

Exclusions

Advanced green

Engaged investors with
ESG teams

Committed to at least one
UN-lead initiative e.g., PRI,
PSI, PRB

Impact oriented strategies

Best in class funds• 12 issuers representing 18 bonds replied
without disclosing the data
• 29 issuers representing 34 bonds did not reply
Based on these responses, the average
allocation to investors describing themselves
as green was found to be 66%. This appears
to have stabilised over the past few observation
periods, as the number has remained within a 2%
band throughout 2021 and 2022.
Allocations ranged from 100% (Soc. Du Grand
Paris 2053) to 15% (Siemens 2026 and 2029).
Engagement with USD issuers improved with
six replies to the request for numbers, and two
more representing four deals who replied but
could not disclose. Twelve did not acknowledge
the request. Nine of the USD deals originate
from the USA or Europe, with the remaining 14
originating from ASEAN or the Middle East, and alack of contact information or language barriers
contribute to the challenges of gathering thisdata. It is hard to draw conclusions from thepersistently small USD dataset, but those who
replied were as always positive on the benefits ofthe green label.

Among the EUR issuers, 20 responsible for 25
deals provided data classified by dark green,
medium green, or light green categories. These
categories are defined either internally by issuers
or by their brokers. Climate Bonds has recorded
this for the first time so that changes can bemonitored over time. The definitions of eachcategory were understandably not the same fromeach source but were broadly aligned. The abovetable includes examples of the descriptions
provided for each category.

Methodology notes: Green investor
participation is provided by issuers. There is
no standard methodology for defining a green
investor and Climate Bonds acknowledges that
this is subject to interpretation. There is no way
to monitor how investors split their allocations ofgreen bonds among their different portfolios.

Issuers generally acknowledge that the greenlabel attracts a broader range of investors
enabling good diversification of the investor
base. Furthermore, each subsequent deal attracts
a larger number of dedicated investors.

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative7

66% of green bonds allocated to green investors
Dark

MediumLight

Green not specified

Not green

Average 66% was allocated to green investors

Rating Group
EUR

0%

20%

40%

60%

80%

100%

40%

60%

80%

100%

Madrid 2028
BADWUR 2033
KfW 2030
Adif Alta 2033
SNCF 2033

SSA

Soc. Du Grand Paris 2053
KUNTA 2028
JFM 2028
KfW 2033
ICO 2027
Soc du Grand Paris 2043
BPCE SFH 2033 (CO)UniCredit CZ 2028 (CO)SpareBank Bolig. 2030 (CO)Nat. Nederland Bank 2027 (CO)BACA 2029 (CO)Caja Rural de Navarra 2027 (CO)DZ HYP 2032 (CO)DZ HYP 2026 (CO)SEB 2027 (SP)NBN Co. 2033
NBN Co. 2029
Alliander 2028
Mercedes Benz 2031
Mercedes Benz 2026
Volksbank 2027 (SP)Hyp vorarlberg Bank 2026 (SP)HESLAN 2030 (SNP)
Hypo Noe 2027 (SP)SRBANK 2027(SP)Lansforsakringar Bank 2027 (SP)Swedbank 2028 (SNP)
Ferrovie 2033
Ferrovie 2029
Intesa SP 2030 (SP)Intesa SP 2026 (SP)
Siemens 2029
Siemens 2026
Ahold 2028
VW2026
VW 2029
Intesa SP 2033 (SNP)
RWE 2035
RWE 2029
Acea 2031
Elia 2033
ABN Amro 2028 (SNP)

COV

AA

A

BBB

USD
Norinchukin Bank 2028
SMTB 2028
Comcast 2033
AES 2028
Verizon 2033
Boston Properties 2034

A

BBB

0%

20%

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative8

4. Greenium

However, sometimes, a bond may be issued
with a higher price, and thus have a lower yieldcompared to outstanding debt. The bond will priceinside its own yield curve. This is known as a newissue concession; when present in a green bond,Climate Bonds has termed it greenium. This is an
excellent outcome for any issuer because it meansthat it pays less to fund its green bond compared
to its secondary market vanilla debt.
There is no reason why a bond being green should
impact its price, since green bonds rank pari-passu(on equal footing) with bonds of the same paymentrank and issuer. There is no credit enhancement to
explain pricing differences and issuers of green bonds
often incur costs such as Second Party Opinions andCertification, although these are typically negligible.
EUR

USD
Q2

Q1

Q2

Greenium

6

6

2

2

16

New issue
premium

18

10

2

4

34

Sum

24

4

6

50

3.4

3.3

3.2

3.1

3.0
0
Duration

EUR

Vanilla bonds

BACA 2029 (CO)JFM 2028
KUNTA 2028
Nat. Nederland Bank 2027 (CO)Stadshypotek AB 2028 (CO)Ned. Water. 2033
SpareBank Bolig. 2030 (CO)KfW 2030
NRW 2030
LBBW 2027 (CO)Madrid 2028
USD

ICBCAS (HK) 2026
Comcast 2033
Saudi Elec. 2033
AES 2028

The deal priced at mid-swaps -3bps
but secondary market performance was
impacted by the collapse of SVB andassociated market turmoil, and the spread
moved in a range of between -8.9bps and3.4bps. However, by the end of June, thebond was at mid swaps -2.8bps.3

KUNTA 2028 exhibited a greenium

Green bonds exhibiting agreenium in H1 2023
DZ HYP 2026 (CO)2028 priced in mid-February. The EUR1bn(USD1.1bn) bond covered its book twice
compared to its vanilla basket which managed
1.2 times. Both the Kunta 2028 and its vanillabasket tightened by 2bps during book building,and the Kunta 2028 priced inside its secondary
market yield curve. The order book was welldiversified geographically and by investor type,and 80% of the deal was allocated to investors
describing themselves as green.

Kunta initiated its green bond programmein 2016 and has priced eight aligned deals to
date. The most recent of these was the Kunta

Total

Q1

16

Kuntarahoitus Oyj (Kunta) is a Finnish, public
sector owned institution lending to municipals
to finance sustainable development. Thislending is financed in the capital markets.
Kunta’s objectives are aligned with thoseof the Finnish government, aiming for bothcarbon neutrality by 2035 and the protectionof biodiversity, and financed emissions arecalculated and monitored. Kunta updated
its Green Bond Framework in August 2022,
referencing both the EU Taxonomy and the EU
GBS. Eligible project categories were stated as
Low-Carbon Buildings, Low-Carbon Transport,
Low-Carbon Energy, and Water and Waste.

Yield as of 15/02/2023

Pricing
outcomes

Kunta 2028

Source: Bloomberg

The new issue premium is the extra yield that abuyer receives and a seller pays for a new bond,compared to where seasoned bonds from thesame issuer are trading in the secondary market
at the time of issuance. A new issue premium is astandard feature of the bond market.

2

4
Seasoned green bonds

Green bonds and vanilla equivalents are subject
to the same market dynamics such as supply,
rate expectations and geopolitical crises.

EUR investors willing to pay for green
deals from SSA and covered bond issuers
In H1 2023, Climate Bonds built yield curves for
50 non-sovereign bonds out of a sample of 106.
Within our sample of 50 green bonds, 16 priced
on or inside their own secondary market yield
curves (32%).
Twelve bonds obtaining a greenium were EUR
denominated, while four were priced in USD.
Among the EUR deals, five were covered bonds
and seven were SSA. This is consistent with theincreased interest observed for green bonds fromsuch issuers during book building.
The USD bonds were from the private sector,
but there are not enough data points to draw
any conclusions.

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

6

8
New issue green bond

10

12

Existing social point

A third of green bonds achieving a greenium isconsistent with the historical average observed by
Climate Bonds since H2 2016. SSA and Covered
Bonds achieving strong pricing dynamics is to
be expected given the landscape in H1 2023. The
green label offers extra appeal, firstly becauseof the dedicated investor base, and secondly
because of the liquidity it offers to investors who
may later decide to sell. Such flexibility is pricelessin uncertain markets, which is one reason why
the green bond market remains undersupplied.
Climate Bonds expects this dynamic to continue
for the foreseeable future, as more investors,
particularly in Europe, commit to investmentsthat support decarbonisation efforts.
Climate Bonds continues to receive various
inquiries on the topic of greenium calculations.
The box below is reprinted from the H1 2022
iteration of this report.

9When is a greenium not a greenium
Climate Bonds uses the term greenium whena bond is sold in the primary market with ahigher price – and corresponding lower yield –compared to where existing debt of the same
issuer is trading in the secondary market. Thisis similar to what is described as a new issue
concession. Climate Bonds uses this data asa proxy to determine whether the green label
can achieve cheaper funding for the issuer.

green bond pricing. These include secondary market
performance, or comparisons of new issue spreadsof green bonds and other bonds issued in different
years from the green bond for example, which would
naturally result in vastly different conclusions.
Even when the term greenium is used as a proxyfor new issue concession by others, there are somedetails which may give different results fromthose achieved by Climate Bonds.

There is nuance to this: for example, even if
a green bond does not price through its own
yield curve and delivers a traditional new issuepremium, the issuer could still have achieved
cheaper funding that it would have, had it
issued a vanilla bond. Climate Bonds does not
remark on this for now.

• Climate Bonds uses Bloomberg closing prices.
• For large government bonds, Climate Bonds
confers with the issuer to determine the precise
timing of the deal to ensure that a yield curveis built using data from the exact same time.
Where possible, official pricing sources are used.

• Climate Bonds does not account for a vanillabond new issue premium equivalent in
its greenium calculations. Climate Bonds
determines the greenium through linear
interpolation according to the position of
the bonds on either side of the green bond’s
duration at the time of the green bond’s pricing.

• Climate Bonds plots the duration on the x-axis,
not the maturity. Using the duration accounts
for differences in coupon and pricing dates
across the yield curve.

Since Climate Bonds introduced the termgreenium in 2017, it has been incorporated into
the financial vernacular. The term has been used
to describe a multitude of calculations related to

Stadshypobank 2028 (CO)Stadshypotek 2028 (CO) was the first EUR
covered bond from the issuer and was priced
in late March as the new issue market started
to reopen post SVB. The EUR1bn (USD1.1bn)
deal accumulated book cover of 2.25 times,
beating its vanilla basket (1.6 times), and the
spread tightened by 4bps compared to 3bps
for its comparable. The bond landed at midswaps +16bps, which was inside its secondary
market yield curve, delivering a greenium, andit continued to tighten in the secondary market.
After both seven and 28 days, the bond hadtightened by a larger magnitude than its vanillabasket and corresponding index.

Stadshypotek AB is the mortgage subsidiaryof Swedish bank Svenska Handelsbanken.
Stadshypotek AB issues under the SHBASS ticker
from which Climate Bonds has recorded sixaligned green deals to date. Handelsbanken’s
green bond framework, which was updated inAugust 2022, acknowledges the EU GBS andreferences the six environmental objectivesof the EU Taxonomy. The framework names
eight eligible project categories: Low-Carbon
Transport, Adaptation, Energy Efficiency, Land
Use, Pollution Prevention and Control, LowCarbon Energy, and Water and Wastewater.
Handelsbanken’s own operations have been
net-zero since 2017, and it has committed to fully
decarbonising by 2040 at the latest.

Stadshypotek 2028 (CO) exhibited greenium
3.4

Methodology notes: We use yield-on-issuedate, which reflects the price that the green bondoffered on the pricing date. For comparable
bonds, we use the yield-to-convention-mid.
For all bonds, we use modified-duration-tomid, and all the data is as of the pricing dateof the green bond. The modified duration is
the percentage price change of a security for agiven change in yield. The higher the modified
duration, the more sensitive the bond’s price is tointerest rate movements.
First, we plot seasoned vanilla bonds (blue dots)
and fit a 2nd order polynomial yield curve. Next,
we overlay any seasoned green bonds (orange),
and finally we add our subject bonds (green).
Vanilla bonds issued on the same day as the
subject green bond are also included (grey). We
include the yield curves of bonds in our sample
with a minimum of two comparable bonds (onewith a shorter duration, and one with a longer
duration than the green bond).
Comparable bonds used for this exercise must
fit the specification for green bond selection
outlined on page 21, except that they are notlabelled and the UoP is not limited. Bonds must
share the same credit rating and payment rank as
the green bond and have been issued on or after
1 January 2014.

3.3

3.2

3.1

Source: Bloomberg

Yield as of 28/03/2023• Climate Bonds uses a homogenous setof bonds. Only bonds sharing the samecharacteristics as the green bond areincluded in the construction of the yield
curve (for example, minimum size of
USD500m, bonds of the same seniority, etc.).
Bonds bearing other thematic labels are
excluded or plotted as a separate curve.

3.0
0
Duration

2

4

Vanilla bonds

New issue green bond

6

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

810

5. Performance in the immediate secondary market• Seven days after pricing, 49%
of green bonds had tightenedmore than comparable vanillabaskets; 69% had tightened morethan their corresponding index.

Rating
Group
EUR

SSA

Covered

AA

A

Bond

• 28 days after pricing, 49% of
green bonds had tightened morethan comparable vanilla baskets;
67% had tightened more thantheir corresponding index.

In H1 2023, 77% of green bonds in our sample
exhibited tighter spreads seven days after theirpricing date. This declined slightly to 71% after
28 days. In the prior observation period, 67% ofdeals had tightened after seven days, and 73%
had after 28 days.

1 week change

28 day change

Green Bond

VanillaBasketCorrespondingiBoxx index

Green Bond

VanillaBasketCorrespondingiBoxx index

NIB 2030

18.6%

14.2%

-89.1%-90.5%

1.3%

Ile de France Mob. 2033

-22%

-55%

-7%

6%

-11%

-13.0%-21%

Ile de France Mob. 2043

2%

-1%

-1%

3%

-6%

-40%

ICO 2027-43.6%

-8.3%

1.4%

-9.3%

7.5%

18.0%

KfW 2033-165.3%-133.3%82.7%

109.9%

-0.7%

1.6%

EIB 2028-82.6%-39.0%

-3.2%

17.9%

-5.6%

10.9%

JFM 2028

-1.3%

12.7%

-4.8%

14.1%

-1.2%

43.8%

KUNTA 2028

42.0%

213.0%

42.3%

12.0%

-1.0%

20.7%

Soc. Du Grand Paris 2053

4.4%

1.2%

-12.7%-21.2%

-0.1%

-1.3%

Ned. Water. 2033

-5%

2%

-7%

13%

-0.75%

14.59%

SNCF 2033-23.20%

-26%

-3%

-2%

0.36%

13.08%

Adif Alta 2033

-10%

-8%

-3%

-2%

6.71%

10.33%

Ferrovie 2033

-8%

-9%

-3%

-2%

-0.98%-9.84%

KfW 2030

-4%

24%

-57%

36%

-1.25%

0.64%

NRW 2030

-19%

74%

-22%

31%

5.00%

5.49%

EIB Korea 2030

-5.9%

-6.9%

-5.4%

20.4%

2.7%

-9.0%

Ile de France Mob. 2038

-8.4%

-12.5%

-7.9%

-6.4%

-0.6%

-2.9%

BADWUR 2033

37.0%

-17.0%

-3.1%

-2.0%

-7.2%

-5.7%

Madrid 2028

5.5%

6.4%

0.7%

-12.8%

-9.5%

-9.9%

DZ HYP 2026 (CO)-97.0%-130.3%118.0%

497.0%

3.5%

-4.4%

DZ HYP 2032 (CO)

-4.9%

-5.5%

-2.2%

-1.3%

3.2%

-3.2%

Caja Rural de Navarra 2027 (CO)-16.9%-13.2%

-3.9%

-9.5%

1.9%

-9.9%

BACA 2029 (CO)

-9.8%

-13.2%

-0.5%

-1.4%

-2.5%

-0.2%

Nat. Nederland Bank 2027 (CO)-21.8%-13.8%-23.8%-22.7%

-0.2%

7.4%

Stadshypotek 2028 (CO)

-9.5%

-10.6%

-1.3%

-6.4%

-3.5%

1.0%

SpareBank Bolig. 2030 (CO)

16%

-4%

-5%

-11%

-3.11%-2.18%

Arkea 2033 (CO)

1.8%

7.0%

-1.2%

5.5%

-1.9%

-0.2%

UniCredit CZ 2028 (CO)-21.8%-22.4%

-1.5%

-2.4%

2.6%

0.5%

BPCE SFH 2033 (CO)

-3.0%

-6.7%

-1.2%

5.5%

1.4%

-0.7%

LBBW 2027 (CO)104.0%

168.0%

15.3%

28.4%

1.5%

-0.4%

NBN Co. 2029

-44.2%-14.6%

4.7%

-2.5%

-0.1%

-0.6%

NBN Co. 2033

-13.6%-11.9%

-9.5%

10.9%

-4.7%

-5.7%

SEB 2027 (SP)

-5.2%

-22.8%

4.0%

0.7%

1.6%

-7.7%

Swedbank 2028 (SNP)-5.5%-16.8%

-3.1%

-5.6%

-1.1%

-13.8%

Lansforsakringar Bank 2027 (SP)

-9.5%

-24.6%-13.4%-19.9%-6.4%-22.4%SRBANK 2027(SP)-8.9%-14.8%-13.4%-19.9%-12.6%-21.3%

Hypo Noe 2027 (SP)

-3.1%

0.5%

-13.4%-19.9%-4.8%-10.5%HESLAN 2030 (SNP)-14.8%

-0.6%

-1.8%

-10.8%-1.6%-17.1%

Hyp Vorarlberg Bank 2026 (SP)-11.8%-14.9%-18.1%-27.2%

13.7%

23.6%

Volksbank 2027 (SP)

-1.5%

35.2%

-13.4%-19.9%

15.4%

7.4%

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative11

1 week change

Continued

EUR

Rating
Group

Bond

A

Neste 2029

7.2%

Neste 2033
Mercedes Benz 2026

BBB

Green Bond

VanillaBasket28 day change
CorrespondingiBoxx index

Green Bond

VanillaBasketCorrespondingiBoxx index

-6.2%

-1.6%

-23.1%

-2.0%

-5.9%

-4.1%

0.0%

13.2%

-1.6%

-8%

4.4%

-12%

6%

2.41%

3.93%

19.0%

0.0%

Mercedes Benz 2031

-17%

-17%

-2%

2%

-0.89%-1.20%

Statnett 2033

-4.6%

-10.8%

-5.9%

-5.9%

-0.3%

-1.1%

Statkreaft 2033

-0.5%

-11.1%

-5.9%

-5.9%

-0.5%

-1.1%

BoA 2028

-1.5%

-2.4%

-9.7%

-16.0%

-3.7%

-6.4%

Enexis 2034

-6.6%

-10.9%-16.8%-21.7%

-3.2%

-2.6%

Alliander 2028

10.5%

-24.6%

8.9%

10.6%

-6.7%

-9.0%

E.ON 2034

5.4%

-2.9%

-5.0%

-12.2%

-0.3%

-7.5%

ABN Amro 2028 (SNP)-3.0%-25.9%-17.2%-28.8%-3.1%-23.8%

National Grid 2029

-6.5%

-9.6%

-6.4%

-16.9%-2.9%-16.8%

Banque Stellantis 2026 (SP)-20.8%-63.4%-18.1%-27.2%-6.1%-29.9%

Elia 2033

-6.3%

-8.9%

-17.4%-19.9%-3.8%-14.4%

Thames Water 2027 (SS)

-5.9%

-24.6%-4.7%-32.0%-6.3%-21.5%

Thames Water 2031 (SS)

-3.6%

-5.6%

-17.4%-19.9%-3.8%-14.4%

Acea 2031-13.3%-25.9%-17.4%-19.9%-5.8%-12.2%RWE 2029

2.4%

3.8%

-15.6%-23.8%

4.1%

7.6%

RWE 2035

-0.6%

0.9%

-5.0%

-12.2%

3.6%

8.2%

Orsted 2026

-42.4%-20.7%-4.7%-32.0%

0.3%

24.3%

Orsted 2030

-13.6%-18.2%-6.4%-16.9%

0.3%

10.6%

Orsted 2035

-12.8%-16.9%-5.0%-12.2%

2.3%

8.9%

Intesa SP 2033 (SNP)

-4.5%

20.8%

1.3%

-7.7%

5.5%

14.5%

de Volksbank 2030 (SNP)

-5.2%

8.5%

-0.3%

-18.8%

2.7%

15.4%

Stellantis 2030

11.1%

-0.9%

7.5%

3.6%

7.5%

3.6%

Autoliv 2028

-4.7%

7.9%

-2.1%

10.0%

11.8%

10.0%

Brambles 2031

-10.0%-20.3%-3.6%-16.2%

-0.3%

-4.0%

VW 2026-14.6%-21.1%-12.5%-26.2%

2.6%

-8.9%

VW 2029-6.8%-21.0%

1.5%

3.2%

0.3%

-10.9%

Ahold 2028

-23.7%-27.0%-32.5%-38.5%-10.1%-14.8%

Siemens 2026

-25.5%-35.9%-21.3%-34.5%-5.4%-11.2%

Acciona Energia 2030

-6%

16%

9%

7%

1.80%

10.49%

Intesa SP 2026 (SP)

-4%

-11%

-5%

-11%

-3.11%-2.18%

Intesa SP 2030 (SP)

-3%

-9%

-10%

-12%

-0.02%-3.08%de Volksbank 2027 (SNP)

-3%

0%

-4%

3%

-3.79%-8.26%

Ferrovie 2029

-11%

-5%

-18%

-18%

-1.25%

0.64%

Johnson Controls 2035

-12%

-14%

-10%

-17%

-2.05%-4.67%

Stora Enso 2026

-17%

-15%

-27%

-8%

2.80%

-3.20%

Stora Enso 2029

-10%

-11%

-9%

-13%

0.87%

-5.26%

Renault 2028

-7.3%

-17.5%-15.5%-14.6%

-1.9%

-5.9%

EDP 2028

-2.1%

-7.8%

8.9%

10.6%

-1.0%

-3.5%

Siemens 2029

-10.5%-14.0%-1.6%-23.1%-8.1%-11.0%

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative12

1 week change

Continued

USD

Rating
Group

Bond

SSA

EIB Korea 2033
EIB 2033

AA

SK On 2026

A

BBB

Green Bond

CorrespondingiBoxx index

Green Bond-30.9%

7.5%

24.5%

-18.9%-47.6%-19.7%-15.8%

2.5%

-3.3%

-12.2%-21.7%

0.1%-32.7%

5.3%-14.9%-17.9%

VanillaBasket28 day change
VanillaBasketCorrespondingiBoxx index
7.1%

9.0%

ICBCAS (HK) 2026

18.4%

11.0%

-19.0%-17.5%-3.7%-16.8%

Comcast 2033

13.7%

20.1%

10.4%

4.4%

3.0%

7.8%

Gaci 2030-9.8%-14.6%-2.3%-11.2%

5.6%

8.4%

Gaci 2035

9.4%

-8.6%

-0.3%

3.4%

4.7%

5.6%

Gaci 2053

7.2%

6.3%

-1.2%

8.1%

4.7%

5.6%

SMTB 2028-21.3%

0.8%

0.0%-22.4%

-1.6%

28.1%

Norinchukin Bank 2028

-11.1%

17.3%

1.4%

8.6%

2.7%

24.1%

PEG 2033 (SS)

-3.4%

-13.1%

1.1%

5.0%

-8.5%

-10.1%

Saudi Elec. 2033

29.5%

12.3%

-27.5%

-4.6%

3.6%

3.7%

Pacificorp 2053

-2.5%

-1.7%

-1.3%

-7.3%

-2.1%

-3.3%

CCB (Sydney) 2026

6.3%

7.1%

6.1%

-28.2%

-6.5%

-7.8%

SK Hynix (2033)

0.6%-18.7%

5.7%

-0.6%

-5.1%

-11.5%

Alexandria Real Estate 2035

-2.4%

8.0%

2.8%

6.1%

4.8%

10.7%

REC 2028

0.3%

-5.9%

-9.0%

-2.8%

1.9%

-2.4%

Boston Properties 2034

0.4%

0.0%

-3.7%

-11.9%

0.7%

-2.3%

Verizon 2033

-6.0%

-0.1%

-3.5%

-7.2%

-0.2%

-5.7%

AES 2028

0.3%

1.5%

-17.1%

-6.0%

-3.2%

-8.7%

MAF 2033 (Sukuk)

0.0%

3.0%

0.4%

0.9%

-2.5%

-6.0%

MVM Energetika 2028

-6.7%

-11.2%-17.1%

-6.0%

-2.6%

-10.9%

Hyundai 2025

2.2%

-17.7%

-5.4%

-5.3%

-1.8%

-5.5%

The relatively lower number of deals beating
their vanilla baskets compared to their indicesis indicative of the prevailing volatile market
conditions and credit events towards the endof Q1. Bonds are matched with baskets on
a best-efforts basis with bonds priced in thesame quarter. Where the green bonds and theirbaskets were not priced in the week or even on
the same day, they would not necessarily have
moved in the same direction in the secondary
market. Bonds are compared to corresponding
indices over the same period, so timing does not
influence differences.

After seven days
• 49% of green bonds had tightened by morethan their vanilla baskets: 49% of EUR and 48%
of USD green bonds.
• 70% of green bonds had tightened by morethan their corresponding index: 76% of EUR
and 52% of USD green bonds.
A larger percentage of individual bonds tightenedon the break in H1 2023 compared to H2 2022
(77% against 67%). In H1 2023, 49% of green
bonds had tightened compared to vanilla baskets
after 7 days, while that figure was 59% in the priorobservation period. The percentage of bonds
tightening more than their corresponding indicesafter 7 days was unchanged: 70% in H1 2023,
against 70% in H2 2022.

Bonds generally often deliver pricetightening in the immediate secondary
market since investors may want toincrease their position or open a position
in a bond they were not allocated. Timing
is an important factor because bond indicesrebalance at each month end. Therefore, ifbonds are issued early in the month, there
could be an opportunity for managers to add
some off-benchmark performance before
bonds are added to benchmark indices. Oncebonds enter indices, liquidity can quickly
evaporate (independent of credit events), andaccurate spreads are quoted on a bilateralbasis. As a result, our consideration of thesecondary market only extends to one monthafter the pricing date of each bond.

Firstly, we match each green bond to a vanillabond or if possible, a basket of vanilla bonds
sharing similar characteristics, issued in
the same quarter as the green bond. This
comparison is a proxy for the opportunity
cost to the investor. Secondly, we compare
each green bond to a corresponding index tomonitor their performance against the market.
Since it is unlikely that the vanilla bonds are
priced on the same day as the green bond, this
could be expected to impact performance in thesecondary market particularly when markets
are volatile. This exercise is designed to illustrate
what an investor could otherwise have done with
their money in the vanilla bond market during
the same period. Volatility sometimes benefits
green bonds, other times, not.

To contextualise spread movements, we
compare each green bond to two alternatives.
31% of EUR green bonds had tightened against
both their vanilla basket and corresponding index
after a week. These included seven SSA deals
among which were KfW 2033 (165%), EIB 2028
(83%), and SNCF 2033 (23%). As already stated, risk
aversion and a preference for perceived safer names
would have contributed to this performance.
DZ HYP 2026 (CO) was one of the bonds
obtaining a greenium and tightened even further(97%) 7 days after pricing, beating both vanilla

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiativebaskets and corresponding indices. Over the past
year, DZ Hyp has ramped up its commitment tofinancing Low-Carbon Buildings.
National Broadband Network (NBN) is an
Australian government owned broadband
infrastructure provider. It has a clear
decarbonisation strategy in place with a plan toreach net zero by 2050 (or sooner). Its first EUR
green bonds, NBN Co. 2029 and NBN Co. 2033
received strong support from the green investor
13community when they priced in early March. The
shorter deal had tightened by 44% seven days
after pricing, and the 2033 tranche managed 14%.
Danish multinational energy company andsustainability leader Orsted priced a threetranche deal in late May. Orsted 2026, Orsted
2030, and Orsted 2035 had all tightened morethan their vanilla baskets and indices after sevendays, achieving spread tightening of 42bps,
14bps, and 13bps respectively. Orsted is on track
to reach its SBTi approved net-zero target for
scope 1 and 2 emissions by 2025 and intends todecarbonise its scope 3 emissions by 2040.
In USD, 35% of green bonds had tightenedagainst both their vanilla basket andcorresponding index after a week. The spread of
the SMTB 2028 (addressed above) had snapped inby 21% seven days after pricing; the largest change
among the USD bonds, and beating both its vanillabasket and corresponding index. EIB Korea 2033,
in the SSA space, also exhibited strong performanceand tightened by 18% in its first week.
American wireless network provider Verizon has
priced a USD1bn green bond every year since
2018, adding its fifth deal in May. The Verizon
2033 tightened by 6% in its first seven days beating
both comparables. Proceeds were earmarked
for Low-Carbon Energy, Energy Efficiency, LowCarbon Buildings, Water, and Land Use.

After 28 days
• 49% of green bonds had tightened by morethan their vanilla baskets: 51% of EUR and 43%
of USD green bonds.
• 67% of green bonds had tightened by morethan corresponding indices: 71% of EUR and
57% of USD green bonds
After 28 days, a higher percentage of green
bonds had tightened against their corresponding
indices in H1 2023 (67%) compared to H2
2022 (64%). However, a lower percentage hadtightened against corresponding baskets: 49% in
H1 against 55% in H2 2022. 45% of green bonds
had tightened more than both corresponding
bonds and indices after 28 days.

In EUR, some of the bonds already highlighted
in this report continued to demonstrate strong
tightening after 28-days: KfW 2033 (133%), EIB
2028 (39%), SNCF 2033 (26%), DZ HYP 2026 (CO)(130%), NBN 2029 (15%), NBN Co. 2033 (12%),
Orsted 2030 (18%), and Orsted 2035 (17%).
In February, UniCredit Bank Austria priced its
second covered green bond. The EUR750m(USD800m) BACA 2029 (CO) deal did not beatits vanilla basket in book building metrics,
but priced inside its yield curve obtaining agreenium, and had tightened by more thanits comparables after both seven and 28 days.
Proceeds from the deal were earmarked for
Low-Carbon Buildings supported by Unicredit
Bank Austria’s loan portfolio.

Methodology notes: 1. Vanilla baskets
comprise the closest possible matches basedon the considerations highlighted on page 21.
We have created this proxy to illustrate whatelse an investor could have done with theirmoney during the same quarter. 2. Indices.
We compare each bond to a standard iBoxx
index. The indices are granulated by currency,
asset class, tenor, and credit rating: all ofwhich can influence the behaviour of a bond.
Each bond is therefore compared to an index
sharing similar characteristics; for example,
RWE 2029 was matched with the iBoxx EUR
Corporates BBB 5-7 index.
Seven calendar days include five data observations.
28 calendar days include 20 data observations.

A second covered bond from the UniCredit
stable, UniCredit CZ 2028 (CO), beat its vanillabasket in book building metrics, and then after
seven days had tightened by 22% which it
maintained after 28 days.
In USD, nine green bonds achieved greater
spread tightening compared to both equivalents
at the end of the first month. EIB 2033 exhibitedthe most aggressive tightening, reaching
48% after 28 days. The USD5bn deal priced in
February had tightened by 19% after seven days
but was marginally beaten by its vanilla basket
which managed 20%.
Hungarian power company MVM Energetika has
a monopoly on the production, distribution, andsale of electricity in the country. Its May 2023
Green Financing Framework references the EU
taxonomy and lists eligible project categories as
renewable energy and electricity networks, both
Low-Carbon Energy. Its debut MVM Energetika
2028 USD750m deal was priced in early June.
The deal did not beat its vanilla basket on bookbuilding metrics, but after 28 days had tightenedby 11bps, more than both of its comparables.

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative14

6. Green bond ETFs
At the end of H1 2023, Climate Bonds wasaware of 17 EUR or USD green bond ETFs withcombined fund assets of almost USD3bn, an
increase of 20% on the prior period. DedicatedETFs are an important source of secondary
market demand for green bonds.

Currency

ETF name

Lyxor Green Bond DR
UCITS ETF

SFDRClassification

Three ETFs have been added to the list. The
Amundi EUR Government Tilted Green Bond
Index ETF is a seasoned ETF launched in 2018.
X Eurozone Gov Green Bond 1D and UBS ETF
Green Bond USD were recently launched in 2022
and 2023 respectively. During the same period,
the L&G Green Bond UCITS ETF was liquidated.

The EU Sustainable Finance Disclosure Regulation(SFDR) is intended to make it easier for investors
to compare sustainable investment options within
the European Union. The regulation specifies
expectations for disclosure and describing
sustainability considerations in investments.
There are three categories of fund type:
Article 6 - No sustainability focus or considerationof ESG factors in the investment process.
Article 8 - Promotes environmental and social
characteristics. Also known as light green.
Article 9 - Has sustainable investment as its
objective and is also known as dark green.

Index

Launchdate

Size atlaunchFunds classified as Article 6 are outside the scopeof this research. Among the tracked ETFs, fiveare classified as Article 8, and eight are classified
as Article 9. Funds in both categories havecontinued to attract new assets in 2023. Two ETFs
in our sample each increased their assets by 70%
during the first six months of 2023: the Amundi
EUR Government Tilted Green Bond Index
ETF (Article 8) and the iShares EUR Green Bond
UCITS ETF (Article 9).
The Lyxor Green Bond DR UCITS ETF remains
the largest ETF in our sample with assets of
EUR628.9m (USD655.8m). The assets have grown
126 times since the fund was launched in 2017.
Local 29
Local USD
30 Dec 30 Dec June 2023
2022 2022

USD 29June 2023

ChangeonperiodEUR

8 Solactive Green Bond Index

01/02/2017

EUR5m

587.2

628.9

603.3

655.8

4.3%

Van Eck Vectors Green USD
Bond ETF

N/A S&P Green Bond Select Index

01/03/2017

USD5m

73.5

73.5

75.4

75.4

2.7%

Amundi EUR
Government Tilted
Green Bond

EUR

8 Bloomberg Euro Treasury Green
Bond Tilted Unh EUR index

05/04/2018

EUR296.1m

342.9

367.3

574.7

624.7

70.1%

iShares Global Green
Bond ETF

USD

N/A Bloomberg Barclays MSCI Global
Green Bond Select Index

01/11/2018

USD25m

291.1

291.1

314.1

314.1

7.9%

UC MSCI European
Green Bond ETF

EUR

9 Bloomberg Barclays MSCI European 01/11/2018
GB Issuer Capped EUR Index

EUR20m17.3

18.1 Unavailable Unavailable

N/A

Franklin Liberty Euro
Green Bond ETF

EUR

9 Bloomberg Barclays MSCI Euro
Green Bond Index

01/04/2019

EUR10m

184.9

198.1

257.5

280.0

41.4%

Lyxor Green Bond ESG EUR
Screened

8 Solactive Green ESG Bond EUR
USD IG TR Index

01/10/2019

EUR4m

154.8

165.8

168.4

183.0

10.4%

L&G ESG Green Bond
UCITS ETF

EUR

9 JP Morgan ESG Green Bond
Focus Index

01/02/2021

EUR22.9

6.2

6.7

Liquidated

Liquidated

N/A

iShares EUR Green
Bond UCITS ETF

EUR

9 Bloomberg MSCI Euro Green BondSRI including Nuclear Power Index

25/03/2021

EUR30m

48.4

50.7

79.5

86.4

70.3%

Horizons S&P Green
Bond Index ETF

CAD

01/06/2021

CAD6.2m

5.4

4.3

5.3

4.0

-6.5%
23.7%

N/A S&P Green Bond U.S. Dollar
Select Index

Xtrackers EUR Corporate EUR
Green Bond UCITS ETF

9 Bloomberg MSCI EUR Corporate
and Agency Green Bond Index

24/06/2021

EUR20m

148.1

155.3

176.6

192.0

Xtrackers USD Corporate USD
Green Bond UCITS ETF

9 Bloomberg MSCI USD Corporate
and Agency Green Bond Index

24/06/2021

USD16.872

233.4

233.4

178.0

178.0 -23.8%

Lyxor EuroGov Green
Bond DR

9 Solactive Euro Government
Green Bond Index

01/07/2021

EUR48m

124.2

133.0

177.0

192.4

44.7%

8 Solactive EUR USD IG Corporate
Green Bond TR Index

24/08/2021

EUR50m

24.2

25.9

25.3

27.5

6.4%

02/05/2022

USD101.2

107.9

107.9

110.5

110.5

2.4%

EUR

Lyxor Corporate Green EUR
Bond DR UCITs ETF
Franklin Municipal
Green Bond ETF

USD

N/A Bloomberg Municipal
Bond Index

X Eurozone Gov Green EUR
Bond 1D

9 iBoxx EUR Eurozone Sovereigns
Green Bonds Capped Index

15/11/2022

EUR3m

4.3

4.6

5.7

6.2

32.9%

UBS ETF Green Bond
USD

8 MSCI Global Green Bond 1-10 Year
Sustainability Select Index (TR)08/06/2023

USD20.5m

N/A

N/A

20.6

20.6

N/A

2950.7

19.7%

USD

Total Green bond ETF
Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

2464.615

7. Spotlight: Sovereign Green Bond Club
By the end of H1 2023, Climate Bonds hadrecorded aligned sovereign green bonds witha cumulative volume of USD314.9bn. EUR isthe dominant currency with 75% of the total(USD235.4bn) from 16 countries, and USD takes
5% (USD16.5bn) from six countries.

EUR and USD sovereign green
bonds, H1 2023 highlights• USD40.3bn of aligned sovereign green bonds
were priced in either EUR or USD.

• Austria, Germany, Israel, and Italy together priced
eight new deals amounting to USD29.7bn.4• Austria, Belgium, France, Germany, and Italy
all reopened existing bonds adding EUR9.8bn(USD10.6bn) to the market.
• Israel was the only debut aligned sovereign
green bond issuer with its USD2bn deal
priced in January. This was also the only USD
denominated sovereign green deal.

• Germany priced the largest volume, with
EUR13.8bn (USD15bn) split between two newdeals and three taps.
• Italy priced a EUR10bn (USD10.1bn) 8-year BTP
which was the largest single deal.
• France reopened two deals and remains
the largest single issuer of sovereign green
bonds with cumulative volume of EUR54.6bn(USD61.7bn).

Reopenings Five issuers reopened existing green bonds in H1 2023
IssuerMaturity

Date of tap

Size of tap (local)

Size of tap (USD)

Austria

25-05-2023

27-02-2023

EUR100m

USD107m

01-03-2023

EUR160m

USD171m

30-03-2023

EUR45m

USD50mSize as of
30/06/2023 (EUR)

Size as of
30/06/2023 (USD)

MaturedMaturedBelgium

22-04-2039

02-03-2023

EUR863m

USD930m

EUR5.4bn

USD5.4bn

France25-07-2038

24-04-2023

EUR702m

USD769m

EUR5.3bn

USD5.6bn

25-06-2039

08-05-2023

EUR1.9bn

USD2.1bn

EUR32.9bn

USD37bn

10-10-2025

24-01-2023

EUR1.5bn

USD1.6bn

EUR7.5bn

USD8.6bn

09-06-2023

EUR1bnUSD1.1bn

15-10-2027

21-03-2023

EUR1.5bn

USD1.6bn

EUR6.5bn

USD6.6bn

30-04-2035

16-03-2023

EUR2bnUSD2.1bn

EUR10bn

USD10.3bn

EUR9.8bn

USD10.6bn

Germany

Italy
Total

New bonds
Four sovereign issuers priced new green bonds in H1 2023. Israel was the only aligned debut issuer and the only one to price a sovereign green bond in USD.

Sovereign Scorecard H1 2023
H2 2022

IsraelGermany

Italy

Austria

Coupon & Maturity

4.5%
17-01-2033

2.3%
15-02-2033

1.8%
15-08-2053

4%30-10-2031

0%25-05-2023

0%
17-04-2023

2.9%
23-05-2029

0%
25-05-2023

Pricing Date

17-01-2023

03-05-2023

20-06-2023

13-04-2023

23-02-2023

16-03-2023

25-04-2023

24-08-2023

Tenor

10 years

10 years

30 years

8 years3m

30-days

6 years

3m

Amount issued

USD2bnEUR5.25bn/
USD5.8bn

EUR4.5bn/
USD4.9bn

EUR10bn/
USD10.9bn

EUR1bn/USD1.1bn

EUR50m/
USD53m

EUR3bn/USD3.3bn

EUR1.5bn/
USD1.7bn

1

7

3

6

USD2bnEUR51.3bn/
USD57.8bn

EUR33.5bn/
USD37.1bn

EUR10.9bn/
USD11.7bn

1%

3%

1.4%

2.5%

Total green bonds at 30/06/2023
Cumulative numberof green bonds
Cumulative green
bond volume% of outstanding
sovereign debt (market
data from Bloomberg
as of 30-6-2023)

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative16

Germany
Germany was responsible forthe largest volume of aligned
sovereign green bonds in
H1 increasing its number ofgreen deals to seven. The firstof the new deals was a green
Bund (10-year) priced in late April. Orders for the
EUR5.25bn (USD5.8bn) syndicated transaction
covered the deal size by 2.8 times. The second
deal was a EUR4.5bn (USD4.9bn) 30-year priced
in mid-June, and attracted an order book thatcovered the deal size by 6.4 times. Both followed
the twin bond structure, whereby a vanilla bond isissued, closely followed by a green bond sharing
similar characteristics. Even in a rising interest rateenvironment, each bond priced 0.5bps inside its
vanilla twin demonstrating enduring demand forthe green label. Germany’s yield curve has inverted
since the prior iteration of this report, but at theend of June its green bond yields were inside
those of their vanilla twins.

3.0

2.0

1.0
Source: Bloomberg

In January 2023, Israel joined
the Sovereign GSS+ Bond Club
with its debut green deal
worth US2bn. The 10-yearbond attracted USD12bn
in bids, covering the booksix times, and was eventually allocated to 200
investors in 35 countries. The green financing
framework highlighted eight eligible green project
categories, including Renewable Energy (Wind &Solar), Environmentally Sustainable Managementof Living Natural Resources and Land Use (LandUse), and Adaptation. Israel priced its first deal
in USD to attract the international investmentcommunity but the treasury is exploring its
options for a local currency deal to mobilise local
capital and encourage green market creation.

At the end of June Germany’s green bonds were inside their vanilla twins

Yield as of 30/06/2023

Israel

0
0

5

10

15

20

25

30

Duration
Vanilla twins

Seasoned green bonds

Austria

Italy

Austria pioneered short-termsovereign green bonds andremains the only sovereign tohave issued in this space. In
October 2022 it issued its firstgreen treasury bills, and green
commercial paper followed in March 2023.

Italy brought the largest singlealigned sovereign GSS+ dealin Q2, its third bearing thegreen label. The EUR10bn(USD10.9bn) 8.5-year maturity,
priced via syndicate in early
April. Interest in the deal reached EUR52.9bn,
enabling 2bps of spread compression. The
bond was well received by the market, with 290
investors getting involved. Around two thirds ofthe deal was allocated to investors describing
themselves as green or socially responsible.
By the end of Q2, Italy had issued cumulative
green bonds totalling EUR33.5bn (USD37.5bn)
amounting to 1.4% of its outstanding liabilities.

In H1 2023, Austria priced four new deals, three of
which had a maturity of less than one year. This
contributed to the Austrian Debt Management
Office (DMO) target to split its green liabilities 80/20
between medium- and longer-term paper. The shortterm deals are arranged on a bilateral basis, tailoredto suit the preferences of individual investors.
In April, Austria priced a EUR3bn (USD3.3bn) sixyear green bond together with a EUR2bn 30-year
vanilla deal, via syndicate. The new bond offeredinvestors a new point on the green yield curve, tofill the gap between short-term green paper andthe existing 2049 green bond. The order bookwas 2.5 times covered, and two thirds of the total
allocation went to investors describing themselves
as green. The DMO observed a 3bp greenium.

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative17

8. Spotlight: Quality discernment in the sustainability-linked bond market
Introduction
Climate Bonds had recorded
cumulative volume of
USD252bn in sustainabilitylinked bonds (SLBs) at the endof H1 2023. This underscores
the rapid growth in this label
since the first deal was priced in 2017.
Historically, Climate Bonds has recorded, but notscreened, SLB deals but in June 2023, published
its SLB Database Methodology which will enable
screening going forwards.5

Description ofsample
EUR

Green

27

To ascertain whether investors were making
any discernments based on the quality of the
SLB targets, Climate Bonds gathered primarymarket pricing data for SLBs priced in H1 2023,
which were selected according to the criteria
described below.
The sample included 18 bonds with a broad
range of economic sectors represented (as shownin the table).
The results demonstrate that investors in EUR
bonds are not giving preference to aligned deals
in favour of non-aligned deals. Given that there is

Not Aligned

6

1

All SLBSLB fullyaligned

2.7

4

VanillaAll SLB25

SLB fullyaligned33

no consensus on how to evaluate the quality of
SLB targets, this indicates that EUR investors areprioritising exposure to a particular sector, issuer,or sustainability label, regardless of structure or
decarbonisation plans. For this reason, Climate
Bonds SLB Database Methodology is basedon the 5 Hallmarks for credible transition, inparticular Hallmark 1: Paris-aligned targets.
The purpose of this methodology is to support
investors in discerning which bonds havecredible and material targets.6• SLB structure
Note: USD deals were originally eligible but
discarded due to the paucity of data

4.5

4.1

Results
Description of sample
The sample is grouped into fully aligned, aligning,
and not aligned categories. No eligible bonds
fell into the strongly aligned category. Eight
economic sectors were represented.
Book building
In H1, it appears that primary market pricing
could be squeezed more on SLBs in the notaligned category compared to fully aligned
because of strong investor interest. Both fullyaligned and not aligned SLBs accumulated
larger order books and achieved more

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

SLBaligning

SLB notaligned25

33
Numberof bonds

Communications

2

Consumer Discretionary

2

Consumer Staples

1

Energy2

Industrials

6

Materials

1

Technology

1

Utilities

3

Total

18

aggressive spread compression in primarymarkets compared to bonds in the green andvanilla samples.
Green and vanilla bond data is based on the
averages of the EUR corporate bonds included in
the analysis presented in the body of this paper.

Vestas Wind is a Danish
manufacturer, seller, installer,and servicer of wind turbines.
Vestas has issued two aligned
green bonds, and three fullyaligned SLBs, the most recent of which was
Vestas 2026 priced 08 March. The EUR500m(USD535m) deal was linked to targets related
to the reduction of scope 1, 2, and 3 emissions
and the material efficiency ratio of its own
operations. The deal attracted book cover offour times and the spread narrowed by 30bps
during book building. Climate Bonds could• Investment-grade credit rating

SLB notalignedEconomic sector• Non-financial corporate issuer• Original issue size of at least
USD500m equivalent

SLBaligning

32

Investors blown away by Vestas SLB• Pricing date between 01 January 2023
and 30 June 2023

18

11

3.8

Criteria for inclusion in analysis• Currency: EUR

TotalsAverage spread compression (bps)

1. Fully aligned: SLB targets cover all material
sources of emissions and are aligned with therelevant pathway.

4. Not aligned: SLB targets fail to meet any of theabove criteria, or do not meet the other requirements
detailed in the SLB Database Methodology.

Vanilla

2.9

Green

3. Aligning: SLB targets cover all material
sources of emissions, are aligned with thepathway on a % reduction basis, and the issuer
has the basic tenets of a transition plan.

Aligning

Average book cover

The methodology organises SLBs into
four categories:

2. Strongly aligned: SLB targets cover allmaterial sources of emissions and will be alignedwith the relevant pathway by 2030.

Fully aligned

not construct a yield
curve for this issuer.
Seven days later, theSVB drama was in fullswing by which timethe deal had tightenedby 42%, the largest seven day change in our
sample. After 28 days that had settled at amore subdued 13%. Investors evidently like thesafety of a pureplay name such as Vestas during
turbulent markets, and the materiality andambition of the targets on this deal underpin
the green credentials of the company.

18

The greenium
Climate Bonds built yield curves for nine SLBs.
None of them priced inside their secondary
market yield curves. This is unsurprising given thecurrent market backdrop. Climate Bonds analysisof the green bond market revealed that for EUR
bonds, investors were willing to pay more forgreen deals when the label was combined withthe highest credit quality during H1.
Secondary market
In the secondary market, 83% (15 out of 18) of
the SLBs had tightened after both seven and 28
days. Among the three deals that did not tighten,
one was classified as aligning, and two as notaligned. However, ten not aligned deals had
tightened after both seven and 28 days which
again suggests no discernment is being exercised
based on the strength of alignment. Thisemphasises the shortage of supply of benchmark
sized EUR SLBs, as observed in the green bondmarket over the last seven years.

SLB Market Outlook
Climate Bonds found that
qualifying SLBs priced in
H1 2023 achieved higher
book cover, and larger
spread compression, on
average, when comparedwith green and vanilla bonds priced in thesame period, irrespective of the materiality of
the SLB targets. While this did not translate
into a greenium in the primary market, mostof the SLBs in the sample had tightened sevenand 28 days post-issuance. This points to ashortage of supply, not unlike the ongoing
dynamic in the green bond market.
However, the SLB sample size is small andfragmented which makes it difficult to draw
conclusions. Climate Bonds does not havea clear understanding of the profile of SLB
investors and their motivation for buying
them. Climate Bonds approached a third ofissuers in the sample with questions on thepercentage of each SLB allocated to investors
describing themselves as green or socially
responsible, but received no replies and will
explore this further over the coming months.

of all SLBs in 2022), the main reasons in H1
2023 were partial emission coverage in targets(37.8%), lack of GHG targets (35.4%), followedby partial alignment with the pathway(9.8%). The proliferation of Climate Bonds
SLB Database Methodology should enable
standardised comparisons between SLBs,
which could eventually influence their pricing
metrics as investors become more comfortablewith evaluating their ambition levels.
To contribute to a more credible SLB
market, the Climate Bonds SLB Database
Methodology clearly defines expectations for
SLBs in terms of the materiality of KPIs andalignment with sector-specific pathways. This
is intended to contribute to more disciplinein the design of such instruments, as wellas investor discernment. With the launchof the SLB Database Methodology, Climate
Bonds also published a call to action for SLB
stakeholders to increase the proportion of
SLBs in alignment to 50% by the end of 2023,
from 25% in the first half. Climate Bonds
will continue to follow developments in thismarket and through its SLB dataset, supports
issuers and investors in building a market thatdelivers meaningful transition finance.

The reasons for SLB non-alignment with
Climate Bonds SLB Database Methodology are
evolving and improving. While in the past thiswas due to a lack of GHG targets (just over half

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative19

9. Outlook
During the first six months of 2023, USD278.8bnof aligned green bond volume was added to
the Climate Bonds GBDB, denominated in 26
currencies. Just over half of that (51%) was
priced in EUR while 20% was priced in USD. The
volume and number of deals eligible for inclusionin this report reached its peak with 111 bonds
making a combined volume of USD124.6bn.
The previous highs of 93 bonds with combined
volume of USD93.4bn constituted the H1 2022
sample. The new highs indicate that issuers arecoming to the market with more large deals that
also have the required rigour and transparency
to be in alignment with Climate Bonds GBDB
methodology. Included in the sample was
USD40.3bn of sovereign green bond volume, thelargest in any observation period to date. The
momentum behind the sovereign green bondmarket continues with 30 having issued at least
one deal to date, 22 of which have priced at least
one deal in either EUR or USD. Governments
can use the green label to attract visibility andsometimes pricing benefit for their efforts todecarbonise, and leverage the capital markets
to attract crowding in. Japan and the USA are thelargest debt issuing developed markets yet to enter
the market although Japan has committed to do so.
H1 2023 was characterised by issuer appetite
to secure funding before further rate increases,
combined with volatility and a flight to quality
driven by the collapse of SVB and Credit Suisse.
The green label became more important thanever in enabling issuers to get deals done.
Investors responded well to large green deals
from high quality issuers, with some in the EUR
SSA and Covered Bond categories in particular

EUR and USD took almost threequarters of the aligned volume
in H1 2023

attracting strong interest during book building, insome cases obtaining a greenium, and tightening
further in the secondary market. It is encouraging
to see green bonds from utility companies
among those with the strongest pricing dynamics
in the EUR primary market. Electrification is themost critical process for the decarbonisation of
the economy and evidently investors are ready
and willing to support this transition. Demandis in place to scale up low-carbon electricity
and improvements to the grid, and Climate
Bonds hopes that the results of this analysis will
motivate more issuers from the utility sector tocome to the market to satisfy this.
The USD sample remains smaller andmore fragmented, making it harder to draw
conclusions, but debut issuers continued to jointhat market, and those that participate reportthat the green label helps them to attract moreinterest and diversify their investor base. The
results of this analysis clearly point to a market
that remains undersupplied with large deals
having the required rigour and transparency
around the UoP. Climate Bonds encourages allbond issuers to prioritise green investment andleverage investor appetite for green bonds.
Climate Bonds study on the primary market
pricing dynamics of a small sample of SLBs
suggests that investment decisions are notyet being based on the strength of the issuer’s
decarbonisation targets. SLBs priced during
H1 2023 achieved higher book cover and larger
spread compression compared to the green
and vanilla bond data sets, and those that were
not aligned with Climate Bonds SLB Database

Almost half of the USD volume wasincluded in this analysis

Methodology exhibited the strongest pricing
dynamics, on average. However, there was noevidence of greenium indicating that investors
are cautious about overpaying for SLBs, which isconsistent with the pricing dynamics observed in
the corporate green bond market during the same
period. Whether in the case of SLBs this reflects
a lack of conviction about their quality, or wider
concerns about the inflation trajectory and its
impact on interest rate expectations remains to be
seen. Climate Bonds will monitor and extend its
work in this area. The Climate Bonds SLB Database
Methodology has been developed to highlight
those deals with the highest levels of material
ambition and could contribute to the decisionmaking process of both issuers and investors.
This analysis is based on a limited numberof green bonds, chosen according to theparameters outlined on page 21. Green bonds
issued in other currencies, structures, formats,and sizes may perform differently from those
discussed in this paper. Climate Bonds started
monitoring green bond pricing in 2016, andafter six-and-a-half years (30 June 2023) 817
securities had been included in the analysis. As
the profile of green bonds has evolved in theintervening period, pricing dynamics have alsochanged. Observations made five years ago
will almost certainly not pertain to the current
market which is rapidly developing. Climate
Bonds will continue to monitor the behaviourof green bonds in the primary and immediate
secondary markets.

68% of EUR volume was includedin this analysis

Not investment grade 3%

SEK 2%AUD 2%
GBP
5.5%
CNY
12%

Loan 3%Other
4%Structure13%

Too small
26%
Included
48%

EUR
51%
Structure
12%

USD
20%

Too small 3%

Tap
13%

Included
68%

Loan
11%
Source: Climate Bonds Initiative

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

Source: Climate Bonds Initiative

Source: Climate Bonds Initiative20

Methodology
This paper includes labelled green bonds issued
during H1 2023. Labelled green bonds meetingthe following specifications are included:• Announcement date between 01 January 2023
and 30 June 2023
• Currency: EUR or USD• Benchmark size i.e., >= USD500m• Investment grade rated• Minimum term to maturity of three years
at issue• In alignment with the Climate Bonds GBDB
methodology and included in the Climate
Bonds GBDB
Amortising, perpetual, floating rate, and othernon-vanilla structures were excluded. These
parameters are designed to capture the mostliquid portion of the market while not limiting thediversity of data.
All historical data is based on asset swap spreads
for EUR denominated bonds. USD bonds arecompared to a US treasury curve. All historical
data is from Refinitiv EIKON.

Comparable baskets include bonds issued
in the same quarter as the subject green bond.
Comparable bonds must fit the parametersdescribed above except that they are notlabelled and the UoP is not explicitly green, andthey must not have been priced prior to 2014.
Baskets comprise the closest possible matches
based on the following considerations in orderof priority: a) currency, b) market type (EM/DM/SNAT/Sukuk), c) no other thematic label,d) seniority, e) maturity, f) credit rating and g)
sector. If corresponding bonds cannot be found,best efforts are made to find suitable alternatives
from the available sample. The resulting baskets
are a proxy for how the money could have been
invested in the same quarter in which the green
bond was issued. The number of bonds in eachbasket ranges from one to seven bonds. We
acknowledge that bonds behave differently
depending on when they are issued and thatgeopolitical events can affect bond prices fromone day to the next. This proxy was designed tocircumvent the fact that vanilla bonds and green
bonds with similar characteristics are rarely
issued on the same day.

Prepared by Climate Bonds Initiative

Climate Bonds Initiative © September 2023
Author: Caroline Harrison

Endnotes
1. MSCI https://www.msci.com/market-classification
2. Bloomberg, 10/01/2023, EU Credit Close: Second Biggest Day on
Record with EUR39b in Sales, Ronan Martin
3. Secondary market asset swap spreads from REFINITIV.
4. Austria’s short-term deals are not included in the aggregate
statistics for this report but are highlighted to showcase thedevelopment of the short term sovereign debt market.
5. Climate Bonds Initiative, Sustainability-Linked Bond Database
Methodology, June 2023 Sustainability-Linked Bonds Database |Climate Bonds Initiative
6. Climate Bonds Initiative, Transition Finance for Transforming
Companies, September 2022, Transition Finance for Transforming
Companies | Climate Bonds Initiative

Supported by the International Finance Corporation

Suggested citation: Harrison, C., Green Bond
Pricing in the Primary Market H1 2023, Climate
Bonds Initiative, September 2023

Editorial support: Stephanie Edghill
Graphic Design: Godfrey Design, Joel Milsteadwww.climatebonds.net
If you would like to discuss this paper in moredetail please contact:caroline.harrison@climatebonds.net.

Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financial organisation or
investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on external websites.
The Climate Bonds Initiative is not endorsing, recommending or advising on the merits or otherwise of any investment or investment product and no information within this communication should be taken as such, norshould any information in this communication be relied upon in making any investment decision.
A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties on behalf of
an individual or organisation, based in whole or in part on any information contained within this, or any other Climate Bonds Initiative public communication.

Green Bond Pricing in the Primary Market H1 2023 Climate Bonds Initiative

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