GREEN BOND PRICINGIN THE PRIMARY MARKET:
January - June 2019

H1
(Q1-Q2)
2019

Report highlights• Includes 61 green bonds from 52 issuers witha combined face value of USD56.6bn issued in
H1 (Q1-Q2) 2019
• EUR green bonds achieved larger book cover,and greater spread compression than vanillaequivalents, on average• USD green bonds were similar to vanillaequivalents, on average• Two thirds of green bonds in our sample priced
without new issue premium• 53% of green bonds were sold to green investors• 28 days after pricing, green bonds tend to havetightened more than their benchmarks, on average• Spotlight on EUR Utility bonds

With funding support by Obvion Hyptheken and Lyxor Asset Management
Green Bond Pricing in the Primary Market: January - June 20191

Introduction

Report highlights

This is the 8th report in our pricing series,in which we observe how green bonds
perform in the primary markets. This
report includes bonds issued in the first six
months of 2019 (H1 2019).

• On average, EUR green bonds achievedlarger oversubscription and spreadcompression than vanilla equivalents (forthe same sector and period).
See more on page 3

During this period, USD117bn of green bonds
were issued that complied with the Climate
Bonds Taxonomy.1 Our analysis for H1 2019
includes almost half of that, USD56.6bn split
between 61 green bonds from 52 issuers. The
overwhelming majority of this, USD45.6bn(EUR40.5bn), is denominated in EUR andsplit between 46 bonds. The remaining
USD11.0bn comprises 15 USD-denominatedbonds. In 2018 – the whole year - we looked
at a total of 63 green bonds amounting to
USD58.4bn. H1 2019 data highlights thesubstantial increase in benchmark-sizedgreen bond issuance in EUR and USD.

• On average, USD green bonds achieved
lower oversubscription and spreadcompression than vanilla equivalents.
See more on page 3• 53% of green bonds were allocatedto investors describing themselves as
green.
See more on page 6• Seven days after pricing, vanilla bonds
had tightened more than green bonds, on
average. After 28 days, green bonds had,on average, tightened more than vanillabonds.
See more on pages 12• In Q3 more green benchmark Utilities
were issued than vanilla bonds.
We spotlight the Utility sector todetermine what proportion of debt
issued in 2019 is labelled green.
See more on pages 15• Six green bonds priced with a greenium.
Overall, two thirds of green bonds inour sample did not have a new issuepremium.
See more on page 7

Our methodology is designed to capture
the most liquid portion of the market
and therefore limited to USD- and EURdenominated bonds with a minimum
size of USD500m. See full details of our
methodology on page 24.

1. Market developments
Our pricing publications typically capturearound 30% of the green bonds issued
during the observation period. In H1 2019,
however, our universe includes half thegreen bond issuance volume. This suggeststhat green bonds are getting larger, andindeed, 14 bonds in our sample were at least
USD1bn, four of them Sovereigns.
In Europe, the increase in the number oflarge green benchmark bonds is concomitantwith an increase in overall issuance in EUR
bonds and an increase in appetite for yield,
while in the US, overall issuance contracted.
At the end of June, EUR-denominatedinvestment grade issuance was 24.3%
ahead of the same point in 2018.2 In the US,
investment grade credit issuance was just
87% of the same point in 2018.3
Debt markets had been challenging towards
the end of 2018. At least two green bondissuers roadshowed in late 2018 but held off
until 2019 to issue: OP Bank 2024 and CPPIB
Capital 2029. In Europe, Brexit uncertainty and
Italian budget concerns made investors wary.
In the USA, the increasingly heated trade talks
with China were having a similar effect. Credit
markets rallied in the first four months of 2019,
widening again in early May when the tradetension between US and China came backinto focus, but edged back towards the end ofJune. Many issuers were and remain ready tocapture lower borrowing costs.

Investors were keen to buy bonds, green
or otherwise. The average book building
numbers for both green and vanilla bondsin H1 2019 are the largest we have seenin any observation period since we began
our pricing monitor in 2016. For example,in H1 2019 EUR green bonds were 3.9x
oversubscribed and vanilla bonds were
3.3x oversubscribed compared to 2.6x and2.1x respectively in H2 2018. Demand also
increased for issuers in the USD market. In
H1 2019, order books were 4.1x covered forgreen bonds and 4.5x for vanilla, while in H22018 they were 1.9x and 2.0x respectively.
Twenty-four issuers revisited the market witha single green bond, and six repeat issuersbrought two green bonds each: in EUR,SNCF issued a 2047 in January, and a 2029
in June. Poland (2029 and 2049), TenneT(2030 and 2039), Engie (2027 and 2029),
and in USD MidAmerican Energy (2029
and 2049) each brought two tranche deals.
LBBW issued a covered green bond in USD(2022) and a senior non-preferred in EUR(2024). EIB issued its 45th green bond, the11th denominated in EUR. EBRD issued its
33rd green bond.
There are 23 debut green bond issuerscovered in this paper, adding still muchneeded sector diversification. Telefonica
2024 was the anticipated first green bondfrom the telecom sector, closely followed

Green Bond Pricing in the Primary Market: January - June 2019

by Verizon 2029 (USD), and Vodafone
2026. Korean LG Chemical issued the firstgreen bonds from any chemical company,
in a multi-currency (EUR and USD) threetranche deal. ESB 2030 was the first green
corporate bond from Ireland, following the
Irish Government’s Q4 2018 example. Useof proceeds among the new issuers is mixed,
though renewable energy continues todominate in both EUR and USD.
Remarks:• Based on Moody’s and S&P credit ratings,
we have observed a broader range ofseniority rankings for Financial Corporate
green bonds in 2019. We have denoted
the seniority rankings using the following
abbreviations: Senior Preferred = SP, Senior
Non-Preferred = SNP, Senior Unsecured =SU. As per our standard methodology, wematch the payment rank of the green bondwhen selecting appropriate vanilla bonds
with which to compare the performance.
• There is no index data for LBBW 2022
(USD, covered) because we don’t haveaccess to the correct index.
• We could not establish book cover data for
LG Chemical 2029, and FMO 2024.
• Both Societe du Grande Paris & SNCF
Reseau have been classified as SSA.
They are compared to SSA indices, andcomparable bonds have been chosen fromthis sector.

2

USD first time green bond issuers H1 2019: Energy is the preferred use of proceeds
EnergyBuildings

Transport
0%

10%

Water
20%

Waste
30%

Land Use
40%

50%

Industry
60%

ICT
70%

Unallocated A&R
80%

90%

100%

Hong Kong 2024
Chile Government 2050
FMO 2024
Verizon 2029
DTE 2049
LG Chemical 2024 & 2029
Rongshi 2024
Korea Electric 2024

EUR first time green bond issuers H1 2019: Energy is the preferred use of proceeds
EnergyBuildings

Transport
0%

10%

Water
20%

Waste
30%

Land Use
40%

50%

Industry
60%

ICT
70%

Unallocated A&R
80%

90%

100%

Netherlands 2040
ICO 2024
Citigroup 2022 (SU)OP Bank 2024 (SP)Leaseplan 2024 (SP)Danske 2024 (SP)Unione di Banche 2024 (SP)La Banque Postale 2029 (SNP)RBC 2024 (SU)ERG 2025
LG Chemical 2023
Vodafone 2026
Vesteda 2027
ESB 2030
Vattenfall 2026

Green Bond Pricing in the Primary Market: January - June 20193

2. Spread compression and book size: Spread compression and order book size of both green andvanilla bonds are the largest we have seen since 2016.
• EUR: Oversubscription average is
3.9x for green bonds, and 3.3x forvanilla bonds. Spread compression
averaged -17 for green bonds and-16 for vanilla equivalents.
• USD: Oversubscription averageis 4.1x for green bonds, and 4.5x
for vanilla equivalents. Spreadcompression averaged -19 forgreen bonds and -20 for vanillaequivalents.

Green bonds are oversubscribed andundergo spread tightening during bookbuilding, just like vanilla bonds. We compare
green bonds to vanilla equivalents to see
whether there are any differences in themagnitude of change.
In H1 2019, average spread compression
and oversubscriptions were the largest
since we started monitoring them inJanuary 2016. This applies both green
and vanilla bonds. This indicates thatinvestors wanted to buy all types of bonds.
On average, EUR green bonds were more
oversubscribed and tightened slightly morethan vanilla equivalents, while in USD, vanillabonds performed slightly better.
EUR green bond pricing
Individually, 26 out of 46 EUR green bonds
attracted larger book cover than their vanillabaskets and 27 achieved greater spreadcompression during pricing.
Book cover. Prior to H1 2019, the largest

26 out of 46 EUR green bonds attracted higher book cover than vanilla equivalents
Sovereign

SSA

Covered

AAA

AA

A

BBB

•

Green Bond•

Vanilla bondTimes oversubscribed

8
EUR Green bond averagebook cover: 3.9x

6
4
2
0

d
lan

Po

8
Times oversubscribed

EUR Vanilla bond averagebook cover: 3.4 x

6

2
4
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27
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EUR Green bond averagebook cover: 3.9x

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EUR Green bond averagebook cover: 3.9x

EUR Vanilla bond averagebook cover: 3.4 x

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Green Bond Pricing in the Primary Market: January - June 20194

Seven out of 13 USD green bonds attracted higher book cover than vanilla equivalents
Sovereign

SSA

Covered

AAA

AA

A

BBB

•

Green Bond•

Vanilla bondTimes oversubscribed

8
6

USD Green bondaverage book cover: 4.1x

USD Vanilla bond average book cover: 4.5 x

4
2
0

)
9
9
9
9
9
9
9
4
4
4
4
0
02
02
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book cover we had seen for a EUR green
bond in our sample was TenneT which
attracted book cover of 7.5x when it
issued two bonds in 2016 (2026 and 2036
maturities). Four of the EUR green bonds
issued in H1 2019 exceeded that. Irish Utility
ESB 2030 and Korean chemical company LG
Chemical 2023 both attracted book coverof 8.2x their final size. ESB went on to priceon its own yield curve, offering no new issuepremium.
Spread compression. The highest spreadcompression in our EUR green bond sample
had previously been 30bps (Lietuvos
2027, issued Q3 2017). In this observation
period, three green bonds tightened by atleast 32bps during book building. The mostextreme example is Prologis 2029, which,having achieved 4x book cover, tightened by
35bps. We were unable to verify reports of agreenium for this bond, because there wereinsufficient bonds to build a yield curve.

USD green bond pricing
In USD, seven out of 13 green bonds
attracted larger book cover than vanillaequivalents, while seven out of 15 exhibitedlarger spread compression.
Book cover. Verizon 2029 had the largest
book cover (eight times). The highest
demand we have seen for a USD green bondin our sample remains Mexico City Airport
2026, issued in Q3 2016 which achieved
book cover of 10x. Verizon 2029 has a
Bloomberg composite credit rating of BBB+,
but while Mexico City Airport introduced
Emerging Market (EM) risk, Verizon has a
Developed Market (DM) country of risk.5
As the first green bond from a US Telecom
company, the diversification opportunity
would have also been a big draw forinvestors, and the bond priced on its own
yield curve.

Green Bond Pricing in the Primary Market: January - June 2019

Spread compression. Green bonds
achieving the largest spread compression
were both domiciled in Emerging Markets(EM): Chinese development bank, Rongshi
2024 and Korean LG Chemical 2024 eachtightened by 30bps.
Following a subdued market towards theend of 2018, demand for all types of bonds
has rebounded. Demand for green bonds
is greatest in Europe and the green label
appears to impact bookbuilding of EUR
bonds. In H1 2019, this demand extended to
USD-denominated names offering yield.
Methodology notes: Baskets comprisebonds that most closely match the green
bonds and are issued during the samequarter. The baskets in this publication
include between one and five bonds. For
methodology discussion, see page 24, andfor summary statistics of the baskets, seepage 19-22.

5

26 out of 46 EUR green bonds tightened by more than their vanilla baskets during the pricing process
Sovereign0

SSA

Covered

AAA

AA

A

BBB

•

Green Bond

34
20

•

Vanilla bondsari
902 nde P
40
2
0
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9
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ta
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s2 1
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6
02
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Ch
EB
SN
NR
CC
So
IC
EIB
Kf
SD
RA
SN

-10
-20

Bps

-30
EUR Green bond average
spread compression: 17bps-40

0

EUR Vanilla bond average spreadcompression: 16bps

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-10
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Bps

-30

EUR Green bond average
spread compression: 17bps-40

EUR Vanilla bond average spreadcompression: 16bps

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Bps

-30
EUR Green bond average
spread compression: 17bps-40

EUR Vanilla bond average spreadcompression: 16bps

Seven out of 15 USD green bonds tightened by more than their vanilla basket during the pricing process
Sovereign0

SSA

Covered

AAA

AA

A

BBB

•

Green Bond•

Vanilla bond

9
9
04
02
0
9
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05
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Du
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Av
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-10
-20

Bps

-30
-40

USD Green bond average
spread compression: 19bps

Green Bond Pricing in the Primary Market: January - June 2019

USD Vanilla bond average spreadcompression: 20bps
6

3. Green allocations: 53% of the amount raised by green bonds was allocated to investors declaring
themselves as green• 53% of the amount raised
through green bonds in our
sample was allocated to thoselabelling themselves as green orsocially responsible.
• 31 issuers provided data andamong those who did not, many
reported high participation fromgreen investors.
Investors declaring themselves as green
are growing in number and constitute a
unique category of support for green bonds.
This has positive ramifications such as giving
issuers more flexibility about the timing oftaps, and repeat issuance.
Since none of the broad market indices actively
exclude green bonds, there is a growing
contingent of mainstream investors too.
Non-dedicated green bond investors remain
an important source of support for green bondissuers since they currently absorb close to halfof green bond primary paper.
All issuers in our H1 2019 sample were asked
what percentage of their bond was allocatedto green investors. Twenty-eight issuers
shared distribution data for 31 green bonds,
split 25 EUR and six USD.
• USD bonds: The lowest allocation toinvestors describing themselves as green
was 20% (DTE 2049) and the maximum
was 70% (Verizon 2029).
• EUR bonds: the minimum allocation togreen investors was 25% (ERG 2025) withthe highest being Vesteda 2027 at 80%.
Demand from green investors is robust. The
overall average of 53% matches exactly withthe data from our H2 2018 publication.6 Thissuggests that despite a material increase in thenumber of large green bonds issued in H1 2019,
demand from green investors has remainedrobust. Verizon (2029) said that the company
pushed allocations to green investors as highas it could to achieve investor diversification
and reward ESG investors who otherwise
cannot buy its offerings.
The market is still being supported bymainstream investors who have no reason
not to buy green bonds, and indeed insome sectors, green bonds are becoming
increasingly hard to avoid.
Credit Agricole CIB and Citi offer
definitions of “green investor”
Twenty-four issuers, encompassing thirty
green bonds, either could not or did not want
to disclose how much of their green bond
was allocated to green investors, citing thelack of a clear definition of a green investor.

One issuer noted that the investors they
had not classified as ‘green’ had all signed
the Principles for Responsible Investment(PRI). Signing the PRI is the starting point
but is apparently not a commitment to green
investment unless accompanied by further
signaling. The emergence of clear definitions
will ultimately enable identification of thisinvestor category and make it easier for issuers
to design bonds to meet investor needs.
For example, Credit Agricole CIB (CACIB) andCiti explained how they define a green investor,
and the common thread is the public declarationof a commitment to invest in green bonds.
CACIB considers a “green bond investor” as
any entity identified at least by two out of
the three following criteria:• Has taken a public commitment to invest
in green bonds, potentially with target
amounts.
• Has an internal organisation to analyse green
bonds, including at least one expert person.
• Has been – to the best of our knowledge noticeably more active in the green bondprimary market than in the vanilla bondmarket.
CACIB acknowledged that while thisclassification was done in good faith, absenceof official definition of “green bond investors”
meant that it was by no means exhaustive.
For Citi’s inaugural benchmark “green
motivated investors” were defined as:• Investors with a dedicated green/ESG
bond fund.
• Investors with a public mandate to buy
green bonds.
• Investors publicly active in the green bondmarket.
• Direct feedback from investors confirming
their interest in the bond due to its green
characteristics.
Dutch State Treasury Agency endorsed aformal “green investor” declaration
The Dutch State Treasury Agency (DSTA)
endorsed a formal declaration by offering
priority allocation of their first green Sovereign,
Netherlands 2040, to ‘real money’ (unleveraged)
bidders willing to declare their green credentials.
Investors were invited to certify that they met
at least three of the four criteria formulated by
the DSTA with a letter signed by their head ofcompliance. The four criteria were:
1. It has established a dedicated teamwithin its organisation, which performs
Environmental, Social and Governance(ESG) analyses for the investment
universe of the organisation;

Green Bond Pricing in the Primary Market: January - June 2019

2. It has specific ESG requirements andcriteria related to green bonds (e.g.
reporting), which need to be met in order
to be able to invest in a green bond;
3. It aims to potentially purchase green bonds
offered by the State of the Netherlands
either for full or partial inclusion in a
specific green (bond) fund or to takethe purchased volume into account for a
specific target on green bonds amounts;
4. It intends to transparently report on
its investments in green bonds in its
annual report or specific sustainability/
responsible investment report.
Prior to the auction, 32 investors wereregistered as green investors and could
benefit from priority allocation over otherreal money investors. Priority allocation
could be as much as up to 10% of their bids
at the cut-off spread. At the cut-off spread,
82.5% of the bids from ‘green real money’accounts were allocated (compared to72.5% for ‘real money accounts’ and 18.5%
for the ‘other’ category).
We are encouraged by these actions fromprominent market participants, particularly
a Sovereign issuer which could set an
example for the market. We await further
developments to establish clear definitions.
Even where precise allocations were
not disclosed, it seems green investor
participation was highAmong the issuers who did not want todisclose precise allocations, the tone of their
responses suggested that green investor
participation was substantial:• Enel (2025) issued a media release describing
participation from a “significant proportionof Socially Responsible Investors”.7• Vodafone (2026) told us that every
investor who was allocated had at least
one green or ESG specific fund.
• Vattenfall (2026) wrote: “There wassignificant interest from investors withspecific SRI/green funds and this element
was taken into consideration during theallocation process”.
• ABN Amro (2026, SP) explained that morethan half of the bond was allocated toinvestors who incorporate ESG considerations
into their investment decisions.
Methodology notes: Green investor
participation is provided by issuers. There is no
methodology for defining a ‘green’ investor, andwe acknowledge that there may be differinginterpretations. There is also no way to monitor
how investors split their allocations of green
bonds among their different portfolios.

7

53% of green bonds were allocated to green investors
Declared green investor

Rating Group
EUR

0%

SOV

Average 53% was allocated to green investors

Not declared green investor

25%

50%

75%

100%

50%

75%

100%

Chile 2031
Poland 2029
Poland 2049
Netherlands 2040

SSA

NRW 2029
ICO 2024
CCPIB Capital 2029
KfW 2027
SNCF 2036

AA
A

OP Bank 2024
TenneT 2030
TenneT 2039
Westpac 2024 (SU)SMFG 2024 (SU)LBBW 2024 (SNP)BBB

Vesteda 2027
Danske 2024 (SNP)
Digital Euro Finco 2026
LeasePlan 2024 (SP)BBVA 2026 (SNP)
Terna 2026
Telefonica 2024
ENEL 2025
Unione di Banche 2024 (SP)ERG 2025

USD
C OV

LBBW 2022

A

Avangrid 2029
Boston Properties 2029
Duke Energy 2029
DTE 2049

BBB

Verizon 2029
0%25%

Green Bond Pricing in the Primary Market: January - June 20198

4. The Greenium: Two thirds of green bonds priced on or inside their yield curves
The new issue premium is extra yield that a buyer
receives, and a seller pays for a new bond incomparison to where seasoned bonds from thesame issuer are trading in the secondary market
at the time of issuance. A new issue premiumis a standard feature of the bond market.

differences and issuers of green bonds incur
albeit negligible costs such as third-party
review and certification. Green bonds andvanilla equivalents are subject to the same
market dynamics such as supply, rate
expectations, and geo-political issues.

Sometimes, a bond may be issued with ahigher price, and thus lower yield comparedto outstanding debt. The bond will priceinside its own yield curve. This is known as a
new issue concession, or when present in agreen bond, we have termed it a greenium.

Among our H1 2019 sample, 32 bonds
from 26 issuers had enough data to build
yield curves. Eighteen of those issuers havealready issued at least one green bond.
Twelve green bonds priced with normal newissue premia, 15 priced on their curves, andsix exhibited a greenium: in EUR, EIB 2042,
Terna 2026, Vodafone 2026, KfW 2027, andNetherlands 2040, and in USD Chile 2050.

The fact that almost two thirds of the bonds
in our sample priced without a normal newissue premium is quite extraordinary andemphasises the strength of demand forbonds in our sample.

Two of the six green bonds exhibiting agreenium were long dated sovereigns: Chile

Spotlight on TenneT

TenneT 2030 & 2039 EUR - on the green curve

TenneT has not issued a vanilla bondsince 2013. The Dutch state-owned
transmission system operator has a total
18 bonds outstanding with a face value of
EUR8.9bn (USD10.3bn).

2.0
1.5

2.0
1.5
1.0

New issue green bondYield as of 20/05/2019

1.0
Fourteen of those bonds are eligible forour yield curve analysis, and 11 are green,
0.5including the two issued in H2 2019.
0.5
We plot the green and vanilla curves
0
separately. The green curve sits inside0.0
the vanilla curve. The two new bonds are-0.5
then plotted separately, and both sit on-0.5
the green curve. We clearly see that the0505
market attaches a value to the green label.
New issue green bonds
Spotlight on Vodafone

Vanilla bonds

15
15

20
20

Seasoned green bondVodafone 2026 EUR - greenium

2.5
2.0
1.5
1.0
0.5
0.0
-0.5

Vanilla bonds

3.0
2.5
2.0
1.5
1.0

New issue green bond

0.5
0Bloomberg

Vodafone is only the second issuer tobring an EUR bond in the telecom sector,
offering a diversification opportunity to
EUR green bond investors.

3.0

Yield as of 06/09/2018

Vodafone 2026 was issued on the same
day as two more, longer dated bonds. Boththe longer-dated bonds priced outside theexisting curve, while the green bond priced
slightly inside the curve.

New issue green bonds

10
10

Bloomberg

There is no reason why a bond being green
should impact its price, since green bonds
rank pari-passu (on equal footing) withbonds of the same rank and issuer. Thereis no credit enhancement to explain pricing

2050 (USD), and Netherlands 2040 (EUR).
Chile attracted at least 40 new investors
because of the green label, the yield and thediversification angle may have been attractive
to green investors enabling Chile to print with
its lowest ever yield. The Dutch green bondwas 3.5x covered. The relatively low risk, large
and long-dated bond would have appealed
to insurers and pension funds irrespective ofa green mandate, but the green label would
have attracted specialist investors, too, adding
extra pressure to the pricing.

-0.5

0
0

55
Seasoned green bondGreen Bond Pricing in the Primary Market: January - June 2019

10
10

15
15

20
20

Vanilla bonds issued on the same day as the green bond9

Spotlight on development bank green bond pricing
KFW 2027 EUR - greenium to vanilla curve, new issuepremium to green curve
1.0

1.0
0.8
0.8
0.6
0.6
0.4
0.4
0.2
0.2
0
0.0
-0.2
-0.2
-0.4
-0.4
-0.6
-0.6
0
0

Bloomberg

Yield as of 15/05/2019

German development bank KfW and multilateral EIB both have secondary market
green curves, which sit inside their vanilla
curves. KfW 2027 priced outside its green
curve, but with a greenium compared toits vanilla curve. EIB 2042 priced with agreenium to its vanilla curve, and on its
green curve. As we have noted in past
papers, where green yield curves arepresent for SSA bonds, green bonds can bepriced relative to those rather than a vanillacohort.

55

New issue green bonds

10
10

Vanilla bonds

15
15

20
20

Seasoned green bondEIB 2042 EUR - greenium to vanilla curve, on the green curve
1.2

Bloomberg

Yield as of 04/04/2019

1.2
1.0 0.9
0.8 0.6
0.6
0.4 0.3
0.2
0
0.0-0.2 -0.3
-0.4
-0.6
-0.6
0
0

5

10
10

New issue green bonds

Vanilla bonds

20
20

25

30
30

Seasoned green bond

NRW Bank 2029 EUR - on the curve
0.8

0.8
0.7 0.6
0.6
0.5 0.4
0.4
0.3 0.2
0.2
0.1 0
0.0
-0.1 -0.2
-0.2
-0.3
22

Bloomberg

Yield as of 28/01/2019

German state development bank NRW.
Bank has a separate green curve, as well,comprising four bonds. This curve wastrading in line with the vanilla curve when
NRW Bank issued a new green bond in
January 2019. The new green bond priced
in line with the existing curves.

15

4
4

66

New issue green bonds

Vanilla bonds

Green Bond Pricing in the Primary Market: January - June 2019

88

10
10

Seasoned green bond

10

3.5

4.5

4.5

4.0

4.0

3.0

3.5

3.0

2 4

4

6

6

8 8

Bloomberg

2.0

2
0

10
10

Verizon 2029 USD - on the curve

6

3.0

3.0

2.5

2.5

Yield as of 04/03/2019

Yield as of 12/06/2019

3.5

2.5

2.5
2.0

2.0

0
0

6.0

0.5

0.3

2.0

-0.0
0

0
0

55

10
10

15
15

20
20

MidAmerican Energy 2029 & 2049 - new issuepremium (2029) and on the curve (2049)

3.0
2.5
2.0

20
20

-0.2

0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2

00

22

4
4

6

8

10
10

4.5

0.8

4.0

0.6

0.8

0.6

3.5

0.4

3.0

0.2

2.5
2.0

0
0

55

New issue green bonds

10
10

Vanilla bonds

15
15

20
20

0.0

Seasoned green bondGreen Bond Pricing in the Primary Market: January - June 2019

0.4

0.2

0

0
0

22

44

66

Bloomberg

Yield as of 05/02/2019

3.5

-0.1

Yield as of 22/05/2019

4.0

15
15

Sumibank 2024 (SU) EUR - new issue premium

Bloomberg

4.5

Yield as of 18/06/2019

00.1

Bloomberg

Yield as of 05/02/2019

4.0

0.2

2

10
10

Westpac 2024 EUR - new issue premium

0.4

4

55

Bloomberg

3.5

Duke Energy 2029 - priced on the curve

Bloomberg

Boston Properties 2029 USD - on the curve

88

Non-green bond issued on the same day as the green bonds

11

-0.4
-0.6

0.2

-0.4
-0.6

4
4

88

12
12

Nordea 2026 (SP) EUR - new issue premium

0.4
Yield as of 21/05/2019

0.3
0.2
0.1
0.0

-0.1

0.6

1.2

-0.5

0.5

0.6

0.4

0.5

0.3

0.4
0.3

0.2

0.2

0.1

0.1

0
-0.1

0
0

2
2

4
4

66

88

10
10

0.0

-0.1

1.6

1.7
1.5

1.2

1.1
0.9

0.4

0

0
0

Yield as of 21/02/2019

0.0

0.8

Bloomberg

Yield as of 04/06/2019

0.4

55

10
10

15
15

20
20

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1

00

22

4
4

66

88

BNP 2024 (SNP) EUR - on the curve

1.3
0.8

-0.5

0
0

0.7

ESB 2029 EUR - on the curve

1.6

0

0.0

ABN 2026 EUR (SP) - new issue premium

Bloomberg

0.5

0.5

0.5

-0.2

0
0

0.6

1.0

1.0

0

Bloomberg

-0.2

1.5

1.5

55

10
10

New issue green bonds

Vanilla bonds

15
15

0.7
0.5

Seasoned green bondGreen Bond Pricing in the Primary Market: January - June 2019

1.7
1.5
1.3
1.1
0.9
0.7
Bloomberg

0.0

0.4

Yield as of 14/06/2019

Yield as of 13/06/2019

0.2

2.0

2.0

Yield as of 08/04/2019

0.4

0.6

Bloomberg

0.6

Engie 2027 & 2039 EUR - on the curve

Bloomberg

RATPFP EUR 2029 - on the curve

0.5

0
0

22

44

66

88

10
10

Non-green bond issued on the same day as the green bonds

12

1.5

1.5

1.5

1.0

1.0

1.0

0

0
0

22

44

66

88

10
10

ENEL 2025 EUR - new issue premium

Yield as of 14/01/2019

1.5
1.0
0.5
0.0

-0.5

2.5
2.0

0.6

1.5

0.5

1.0

0.4
0.3

0.5

0.2

0
-0.5

0
0

22

44

66

88

Chile 2050 USD - greenium

4
3
2

0.1
0.0

4.0

2.0
1.5

3.0

1.0

2.0

1.0

0

0
0

55

New issue green bonds

10
10

15
15

Vanilla bonds

20
20

Bloomberg

0

10
10

20
20

30
30

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

0
0

2
2

44

66

88

SNCF 2036 EUR - on the curve

0.5

1

0

00

0.7

Yield as of 19/02/2019

2.0

0.0

OP Bank 2024 (SU) EUR - new issue premium

Bloomberg

2.5

0.5

0.5

Yield as of 27/06/2019

0.0

0.5
Bloomberg

0.5

Yield as of 12/06/2019

2.0

2.0

Bloomberg

1.0

2.5

2.5

25
25

0.0

-0.5

Seasoned green bondGreen Bond Pricing in the Primary Market: January - June 2019

2.0
1.5
1.0
0.5
0
-0.5

0
0

10
10

20
20

Bloomberg

Yield as of 05/02/2019

1.5

2.0

Yield as of 14/01/2019

2.0

SNCF 2029 EUR - new issue premium

Bloomberg

C 2022 EUR (SU) - new issue premium

30
30

Non-green bond issued on the same day as the green bonds

13

Telefonica 2024 EUR - new issue premium
2.5

2.5

55

10
10

15
15

0.8

1.0
0.5

0.4

0

0.0

-0.5

0
0

22

44

66

88

10
10

Poland 2029 & 2049 EUR - on the curve (2029) &new issue premium (2049)

2.0
1.5
1.0
0.5
0.0

-0.5

2.5

15
15

20
20

25
25

0.2
0.0

1.0
0.8
0.6
0.4
0.2
0

00

55

10
10

15
15

For all bonds, we use modified duration to mid, and all the data is asof the pricing date of the green bond. The modified duration is thepercentage price change of a security for a given change in yield.
Modified duration increases with risk.

2.0
1.5

First, we plot seasoned vanilla bonds (blue dots) and fit a 2nd orderpolynomial yield curve. Next we overlay any seasoned green bonds(orange), finally, we add our subject bonds (green). We include theyield curves of bonds in our sample with a minimum of four suitablecomparable bonds.

1.0
0.5
0.0
-0.5

00

10
10

Methodology notes: We use yield on issue date, which reflects the pricethat the green bond offered on the pricing date. For comparable bonds,
we use the yield-to-convention-mid.

Bloomberg

2.5

Yield as of 25/06/2019

0.6

Bloomberg

Yield as of 03/04/2019

1.0

1.5

0.5

5
5

Chile 2031 EUR - on the curve

2.0

1.0

-0.8

0
0

Bloomberg

Terna 2026 EUR - greenium-0.8

Bloomberg

Bloomberg

Yield as of 28/01/2019

0

0
0

1.5

-0.4

-0.4

0.5

2.0

0

0.0

1.0

0.5

Yield as of 21/05/2019

1.5

1.0

Yield as of 02/02/2019

0.4

0.4

1.5

-0.5

0.8

0.8

2.0

2.0

0.0

Netherlands 2040 EUR - greeenium

55

New issue green bonds

10
10

15
15

Vanilla bonds

20
20

25
25

Comparable bonds used for this exercise must fit the specification
for green bond selection outlined on page 24, except that the use ofproceeds is not limited. Bonds must share the same credit rating andpayment rank as the green bond and have been issued on or after
01/01/2010.

Seasoned green bondGreen Bond Pricing in the Primary Market: January - June 2019Non-green bond issued on the same day as the green bonds

14

5. Green bond ETFs: Franklin Templeton brings the total to fiveFranklin Templeton launched a green bond ETF
in April 2019. So, at the end of June 2019 there
were three EUR and two USD green bond ETFs.

Van Eck Vectors
Green Bond ETF
Currency
Index

Launch Date
Size at launchMarket capitalisation
June 2019

EUR
Solactive Green
Bond Index

February 2017
EUR5m
EUR63.5m

The rapid growth of these products confirms
investor appetite for green bonds. The
expansion of the green bond ETF space will

give additional value to the green bond label
which will be used to determine eligibility.

Lyxor Green
Bond ETF

iShares Global
Green Bond ETF

UC MSCI
European Green
Bond ETF

Franklin Liberty
Euro Green Bond
ETF

EUR

USD

EUR

EUR

Solactive Green
Bond Index

Bloomberg
Barclays MSCI
Global Green
Bond SelectBloomberg
Barclays MSCI
European GB
Issuer Capped
EUR Index

Bloomberg
Barclays MSCIEuro Green Bond
Index

February 2017

November 2018

November 2018

April 2019

EUR5m

USD25m

EUR20m

EUR10m

EUR63.5m

USD26.85m

EUR21.32m

EUR10.17m

6. Performance in the immediate secondary market• 7 days after pricing, 46% of
green bonds had tightened morethan comparable bonds, 59%
had tightened more than theircorresponding index.
• 28 days after pricing, 61% of
green bonds had tightened morethan comparable bonds, and
57% had tightened against theircorresponding index.
Many bonds deliver price tightening in theimmediate secondary market. Investors may
want to increase their position or take aposition in a bond they did not get allocated.
For bonds issued early in the month, this
could be an opportunity for mangers to add
some off-benchmark performance before
bonds are added to benchmark indices atmonth end. We monitor what happens tobond spreads in the immediate secondary
market. We don’t go any further than one
month since liquidity becomes patchy oncebonds are added to indices.
In H1 2019, 61% of green bonds had
tightened seven days after pricing, rising
to 70% after 28 days. To contextualise thisperformance, we compare green bonds with
two alternatives. Firstly, we match eachbond with a basket of bonds sharing similar
characteristics issued during the samequarter (see methodology notes). Secondly,
we compare green bonds to matchedindices to monitor their performanceagainst the ‘market’.
After seven days,• 46% of green bonds had tightened bymore than their baskets: 48% of EUR and
40% of USD green bonds.
• 59% of green bonds had tightened bymore than their corresponding index: 67%
of EUR and 33% of USD green bonds.
These numbers are a bit lower than what
we saw in 2018, perhaps because many
bonds priced quite tightly in H1 2019 andthere wasn’t much room left for investors tomanoeuvre.
After 28 days,• 61% of green bonds had tightened bymore than their baskets: 61% of EUR and
60% of USD green bonds.
• 57% of green bonds had also tightenedwhen compared to corresponding indices:
57% of both EUR and USD green bonds.
EUR green bonds tend to perform better
than USD ones in the secondary market, but
in H1 2019 there was not much difference.
Demand for both EUR and USD green bondwas firm 28 days after pricing.

Green Bond Pricing in the Primary Market: January - June 2019

Methodology notes:
1. Comparable baskets. Each bond is matchedwith a basket of comparable bonds issued
in the same quarter (except where noted),
fitting the parameters described on page 24.
The number of bonds is each basket ranges
from one to five according to what has been
issued in a given quarter. Summary statisticsof the baskets are on page 19-22. Bonds canbehave differently according to which partof the month they are issued in. Geopoliticalevents can influence bond prices. We use
comparable baskets because green andvanilla bonds sharing similar characteristics
are rarely issued on the same day. We havecreated this proxy to illustrate what else aninvestor could have done with their money
during the same quarter.
2. Indices. We compare each bond to a
standard iBoxx index.8 The indices are
granulated by currency, asset class, tenor, andcredit rating all of which can influence thebehaviour of a bond. Each bond is therefore
compared to an index sharing similar
characteristics, for example, Vattenfall 2026
is matched with the iBoxx EUR Corporates
BBB 7-10 Year Index.
Seven calendar days include five data
observations. Twenty-eight calendar days
includes 20 data observations.

15

% change 1 week
Rating Bond
Group
SOV

SSA

AA
A

BBB

SOV
SSA
COV
AA
A

BBB

Poland 2049
Poland 2029
Netherlands 2040
Chile 2031
EBRD 2024
SNCF 2029
CCPIB Capital 2029
NRW 2029
Societe du Grande Paris 2034
ICO 2024
EIB 2042
KfW 2027
SDGP 2050
RATPFP 2029
SNCF 2036
OP Bank 2024
Nordea 2026 (SP)Citigroup 2022
BNP Paribas 2024 (SNP)LG Chemical 2023
ABN Amro 2026 (SP)ICBAS 2022
RBC 2024 (SU)LBBW 2024 (SNP)
TenneT 2030
TenneT 2039
SMFG 2024 (SU)ESB 2030
Engie 2027
Engie 2039
Westpac 2024 (SU)Prologis 2029
Digital Euro Finco 2026
ENEL 2025
Telefonica 2024
LeasePlan 2024 (SP)Danske 2024 (SNP)
Unione di Banche 2024 (SP)Terna 2026
ERG 2025
La Banque Postale 2029 (SNP)
Vesteda 2027
Vodafone 2026
BBVA 2026 (SNP)
Vattenfall 2026
Hera 2027
Hong Kong 2024
Chile Government 2050
FMO 2024
LBBW 2022
MidAmerican Energy 2049
MidAmerican Energy 2029
DTE 2049
Duke Energy 2029
LG Chemical 2024
LG Chemical 2029
Rongshi 2024
Avangrid 2029
Boston Properties 2029
Korea Electric 2024
Verizon 2029

Green Bond

% change 1 month
VanillaBasket

3%
11%
-2%
3%
11%
4%
-21%
64%
-22%
-12%
163%
1%
-5%
-43%
-26%
-6%
11%
-9%
-16%
-28%
0%
-12%
-12%
-1%
13%
10%
9%
-14%
-21%
-15%
-11%
5%
-1%
-9%
-17%
-7%
-7%
0%
-16%
-6%
-10%
-6%
4%
-8%
-11%
-22%
7%
-4%
-1%
-13%
-4%
1%
3%
6%
0%
-3%
3%
-2%
-3%
16%
2%

Green Bond Pricing in the Primary Market: January - June 2019

-2%
-25%
-20%
-39%
-15%
-53%
-53%
-26%
-53%
154%
48%
61%
48%
61%
59%
-8%
-2%
-21%
-7%
-12%
-5%
-13%
3%
-7%
-1%
-1%
3%
-1%
-1%
-1%
3%
3%
-9%
-4%
-12%
-6%
-7%
-8%
-1%
3%
1%
-2%
-2%
-7%
-1%
-1%
-2%
-2%
-1%
-19%
-2%
-4%
-2%
-4%
0%
5%
0%
-1%
0%
-4%
-5%

CorrespondingiBoxx Index

Green Bond

2%
2%
3%
2%
3%
-10%
-7%
-7%
2%
5%
0%
1%
3%
-16%
6%
1%
18%
-4%
-7%
-6%
-7%
-6%
-5%
8%
7%
7%
9%
-7%
-14%
-16%
-9%
-2%
3%
-6%
-6%
3%
-9%
0%
0%
-2%
-2%
5%
6%
-7%
-10%
0%
11%
-5%
1%
N/A
-3%
-4%
-1%
4%
-4%
-6%
1%
0%
-2%
-10%
2%

14%
23%
-7%
6%
19%
8%
-33%
-32%
-36%
-53%
-192%
6%
-24%
-44%
-2%
-8%
19%
-7%
-23%
-36%
-14%
-22%
13%
1%
19%
17%
15%
-31%
-15%
-18%
-26%
1%
-20%
-19%
-14%
-9%
-9%
2%
-36%
-15%
7%
-15%
-3%
-27%
-11%
-48%
8%
-15%
-6%
-7%
-21%
-18%
0%
-2%
0%
-3%
-6%
3%
-13%
16%
-1%

VanillaBasket
3%
-16%
-5%
-66%
-31%
-22%
-22%
-31%
-22%
113%
0%
49%
0%
49%
20%
22%
6%
-31%
-13%
-23%
-24%
-19%
14%
-14%
-3%
-3%
10%
-3%
-3%
-3%
14%
-1%-18%
-12%
-10%
-16%
-13%
-23%
-3%
12%
7%
-1%
-9%
-20%
-3%
-3%
-8%
-2%
-2%
-4%
-5%
-9%
-5%
-9%
1%
-1%
-1%
-12%
-11%
-4%
-11%

CorrespondingiBoxx Index
4%
4%
-17%
-7%
-9%
-17%
-15%
-15%
5%
27%
3%
-4%
-10%
-36%
-4%
-4%
27%
-22%
-11%
-16%
-17%
5%
23%
11%
6%
6%
-1%
-21%
-23%
-21%
-12%
-13%
-9%
-10%
-12%
-6%
-14%
-16%
-14%
-15%
2%
5%
1%
-18%
-20%
-10%
2%
-11%
-5%
N/A
-17%
-24%
-1%
0%
-1%
-1%
8%
3%
-10%
-15%
-2%

16

7. Spotlight on Utility issuers: Half of EUR Utility bonds issued in H1 2019 were green
Eight EUR benchmark green bonds fromthe Utilities sector totalling USD5.3bn were
issued in Q2 2019.9 Finding comparable
bonds (same characteristics including, but
not limited to, a minimum size of USD500m)
was challenging. There were two suitable
EUR vanilla bonds issued in the Utility sector
during this time: ACEA SpA 2028 and
ENEXIS 2031. Each bond was EUR500m. The
performance of qualifying EUR Utility green
bonds issued in Q2 was compared to an
average of these two bonds.
The supply of EUR benchmark-sized, green
bonds in the Utility sector far exceededthat of the vanilla bonds in Q2 2019. Thisis a significant development in the EUR
green bond market. A consequence of thislack of vanilla supply is that buyers of EUR
Utility bonds in Q2 would have been more
likely to have bought a green bond than
not and indicates that EUR bond investors
will plausibly be exposed to green bonds
by default, irrespective of investment
preferences.

Europe appears to be unique in thisregard. For context, close to USD200bnof Utility bonds were issued globally in H1
2019, just ten percent of which had a green
use of proceeds according to Bloomberg.
Currencies with the largest critical massof Utility issuance were CNY (35%) andUSD (30%), with EUR in third place (10%).
Country of risk is still dominated by thosesame three regions and hints at where mostof the investment is being spent.
Few of the Utility bonds issued in H1 2019
in CNY (1%) or USD (12%), had a green useof proceeds while half of the debt issued
in both EUR, and by organisations having acountry of risk in Europe did. Except for GBP,
where 35% of the few Utility bonds had agreen use of proceeds, the trend for Utilities
issuing green bonds has not spread toother currencies or regions, highlighting thepotential for continued growth.

Green Label

80

80

60

60

40

40

20

20

0

0

%

%

Vanilla
100

D

Y

CN

L

BR

R

EU

R

IN

Methodology notes: This analysis is basedon data taken from Bloomberg in mid-July
2019, using BICS categories and Use ofProceeds as defined by Bloomberg.

All utility bonds issued H1 2019 by country of risk

100

US

The use of proceeds of green Utility bonds
in our Q2 2019 sample is more mixed than
one may expect. TenneT 2030 and 2039
and Terna 2026 earmarked the entire useof proceeds to Renewable Energy, while
Vattenfall 2026, Engie 2027 and 2039, ESB
2030 and Hera 2027 split the proceeds
among other green infrastructure projects
such as Transport, Waste, Water, Buildings,
and Industry.

GBP has always been one of the smaller
green bond currency categories, and in fact,

All utility bonds issued H1 2019 by currency
Green Labela GBP900m (USD1.15bn) three-tranche deal
from Dutch company Orsted issued in May
2019 provided the only GBP-denominatedUtility bond of H1 2019.

JPY KRW

P

GB

r

he

Ot

Green Bond Pricing in the Primary Market: January - June 2019

Vanilla

e
a
a
il
n
A
ia
in
er
US Chin Braz urop Ind Japa Kore Brita Oth
E
t
ea
Gr

17

8. Conclusion
During H1 2019, almost USD118bn ofgreen bonds were issued in 27 currencies.
Almost 50% of green bonds issued weredenominated in EUR, consolidating the
EUR as the preferred currency for issuance.
Nearly half of the total, 61 bonds witha combined face value of USD56.6bn,
was suitable for inclusion in our pricing
analysis. This is far higher than in previous
publications, where 30% of total issuancetypically qualified for our research.
The pricing story was strong in H1 with
opportunities for both issuers and investors.
EUR green bonds experienced good demandin the primary market with larger bookcover and spread compression than vanillaequivalents on average. Slightly more USD
vanilla bonds achieved larger book coverand spread compression than vanilla bonds,
though green bonds including Verizon 2029
and Chile 2050 attracted high interest.
Twenty-six issuers, responsible for 32 bonds
in our sample had enough data to build
yield curves, and two thirds of those priced
without a traditional new issue premium.
TenneT now has an almost exclusively green
yield curve which is encouraging. SSA issuerssuch as EIB and KfW have two distinct yield
curves: one green and one vanilla.

may be increasingly difficult for them to doso.

With many green bonds pricing tightly, it
is unsurprising to see that fewer than half
had performed better than equivalents after
seven days. However, after 28 days, that
number had risen to 61% demonstrating thatinvestors do benefit from further tightening
in the secondary market.

The EUR Utility sector was dominatedby green bonds in Q2, with four times as
many green bonds than not. Consequently,
EUR bond investors may be exposed togreen bonds by default, irrespective of
their investment preferences. It may be
too optimistic to describe this as the startof a trend, but we will continue to monitor
developments in this and other sectors.

Issuers are still looking for guidance todefine a green investor. We have highlighted
definitions published by two banks and one
government and we are pleased to notesome commonalities among them. A clear
definition of a green investor will make thiscategory of investor easier to identify, andissuers will be able to design products tomeet their needs.
In H1 there was a notable increase in thenumber of benchmark-sized green bonds
being issued, and the demand remained
buoyant, with 53% of bonds sold to investors
describing themselves as green. As wehave continually highlighted, non-dedicatedinvestors have no reason to avoid green
bonds, and in some areas of the market, it

The results of our analysis pertain to alimited number of green bonds, chosen
according to the parameters outlined on
page 24. Green bonds issued in othercurrencies, structures, formats, andsizes may perform differently from those
discussed within this paper.
We started monitoring green bond pricing
in 2016, and as of mid-2019, have looked at
248 securities. As the profile of green bonds
has developed so rapidly in the intervening
period, so market conditions have evolved.
We will continue to monitor how green
bonds behave in the primary and immediate
secondary market.

Almost half of green bonds issued in H1 2019 were EUR

8% 5%

EUR 49%

1%
1%

7%

EUR
77%
Included in analysis
Excluded:
Floating
Not Investment GradeNot enough data
Too small
Tap

Other 5%
5%

CNY
6%

USD 25%

50%

USD

37%

SEK
8%
5%

3%

AUD 3%
JPY 2%CAD 2%

Green Bond Pricing in the Primary Market: January - June 201918

EUR summary statistics of bonds used for comparison
Bonds sharing similar characteristics to green bonds in our sample
Q1 - Green bonds priced between January 01 and March 31 2019

Number ofbonds

Average Coupon(par weighted)

Maturity

Deal Size
EURbn

EBRD 0% 10/01/2024

1

0.00%

5

0.6

EIB 0.05% 24/05/2024

1

0.05%

5

3.0

NRW Bank 0.625% 02/02/2029

10.625%

10

0.5

AAA SSA 10 Years

4

0.69%

10

2.4

Digital Euro Finco LLC 2.5% 16/01/2026

1

2.5%

7

0.85

BBB Real Estate 4-6 Years

3

2.2%

4.7

0.6

ENEL Finance International NV 1.5% 21/07/2025

1

1.5%

6

1

BBB Utilities 5-7 Years

3

1.1%

6

0.6

SNCF Reseau EPIC 0.875% 22/01/2029

10.875%

100.75

Societe Du Grande Paris EPIC 1.125% 25/05/2034

11.125%

15

2

CPPIB Capital Inc 0.875% 06/02/2029

10.875%

10

1

AA SSA 10-15 Years

6

0.7%

11.7

1.6

Citigroup Inc 0.5% 29/01/2022

1

0.5%

3

1

A SU Banks 1-3 Years

3

0.8%

3

0.5

Telefonica Emisiones SA 1.069% 05/02/2024

11.069%

5

1

Deutsche Telekom AG 0.875% 25/03/2026

10.875%

7

0.5

OP Corporate Bank Plc 0.375% 26/02/2024

10.375%5

0.5

A SU Banks 5 Years

3

0.9%

5

0.8

BNP Paribas 1.125% 28/08/2024

11.125%

5

0.75

Danske Bank A/S 1.625% 15/03/2024

11.625%5

0.5

A-BBB SNP Fin. Corporate 5-6 Years

5

1.2%

5.2

1.2

LeasePlan Corp NV 1.375% 03/07/2024

11.375%5

0.5

BBB SP Banks 5 Years

2

0.9%

5

0.5

Rep of Poland Gov. International Bond 2% 08/03/2049

1

2%

30

0.5

A Governments 30 Years

2

2.2%

30

1.1

Rep of Poland Gov. International Bond 1% 03/07/2029

1

2%

30

0.5

A Governments 10 Years

3

1.18%

30

2.3

Chile Government International Bond 0.83% 02/07/2031

1

0.8%

12

0.86

EM A Governments 10 Years * excludes subsequent taps

2

1%

10

0.825*

Netherlands Government Bond 0.5% 15/01/2040

1

0.5%

21

5.9

EUR Governments 31 Years* * both bonds issued Q1 2019 ** excludes subsequent taps

2

2%

31

6**

Q2 - Green bonds priced between April 01 and June 30 2019

Green Bond Pricing in the Primary Market: January - June 201919

Q2 - Green bonds priced between April 01 and June 30 2019 Cont.

Number ofbonds

Average Coupon(par weighted)

Maturity

Deal Size
EURbn

Instituto de Credito Oficial 0.2% 31/01/2024

1

0.2%

5

0.5

SSA 3-5 Years

2

0%

5

3

Kreditanstalt fuer Wiederaufbau 0.01% 05/05/2027

1

0.01%

8

3

Regie Autonome des Transports Parisiens 0.35% 20/06/2029

1

0.35%

10

0.5

SSA 7-10 Years

2

0.1%

9

0.8

SNCF Reseau 0.75% 25/05/2036

1

0.75%

17

1.6

SSA 15-18 Years

5

0.82%

16.2

1.4

European Investment Bank 1% 14/11/2042

1

1%

23

0.5

Societe Du Grand Paris EPIC 1.7% 25/05/2050

1

1.70%

31

1

SSA 16-20 Years

5

0.85%

18

1.1

Vodafone Group PLC 0.9% 24/11/2026

1

0.9%

7

0.75

BBB Wireless Communications 8 Years

2

1.3%

8

0.9

LG Chem Ltd 0.5% 15/04/2023

1

0.5%

4

0.5

BBB Materials 6 Years* * Neither of the bonds in the basket originate from EM

2

1.1875%

6

0.5

Engie SA 0.375% 21/06/2027

10.375%

8

0.75

Engie SA 1.375% 21/06/2039

11.375%

20

0.75

TenneT Holding BV 0.875% 03/06/2030

10.875%

11

0.5

TenneT Holding BV 1.5% 03/06/2039

1

1.5%

20

0.75

ESB Finance DAC 1.125% 11/06/2030

11.125%

11

0.5

Vattenfall AB 0.5% 24/06/2026

1

0.5%

7

0.5

Terna Rete Elettrica Nationale SpA 1% 10/04/2026

1

1%

7

0.5

Hera SpA 0.875% 05/07/2027

10.875%

8

0.5

AA-BBB Utilities 9-12 Years

2

1.25%

10.5

0.5

ERG SpA 1.875% 11/04/2025

11.875%

6

0.5

A- BBB Energy 6 Years

2

0.5%

6

0.5

Industrial & Com Bank of China Ltd. Singapore 0.25% 25/04/2030

1

0.25%

11

0.5

EM A SU Bank 12 Years* *One bond

1

0.25%

12

0.5

Royal Bank of Canada 0.25% 02/05/2024

1

0.25%

5

0.5

Westpac Securities NZ Ltd 0.3% 25/06/2024

1

0.3%

5

0.5

Sumitomo Mitsui Financial Group Inc 0.465% 30/05/2024

10.465%5

0.5

A SU Financial 5 Years3

0.416%

5

1.2

Unione di Banche Italiane SpA 1.5% 10/04/2024

1

1.5%

5

0.5

BBB SP Banks 5-6 Years

2

1.13%

5.5

1.3

ABN Amro Bank NV 0.5% 15/04/2026

1

0.5%

7

0.75

A SP Banks 5 Years* * One bond

1

0.625%

51

Nordea Bank Abp 0.375% 28/05/2026

1

0.4%

7

0.75

AA SP Banks 5 Years

2

0.15%

5

1

Green Bond Pricing in the Primary Market: January - June 201920

Q2 - Green bonds priced between April 01 and June 30 2019 Cont.

Number ofbonds

Average Coupon(par weighted)

Maturity

Deal Size
EURbn

La Banque Postale SA 1.375% 24/04/2029

11.375%

10

0.75

1.27%

11

1.175

A SNP Banks 10-12 Years
Landesbank Baden Wuerttemberg 0.375% 24/05/2024

10.375%50.75

A SNP Banks 5 Years

3

0.53%

5

0.9

Banco Bilbao Vizcaya Argentaria SA 1% 21/06/2026

1

1%

7

1

BBB SNP Banks 5-7 Years

2

1.3%

7

0.875

Vesteda Finance BV 1.5% 24/05/2027

1

1.5%

8

0.5

BBB Real Estate 6-7 Years

3

1.58%

6.6

0.55

Prologis Imtermational Funding II SA 0.875 09/07/2029

1

0.9%

10

0.45

A-BBB Real Estate 10-11 Years

2

0.85%

10.5

0.55

Green Bond Pricing in the Primary Market: January - June 201921

USD summary statistics of bonds used for comparison
Bonds sharing similar characteristics to green bonds in our sample
Q1 - Green bonds priced between January 01 and March 31 2019

Number ofbonds

Average Coupon(par weighted)

Maturity

Deal Size
USDbn

Neder Financierings-Maat 2.75% 20/02/2024

12.750%

5

0.5

AAA Development Banks 5 Years2

2.625%

5

1.75

MidAmerican Energy Co 4.25% 15/07/2049

1

4.25%

30

0.9

DTE Electric Co. 3.95% 01/03/2049

1

3.95%

30

0.65

A Utilities 30 Years

4

4.20%

30

0.6

MidAmerican Energy Co 3.65% 15/04/2029

1

3.65%

10

0.6

Duke Energy Progress LLC 3.45% 15/03/2029

1

3.45%

10

A Utilities 10 Years

5

3.7%

10

0.5

Verizon Communications Inc. 3.875% 08/02/2029

13.875%

10

0.5

BBB Communications 10 Years

3

4.5%

10

1.8

Hong Kong Government International Bond 2.5% 28/05/2024

1

2.5%

5

1

EM AA Government 10 Years

1

2%

10

2

Chile Government International Bond 3.5% 25/01/2050

1

3.5%

31

1.4

EM A Government 31 Years

1

5.25%

31

4

Landesbank Baden-Wuertemberg 2.375% 31/05/2022

1

2.4%

3

0.75

AAA-AA Covered 5 Years

2

2.21%

5

0.55

Avangrid Inc 3.8% 01/06/2029

1

3.8%

10

0.75

BBB Utilities 10 Years

2

3.4%

10

1

Korea Electric Power Corp 2.5% 24/06/2024

1

2.5%

5

0.75

EM A Utilities 5 Years

2

2.9%

5

1

LG Chem Ltd 3.25% 15/10/2024

1

3.25%

5

0.5

BBB Materials 5 Years

4

3.4%

5

0.6

LG Chem Ltd 3.625% 15/10/2029

13.625%

5

0.5

BBB Materials 10 Years1

3.875%

10

0.9

Rongshi International Finance Ltd 3.25% 21/05/2024

1

3.25%

5

0.5

EM A Financial Services 5 Years

2

3.92%

5

0.7

Boston Properties LP 3.4% 21/06/2029

1

3.40%

10

0.85

BBB Real Estate 10 Years

4

3.60%

10

0.9

Q2 - Green bonds priced between April 01 and June 30 2019

Green Bond Pricing in the Primary Market: January - June 201922

Relative sizes of green and vanilla bonds used in yield curve construction
RatingGroup

Name

Average of nongreen bonds

Average of existing
green bonds issued
prior to 2019

Green bond issuedin H1 2019

SOV

Poland 2049

1.48

0.875

0.5

Poland 2029

1.48

0.875

1.5

Netherlands 2040

13.9

5.98

Chile 2031

1.23

0.86

SNCF 2029

1.635

0.88

0.5

NRW 2029

0.73

0.5

0.5

EIB 2042

3.48

1.39

0.5

KfW 2027

4.09

1.3

3

RATPFP 2029

0.53

0.5

0.5

SNCF 2036

1.69

0.9

1.5

OP Bank 2024 (SP)0.625

Nordea 2026 (SP)

1.125

Citigroup 2022 (SU)1.24

BNP Paribas 2024 (SNP)

1

0.5

0.75

ABN Amro 2026 (SP)

1.17

0.625

0.75

TenneT 2039

0.5

0.52

0.75

TenneT 2030

0.5

0.52

0.5

SMFG 2024 (SU)

0.7

0.5

0.5

ESB 2030

0.525

Engie 2027

0.67

0.875

0.75

Engie 2039

0.67

0.875

0.75

Westpac 2024 (SU)

0.75

0.5

0.5

ENEL 2025

0.88

1.25

1

Telefonica 2024

1.1

Terna 2026

1

Vodafone 2026

0.94

0.75

SOV

Chile Government 2050

1.15

1.4

A

MidAmerican Energy 2029

0.55

0.7

0.6

MidAmerican Energy 2049

0.55

0.7

0.9

Duke Energy 2029

0.54

0.65

0.6

Boston Properties 2029

0.84

1

0.85

Verizon 2029

2.16

SSA

EUR

A

BBB

USD
BBB

Green Bond Pricing in the Primary Market: January - June 2019

0.5
0.5

0.75
1

0.5

1
1

0.5

1

23

9. Methodology
This paper includes labelled green bonds
issued during H1 2019. We have included
labelled green bonds meeting the following
specifications:

All historical data is based on asset swap
spreads for EUR denominated bonds. USD
bonds are compared to a US treasury curve.
All historical data is from Refinitiv EIKON.

• Announcement date between 01/01/2019
and 30/06/2019

Four bonds qualified for our analysis but
could not be included due to paucity ofavailable data:• Currency: EUR or USD• Benchmark size i.e. >= USD500m• Investment grade rated• Minimum term to maturity of three years
at issue• Consistent with Climate Bonds taxonomy
Amortising, perpetual, floating-rate, andother non-vanilla structures are excluded.
We have designed these parameters to
capture the most liquid portion of the market
while not limiting the diversity of data.

• Indonesia 3.9% 08/20/2024• ADIF-Alta Velocidad 0.95% 04/30/2027

invested in the same quarter in which thegreen bond was issued. The number ofbonds in each basket ranges from one to
five bonds. We acknowledge that bonds
behave differently depending on when they
are issued and geopolitical events can affectbond prices from one day to the next. We
have designed this proxy to circumvent thefact that vanilla bonds and green bonds withsimilar characteristics are rarely issued on
the same day.

• MAF Sukuk Ltd 4.638% 14/05/2029• Russian Railways 2.2% 23/05/2027
Comparable baskets include bonds issued in
the same quarter as the subject green bond.
Comparable bonds must fit the parametersdescribed above except that the use ofproceeds is not green. The resulting baskets
are a proxy for how money could have been

Endnotes:
1. https://www.climatebonds.net/standard/taxonomy
2. Bloomberg: IG Analysis Europe: Engie’s Hybrid, Intesa SanPaolo
lead session, Tassos Vossos 01/07/2019
3. Bloomberg, U.S. Credit Daybook, Brian Smith 29/06/2018:
Pricing volume YTD $640.004b, and Credit Daybook Americas,
Molly Smith, 01/07/2019: Pricing volume YTD $560.473b
4. In late May 2018, the Mexican Government announced thecancelation of Mexico City’s New International Airport (NAICM),
for which USD6bn had been raised via four green bonds between
2016-17. The Government has brought back USD1.8bn frominvestors but there is still no update re the remaining proceeds. Dueto this the bonds are not currently considered green and have been
removed from our database pending further information.
5. https://www.msci.com/market-classification
6. https://www.climatebonds.net/files/files/CBI_GB_
Pricing_2H2018_08052019.pdf
7. https://www.enel.com/media/press/d/2018/1/green-bondenel-eng
8. https://ihsmarkit.com/products/iboxx.html
9. Bloomberg BICS

www.climatebonds.net

Climate Bonds Initiative © October 2019
With funding support by Obvion Hyptheken and Lyxor Asset Management

Lead Author: Caroline Harrison
Co-Author: Monica Filkova, CFA
Design: Godfrey Design

Suggested citation: Green Bond Pricing in
the Primary Market July-December 2018,
Harrison, C.

If you would like to discuss this paper in moredetail please contact:caroline@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
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Green Bond Pricing in the Primary Market: January - June 201924