GREEN BOND PRICINGIN THE PRIMARY MARKET:
January-June 2022

H1
(Q1-Q2)
2022

Report highlights• Sample includes 93 green bonds with a
combined face value of USD93.3bn, priced
between January and June 2022 (H1 2022)• Green bonds in both EUR and USD
performed well on all metrics in the
primary market, on average• Total assets in green bond ETFs ended H1
at USD1.75bn• Spotlight: Sustainability-linked bonds
exhibit evidence of greenium• Spotlight: Green bonds maintain better
liquidity in secondary market

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative11. Introduction

As of 1 August 2022, USD236bn worth ofgreen bonds priced in H1 2022 had been
added to the Climate Bonds Green Bond
Database (GBDB), a 1% decline from H22021 (USD240bn), which had been a record
period. This analysis includes 40% of theamount issued in H1 2022 that met the above
requirements: USD93.3bn split between 93
green bonds from 76 issuers. EUR was thedominant currency with 68 bonds amounting
to EUR69bn (USD75.8bn), while 25 qualifying
USD denominated bonds had a combinedMarket developments
The Russian invasion of Ukraine in February andsubsequent European energy crisis exacerbatedpost COVID-19 inflation, impacting bond market
dynamics. Rising rates and high volatility resulted
in decreased bond issuance, and the market was
thick with anecdotes of issuers pulling deals at
the last minute. The USA faced demand-driven
inflation post COVID-19, which was expected
to react to monetary policy measures, while inEurope the inflation was largely supply-led andharder to address. The ECB has been the largest
buyer in the European bond market for several
years and is in the process of withdrawing that
support, clearing the way for interest rate increases.
In EUR, corporate bond spreads at least doubledin H1: 177% for AAA, 153% for AA, 163% for A, and149% for BBB. Widening of USD spreads was
significant, but less pronounced at 33% for AAA,
46% for AA, and 62% for A and BBB.2
The supply of benchmark green bonds remained
steady, but given the economic backdrop,
investors had limits about overpaying foranything and there were reports of both vanillaand green bond issuers offering larger new issuepremiums to attract investors to new deals.
During H1, green bonds amounting to USD236bn
were added to the Climate Bonds GBDB as
Q2 issuance (USD133bn) picked up slightly
compared to Q1 (USD103bn). May was thebusiest month (USD50m) helped by several large
deals from Austria, which priced its first sovereign
green bond, a 2049 maturity (EUR4bn/USD4.2bn),

Sovereign bonds are subject to different market
dynamics than bonds from other issuer types hence
we address them separately in the Sovereign Green
Bonds Club section. The European Union (EU),a supranational issuer, is also subject to peculiar
pricing dynamics and is again discussed separately.

Report highlights:• Green bonds achieved higher book coverand spread compression than vanillaequivalents, on average.
See more on page 4• Overall, 65% of green bonds wereallocated to investors describing
themselves as having green or
responsible investment mandates.
See more on page 7• Yield curves could be built for 50 bonds
in our non-sovereign sample. Ten
priced inside their issuer’s yield curves,achieving a greenium.
See more on page 9• After 7 and 28 days, green bonds had
tightened by more than comparable
vanilla baskets and corresponding
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 USD1.75bn, a decline of
3% on the prior period.
See more on page 14• Sovereign Green Bond Club: three
sovereign issuers added one new bondeach while the EU (supranational) priced
two green bonds with a greenium.
See more on page 15• Spotlight: Sustainability-linked bondpricing in the primary market: A first lookat pricing reveals evidence of a greenium.
See more on page 18• An analysis of bonds in the real estate
and utility sectors confirms that green
bonds maintain better liquidity in thesecondary market.
See more on page 21

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 23.

issue size of USD18.5bn. This is the largest
sample in any period to date.

100
50
0
January2022

February
2022

March
2022

April
2022

May
2022

June
2022

May
2022

June
2022 Source: Refinitv

Source: Refinitv

USD Corporate Credit Spreads
200

AAA

AA

A

BBB

150
100
Benchmark spread

This is the 14th report in our pricing series, inwhich we observe how green bonds performin the primary markets. This report includes
green bonds issued in the first six months of2022 (H1 2022).

50
0January2022

February
2022

March
2022

TenneT (a four tranche deal worth EUR3.85bn/
USD4.1bn), and EIB (EUR4bn/USD4.3bn).
Almost 70% of the H1 green bond volume
was denominated in EUR (USD115bn) andGreen Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

April
2022

USD (USD47bn), with 58% of that amount(USD93.3bn) qualifying for this analysis. Most of
the qualifying issuers (65 out of 76) had alreadyissued green bonds, while 11 new issuers cameto the market in H1.
2

The table to the right illustrates the compositionof H1 2022 issuance from utilities and real estateby thematic label. More than half of EUR bonds
issued in the real estate and utility sectors bore
a thematic label, while in the USD market, only
a fifth of real estate bonds and a quarter ofutilities did. Among the USD bonds issued with agreen label, two real estate and three utility bonds
were not added to the Climate Bonds GBDB either
because the Use of Proceeds (UoP) was not aligned,or because there was inadequate clarity on the UoP.
This highlights two points:
1. The greenback must back green. Issuers
are still coming to the USD market to fundnon-green utility and real estate assets, projects,
and expenditures, even though there are clearly
defined green alternatives available. Culture andpolicy in the US must catch up to ensure thatgreen capital expenditure is preferenced. The
amount of non-green debt coming from utilities
and real estate in the EUR marketd emonstrates
that there is low hanging fruit.
2. The stealth greening of the EUR bondmarket. It would be increasingly difficult forany type of investor to construct a broad market
bond portfolio without including green bonds inat least the utility and real estate sectors. Broadmarket indices do not exclude green bonds,
hence qualifying green bonds will automaticallybe included, and passive investors will belooking for them in the secondary market. Active
managers could choose to avoid green bonds,
but this would limit their choice of bonds in the
primary market. This means that non-dedicatedinvestors are looking for green bonds in boththe primary and immediate secondary market,
putting even more pressure on pricing dynamics.

Real Estate
As noted above, there were not many EUR vanilla realestate bonds available for comparison. However, foreach pricing metric that we looked at, EUR real estatebonds were among the strongest performers outright.
Issuers are encouraged to issue green bonds frommultiple sources. Brokers are advising real estateissuers to apply thematic labelling where possible toachieve better pricing outcomes, and corporate rental
clients are prioritising landlords with green liabilities
to comply with their own CSR requirements.

Amount issued USD

Number of bonds

35

28

30

24

25

20

20

16

15

12

10

8

5

4

0

0
January

February

March

April

May

Number of bonds

In some sectors it can be challenging to find nonlabelled bonds with which to compare green bondperformance. This paper includes 17 green bonds
from the real estate sector and 19 from the utility
sector. Most of those bonds came from repeat
issuers. European real estate company P3 Groupwas the only debut issuer from the sector, raising
EUR1bn (USD1.1bn) split evenly between 2025 and2029 maturities. Public Service Electric and Gas
co (PSEG) priced a USD500m 2032 bond and was
the only first-time issuer from the utility sector.

One third of the eligible volume was priced in May

USD Billions

Real estate and utilities
get the green light

June
Source: Climate Bonds Initiative

Composition of H1 2022 issuance from real estate and utilities
Real Estate
H1 volume
USD

Utilities
Number ofbonds

H1 volume
USD

Number of
bonds

EUR
Green

9.5

15

20.1

23

Qualifies for Climate
Bonds GBDB

9.0

14

15.0

17

Doesn’t qualify for
Climate Bonds GBDB

0.5

1

5.1

6

SLB

1.4

2

7.2

9

Social

2.6

3

n/a

n/a

Sustainabilty

0.6

1

n/a

n/a

Vanilla

10.3

16

7.6

12

Total

24.4

37

34.9

44

Green

3.6

5

4.3

8

Qualifies for Climate
Bonds GBDB

2.6

3

2.3

4

Doesn't qualify for
Climate Bonds GBDB

1.0

2

2.1

4

USD

SLB

0.5

1

4.0

5

Sustainabilty

n/a

n/a

5.4

8

Vanilla

15.4

20

42.9

59

Total

19.5

26

56.7

80

Bonds priced between 01 January and 30 June 2022 with a minimum original size of USD500m. BICS classification Real Estate or Utility.

Utilities

Remarks:

Most European utility companies have welldefined transition strategies in place backed bygreen bonds. 24 EUR utility green bonds werepriced in H1 2022 (18 qualified for the Climate
Bonds GBDB, 17 for this paper), which is twice
the number of vanilla bonds (12). In USD, green
bonds are the minority at eight out of 80, with
only half of those qualifying for the Climate
Bonds GBDB (three for this paper). At least
59 utility USD vanilla bonds with a combined
volume of USD43bn were priced in H1 2022.

• 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.

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative• The methodology for the selection of
the bonds used as comparators is given
on page 23.

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 3.1 times for green bonds
versus 2.4 times for vanillaequivalents. Spread compression
averaged 18.2bps for green bonds
and 16.4bps for vanilla bonds.

• USD: Average oversubscription
was 3.8 times for green bonds and2.7 times for vanilla equivalents.
Spread compression averaged
29.3bps for green bonds and22.5bps for vanilla bonds.

EUR Book coverCategory

USD Book cover
Vanillabasketaverage
book
cover

Green
averagebookcover

Number ofgreen bonds
beating
vanillabasketGreen
bondsampleCategory

Number ofgreen bonds
beating
vanillabasketGreen
bondsampleVanillabasketaverage
book
cover

Green
average
book
cover

SSA

11

9

4.4

2.3

SSA

2

1

5.8

4.7

Covered

6

5

2.4

1.7

Covered

1

1

2.1

1.2

AA

3

2

1.9

1.4

AA

1

1

6.0

1.9

A

17

10

2.9

2.3

A

4

2

4.2

3.6

BBB

24

12

3.0

2.8

BBB

8

5

3.2

2.2

Total

61

38.0

3.1

2.4

Total

16

10.0

3.8

2.7

Five EUR green bonds achieving largest book coverCategory

Short
Name

SSA
SSA
A

KfW 2032
EIB 2029
Segro
2030
E.ON 2031
Vonovia
2032

BBB
BBB

Deal
size
EURbn

Reported
order
book
EURbn

Book
cover

Vanillabasket
book
cover

3.00
1.00
0.50

34.00
8.25
4.00

11.30
8.25
8.00

1.4
4.3
1.9

0.75
0.85

5.00
5.00

6.70
5.90

1.8
2.5

Five USD green bonds achieving largest book coverCategory

Short
Name

SSA

KEPCO
2025
Korea
East-West
Power
2025
PSEG 2032
Welltower
2032
Bank of
China(Ffurt) 2025

AA

A
BBB
A

Green bonds are oversubscribed and experiencespread tightening during the pricing process, justlike vanilla bonds. To help determine whether
investors attach any value to the green label,green bonds are compared to carefully selectedvanilla equivalents (baskets).

EUR green bond pricing
EUR green bonds obtained slightly moresubdued order books in H1 2022 (3.1x) comparedto the prior half year (3.4x), as did vanillaequivalents (2.4x in H1 2022 against 2.7x in H22021). Spread tightening was also lower, withan average of 18.2bps compared to 19.3bps forgreen bonds, and 16.4bps compared to 17bps forvanilla bonds. Green bonds maintained better
performance than vanilla equivalents on both
metrics (on average).

Deal
size
EURbn

Reported
order
book
EURbn

Book
cover

Vanillabasket
book
cover

0.50

4.1

8.2

5.8

0.50

3.0

6.0

1.9

0.50
0.55

3.0
2.9

6.0
5.3

1.5
1.2

0.50

2.2

4.4

5.1

Individually, 62% of green bonds (38 out of 61)
experienced greater oversubscription comparedto vanilla equivalents, similar to the 61% in theprior period.

Book coverTwo sovereign, supranational, and agency (SSA)
issuers were top among the five EUR deals
achieving the largest book cover.

53% of green bonds (32 out of 60) achievedlarger spread compression that their vanillaequivalents, the same share as in H2 2021.

KFW 2032 attracted an order book of EUR34bn,
11.3 times the size of the transaction (EUR3bn/
USD3.1bn), the largest for a green KFW EUR
transaction so far. It was also the fifth largest bookcover recorded by Climate Bonds for a green
bond since 2016 (the record is held by Prologis
2032 with a book cover of 14 times deal size inJune 2020) and recorded a negligible new issuepremium going on to tighten in the immediate
secondary market.

Bonds in the sample excluded from this analysis:
Caja R. de Navarra 2029 (CO) and ICADE 2030
achieved the same book cover as their vanillabaskets at 1.4 and 1.9 times respectively, while
UPM achieved book cover of 2.5 times, but its
vanilla basket did not have any information onthat data point.
Four bonds achieved the same amount of tightening
as their respective vanilla counterparts: BPI 2027,
RWE 2026, ABN Amro 2032 (SNP), and Prologis 2034.

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

Meanwhile, EIB 2029, priced in January, was the first
Climate Awareness Bond (CAB) of 2022. The EUR1bn(USD1.1bn) deal was covered 8.25 times and priced
inside both the EIB green and vanilla curves.
4

UK Real Estate Investment Trust (REIT) Segro
covered its EUR500m (USD550m) 2030 deal
eight times with a book that reached EUR4bn.
Investors were attracted by the A credit rating,combined with logistics real estate exposure andthe green label. German real estate company
Vonovia priced its second EUR green bond,a 2032 maturity, in March. The EUR850m(USD930m) deal was almost six times covered.
European electric utility E.ON priced threegreen bonds in H1 with proceeds earmarked torefinance sustainable projects with a focus on
the energy transition. E.ON 2031 was part ofdual tranche deal priced in March, and received
indications of interest amounting to 6.7 times the
EUR750m (USD830m) deal size.
Spread compression
The five bonds achieving the largest absolute
spread compressions were all non-financial
corporates and were led by VW 2027. The German
auto manufacturer returned to the market in Junewith a two-tranche EUR1.5bn (USD1.58bn) deal
split evenly between 2025 and 2027 maturities.
The 2027 tranche achieved massive tightening of
42.5bps. For context, only eight EUR green bonds
have achieved spread compression of 40bps
or more since 2016. Daimler holds the recordof 57bps for its 2030 bond priced in September
2020, while the sixth largest recorded spreadcompression for a EUR bond was for the VW 2032
also priced in September 2020, at 42.5bps like therecent deal. Green deals from relatable names
outside the bank, real estate, or utility sectors
remain appealing for thematic investors who arekeen to add sector diversity.
Three of the top five tighteners were from thereal estate sector: Vonovia 2032 narrowed by
40bps, Prologis 2031 managed 39.5bps, andSegro 2026 contracted by 35bps. The otherspot was filled by E.ON 2025, which moved
40bps during book building.
Segro did not have a yield curve, hence
the presence of a greenium could not be
determined. The other four bonds achieving
the most aggressive spread compression priced
outside their yield curves, exhibiting normal
new issue premia.

USD green bond pricing
The USD market experienced opposite trends.
The H1 2022 USD green bond sample achieved
an average book cover of 3.8 times, higher than
the threetimes recorded for H2 2021; the vanillaequivalents saw an average book cover of 2.7
times in H1, identical to the previous period.
Likewise, the average spread compressions of
29.5bps for green bonds and 22.5bps for vanillabaskets were larger than the 25.9bps and 21.7bps
seen in the prior half year.
Nine out of 15 green bonds (60%) achieved larger
book cover than vanilla counterparts. 14 out of
20 green bonds (70%) experienced larger spreadcompression compared to equivalents.
Bonds in the sample excluded from this analysis:
Packaging company Sonoco’s 2032 bond achieved
the same book cover as its vanilla basket (2x). EIB
Korea 2032 attracted book cover of two times, butthere was no data for its corresponding basket.
Six bonds lacked data for book size: JBIC 2027,
JFM 2025, Agri Bank of China 2025, Bank of China(Sing) 2025, CCB 2025, and Industrial Bank 2025.
Three bonds in the USD sample achieved the same
spread compression as their vanilla baskets: SMFG
2029, INRCIN 2032, and Alexandria RE 2034. All
tightened by 25bps in the primary market.
Book cover
Korea’s largest electric power supplier anddistributor, Korean Electric Power Co (KEPCO
2025), achieved the highest book cover recorded
for a USD green bond since 2016, at 8.2 times.3 Theprior record of eight times was reached by both
Mitsubishi UFJ 2023 in 2020 and Verizon 2029 in2019. Repeat green bond issuer KEPCO priced its
USD500m green bond in June (together with a
USD300m 2027 bond), and the combination of theshorter tenor, AA credit rating, state ownership, USD
denomination, and green label created massive
investor interest. The proceeds from the deal were
earmarked to finance or refinance the development
and operations of projects consistent with KEPCO’s
sustainable finance framework, which highlights
solar and wind, increasing stability in the
power supply, clean transportation, and energy
efficiency as eligible green project categories.

EUR Spread compression (swap spreads)

Korea East-West Power (Korea East-West Power2025) published an updated sustainable financeframework in April 2022, outlining its roadmap
to transition to renewable energy, and naming
renewable energy and energy efficiency as eligible
green project categories. Its first USD green bond
was priced in May, a USD500m three-year bondwhich attracted book cover of six times. Again, thestronger credit rating, state support, short tenor,
choice of currency, and transition strategy will all
have helped to attract investors.
New Jersey-based Public Service Electric and Gas
co (PSEG 2032) priced its debut green bond in
March, receiving an order book six times greaterthan the USD500m deal size. The proceeds of thedeal were earmarked to support the company’stransition to cleaner energy.
REIT Welltower Inc (Welltower 2032) invests inhealthcare infrastructure and priced its second green
bond in March to support its commitment to green
buildings, energy efficiency, and water efficiency.
The USD550m bond covered its book 5.3 times.
Bank of China Frankfurt (Bank of China
Ffurt 2025) priced a USD500m 2025 green
bond attracting a book of 4.4 times the deal
size. Screening for eligible projects was done
according to the Common Ground Taxonomy(CGT) and the Green Bond Principles, and 14
projects were nominated, falling into renewableenergy, energy storage, low carbon transport,
electric buses, and the manufacture of energy
saving equipment.
Spread compression
Spread compression data was available for all
bonds in the USD sample.
The USD bonds experiencing the largest spreadcompressions were from offshore branches ofChinese financial institutions – this is the same aswhat we observed in H2 2021. In H1 2022, eightbonds achieved spread tightening of at least
40bps, all of which from offshore Chinese banks
except KEPCO 2025. For context, Climate Bonds’
pricing research had included 161 USD bonds atthe end of 2021. Among those, just 11 individual
bonds had achieved spread compression of atleast 40bps (five priced in 2020, and six in 2021).

USD spread compression (treasury spreads)

Category

Green
bond
sampleNumber ofgreen bonds
beating
vanillaequivalentGreenaveragespreadcompression

Vanillabasketaveragespreadcompression

Category

Green
bond
sampleNumber ofgreen bonds
beating
vanillaequivalentGreenaveragespreadcompression

Vanillabasketaveragespreadcompression

SSA
Covered
AA
A
BBB
Total

10
7
3
16
24
60

8
2
1
10
11
32

-5.2
-3.3
-16.0
-23.8
-24.5
-18.2

-3.6
-3.4
-19.5
-20.1
-22.7
-16.4

SSA
Covered
AA
A
BBB
Total

5
1
1
6
8
21

3
1
1
5
4
14

-23.8
-3.0
-35.0
-40.5
-26.8
-29.1

-23.8
-1.6
-20.0
-21.2
-25.5
-22.6

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

5

The ceiling was set by a green bond from US
energy and utility company, Avangrid with a 2025
deal priced in 2020, which demonstrated spreadcompression of 50bps.4
Another commonality of the USD bonds with thelargest spread compression in H1 2022 was thematurity. All were short dated with a maturityof 2025. The results of this analysis suggest thatinvestors liked short-dated USD paper from
offshore branches of Chinese banks. The shorttenor (given interest rate risk) combined with

exposure to China without the risk of onshore
investing is evidently something investors value,
and the green label is the cherry on the cake.
Industrial & Commercial Bank of China (Hong Kong)
priced a USD1.2bn green bond in May (ICBAS (HK)2025). The bond was 5.1 times oversubscribed
and the spread tightened by 47bps during bookbuilding, the largest of any USD deal in H1 2022.
The bond was one of just a handful to achievea greenium, pricing just inside both the green
and vanilla curves of the issuer and going on totighten aggressively in the immediate secondary
market. The issuer’s 2021 Green Bond Frameworklists eligible project categories as renewable energy,
clean transport, energy efficiency, and sustainable
water and wastewater management.
Methodology notes: Baskets comprise bondsthat most closely match the green bonds andare issued during the same quarter. The baskets
in this publication include between one and ten
bonds. For an explanation of the methodology,
see page 23.

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

Bond

Pricing date

IPT

Primary Spread

Compression
green bondCompression
vanilla basket

BBB

VW 2027

21/06/2022

198.0

BBB

Vonovia 2032

21/03/2022

180.0

155.0

-42.5

-30.00

140.0

-40.0

BBB

EON 2025

23/03/2022-22.00

75.0

35.0

-40.0

A

Prologis 2031

-23.75

18/05/2022

187.5

148.0

-39.5

0.00

A

Segro 2026

16/03/2022

105.0

70.0

-35.0

-32.50Compression
green bondCompression
vanilla basket

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

Bond

Pricing dateIPTAICBCAS 2025

24/05/2022

85

38

-47

-32.5

A

Bank of China (Ffurt)
2025

09/06/2022

65

20

-45

-32.5

A

CCB 2025

10/05/2022

90

47

-43

-32.5

BBB

Industrial Bank 2025

11/05/2022

95

52

-43

-32.5

A

Agri Bank of China 2025

22/02/2022

75

35

-40

35.0

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

Primary Spread

6

3. Green allocations: 65% allocated to investors describing themselves as green
The 73 non-sovereign issuers included in thisanalysis were invited to disclose what percentageof their deal was allocated to investors describing
themselves as green or socially responsible(green investors). The results of this outreachwere as follows:• 31 issuers representing 41 bonds shared the data
• Three issuers representing four bonds replied
without disclosing the data
• 39 issuers representing 45 bonds did not reply

During H1 2022 the markets were very volatileand there were reports of numerous transactions
being withdrawn from the market. In the US,
there were periods of as long as seven days withno new issuance at all. Some issuers noted thatthe green label had been what had enabled
them to issue in these challenging times. As
always, issuers noted that the green label helped
to attract a more diversified order book andsubsequent better pricing outcome than may
have been possible otherwise.

Based on these responses, the average
allocation to investors describing themselves
as green was 65% (1% lower than in the priorobservation period). Allocations ranged from35% (Munhyp 2030 (CO) and DZ Hyp 2029 (CO))
to 90% (Gecina 2033).

Nordea priced a EUR1bn senior non-preferred
2027 bond (Nordea 2027 (SNP)) during a
relatively quiet period in February. It was thebank’s fourth EUR green transaction. Around 75%of the deal was allocated to investors describing
themselves as green, reflecting the benefits of astrong sustainability policy and the green label.

Just three out of 24 issuers in our USD sample
acknowledged the request for data which meansthat we cannot monitor changes in investor
demand in this market. From the responses
received, the green label appears to have been
helpful in attracting high-quality order books
during turbulent times.

European logistics real estate investor anddeveloper P3 Group Srl priced its first green
deal in January. The EUR1bn transaction was
split evenly between 2026 and 2029 tenors (P3Group 2026 and P3 Group 2029). The company
was pleased with the deal, which attracted a

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

high-quality order book. The roadshow gave
P3 Group the opportunity to respond toinvestor questions on post-issuance reporting
commitments, and green lease terms andapproach. Investors describing themselves as
green were allocated 62% of the 2026 and 57%of the 2029 deals. Three-quarters of the top
twenty investors, who collectively bought 81%,
described themselves as green.
Methodology notes: Green investor
participation is provided by issuers. Where theallocation is split between dark, medium, andlight green investors, percentages for dark andmedium green are included in this analysis.
There is no standard methodology for defining
a green investor and we acknowledge that thisis subject to interpretation. There is no way tomonitor how investors split their allocations ofgreen bonds among their different portfolios.

7

65% of green bonds were allocated to green investors
Declared green investor

Rating GroupEUR

Not declared green investor

0%

SSA

20%

Average 65% was allocated to green investors
40%

60%

80%

100%

40%

60%

80%

100%

NRW 2032
EIB 2029
Kommuninvest 2029
EU 2043
KfW 2032
Kunta 2029
EIB 2032
ICO 2026
EU 2048COV

DZ Hyp 2029 (CO)Munchener Hyp. 2030 (CO)NN Bank 2032 (CO)BPCE 2032 (CO)AA

Berlin Hyp 2027 (SP)SB1 Oestlandet 2027 (SP)A

Gecina 2033
SBAB 2027
Nordea 2027 (SNP)
TenneT 2042
TenneT 2026
TenneT 2033
TenneT 2029
Prologis 2031
Stedin 2030

BBB

SBAB 2025 (SP)VGP 2030
VGP 2027
NE Property 2030
Acciona 2032
P3 Group
2025
Stora
Enso
2030
P3 Group 2029
EDP 2029
Vonovia 2032
UPM 2029
RWE 2030
RWE 2026
ABN Amro 2032 (SNP)ABN Amro 2032 (SNP)
VW 2027
VW 2025USD
BBB

Verizon 2052

0%

20%

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative8

4. The greenium: ten out of 50 green bonds priced on their yield curves

There is no reason why a bond being green
should impact its price, since green bonds rankpari-passu (on equal footing) with bonds of thesame payment rank and issuer. There is no credit
enhancement to explain pricing differences andissuers of green bonds often incur costs suchas Second Party Opinions and Certification,although these are typically negligible. Greenbonds and vanilla equivalents are subject tothe same market dynamics such as supply, rate
expectations and geopolitical crises.

Japan Bank for International
Cooperation (JBIC 2027)
Government-owned JBIC priced its first green
bond in January, a USD500m maturing in
2025. Climate Bonds could not obtain data on
the book size, but the bond achieved spreadcompression of 3.3bps, which did not beatthe vanilla basket. The bond priced inside its
own yield curve and tightened by a greater
magnitude than both its vanilla basket andcorresponding index after both 7 and 28 days.
JBIC published its Green Bond Frameworkin October 2021 and obtained an SPO from
Sustainalytics. The framework describes threeeligible project categories: clean transport, green
buildings, and renewable energy.

Within the sample of 50 green bonds, 12 priced
inside on or inside their own yield curves.
This is expected given prevailing market conditions.
20% of bonds in the sample received a pricing
benefit, but investors are being more cautious andare happy to sit on cash, and in some cases, issuers
are offering investors larger new issue premiumson their new bonds to gain access to capital.
The relatively low incidence of greenium in
H1 2022 is not bad news for the green bondmarket specifically, and rather reflects investors
exercising extreme caution due to the uncertain
geopolitical and macroeconomic conditions. In
the introduction to this paper, we highlighted
the change in approach to financing in the EUR
real estate sector, where labelled green bonds
now dominate. We expect investor demand tocontinue to increase particularly in the US, where
regulatory changes will introduce more green
projects in the real economy.

Within our sample of 50 green bonds:
Pricing
outcomes

EUR

USD

Total

Q1

Q2

Q1

Q2

Greenium

4

1

4

1

10

On the
curve

2

0

0

0

2

New issue
premium

11

21

6

0

38

Sum

17

22

10

1

50

Green bonds exhibiting a greenium
in H1 2021
EUR

NRW 2032

EUR

RTE 2034

EUR

NE Property 2030

EUR

EIB 2029

EUR

EIB 2032

USD

HK Airport 2027

USD

JBIC 2027

USD

JFM 2025

USD

Sonoco 2032

USD

ICBCAS 2025

JBIC 2027 USD - greenium
2.0

1.5

1.0

0.5

Source: Bloomberg

Sometimes, a bond may be issued with a higher
price, and thus have a lower yield comparedto outstanding debt. The bond will price inside
its own yield curve. This is known as a new issue
concession; when present in a green bond, we havetermed it greenium. This is an excellent outcome
for any issuer because it means that it pays less tofund its green bond compared to its vanilla debt.

Investors more discerning in 2022
In H1 2022, Climate Bonds built yield curves
for 50 of the 87 non-sovereign bonds in thesample. This is the largest number of yield curves
available in any observation period so far.

Yield as of 12/01/2022

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.

0
0

2

4

6

8

10

Duration

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

9

NRW Bank (NRW 2032)
NRW is the state development bank ofGermany’s North Rhine-Westphalia region andpriced its first green bond in 2013.
In January, it returned to the market with its
12th green bond, a EUR500m (USD563m)
ten-year. The bond accumulated EUR2.1bnof orders, covering the deal by 4.2 times andshaved3 bps off initial price thoughts, beating its
vanilla basket on both metrics. The bond priced
inside its own vanilla yield curve and achieved agreenium. The order book was well diversified,and more than 80% was allocated to investors
describing themselves as green. The spreadwidened on the break but 28 days after pricing
was 10% tighter, beating both the corresponding
index and vanilla basket.

The proceeds of the bond were earmarked for
categories aligned with the draft EU Green Bond
Standard (GBS) and the EU Taxonomy. Twothirds of the proceeds were reserved for river
renaturation projects (adaptation), the rest to
mitigation projects in several categories. Climate
Bonds expects bonds that are aligned with
the EU GBS and EU Taxonomy to attract more
attention from investors in the primary market.

NRWBK 2032 EUR - greenium
0.8
0.6
0.4
0.2

-0.2
-0.4

Source: Bloomberg

Yield as of 18/01/2022

0

-0.6
-0.8
0

5

10

15

20

25

Duration
Vanilla bonds

Seasoned green bonds

New issue green bondWhat’s in a greenium?
Climate Bonds uses the term greenium when abond is sold in the primary market with a higher
price, and corresponding lower yield, compared
to where existing debt of the same issuer istrading in the secondary market. This is similar
to a new issue concession. Climate Bonds uses
this data to determine whether the green label
can achieve cheaper funding for the issuer.
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.
Since Climate Bonds introduced the termgreenium in 2017, it has been incorporated
into the financial vernacular, used to describe
a multitude of calculations related to green
bond pricing. These include secondary market
performance, or comparisons of new issue
spreads of green bonds and other bonds
issued in different years from the green bondfor example, which would naturally result invastly different conclusions.
Even when the greenium is used synonymouslywith new issue concession by others, there aresome details which may give different resultsfrom those achieved by Climate Bonds.

• Climate Bonds uses Bloomberg closing prices.
• For large government bonds, Climate Bonds
confers with the issuer to determine theprecise timing of the deal to ensure that ayield curve is built using data from the exact
same time. Where possible, official pricing
sources are used.
• Climate Bonds plots the duration on thex-axis, not the term to maturity. Using theduration accounts for differences in coupon
and pricing dates across the yield curve.
• 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.
• Climate Bonds does not account for avanilla bond new issue premium equivalent
in its greenium calculations. The greenium
is determined by eye, or through linear
interpolation according to the positionof the bonds on either side of the green
bond’s duration.

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

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 to mid, andall the data is as of the pricing date of the green
bond. The modified duration is the percentage
price change of a security for a given change inyield. The modified duration increases with risk.
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 23, except that they are not labelled andthe use of proceeds 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.

10

5. Performance in the immediate secondary market• Seven days after pricing, 51%
of green bonds had tightenedmore than comparable vanillabaskets; 80% had tightened morethan their corresponding index.

EUR• 28 days after pricing, 48% of
green bonds had tightened morethan comparable vanilla baskets;
77% had tightened more thantheir corresponding index.

In H1 2022, 64% of individual green bonds in our
sample had tightened 7 days after pricing; this
dropped to 49% after 28 days. In H2 2021, 75%
had tightened after 7 days, and 76% after 28 days.
These differences are unsurprising given theprevailing volatility in H1.

1 week change

28 day change

RatingGroup

Bond

Green Bond

VanillaBasketCorrespondingiBoxx index

Green Bond

VanillaBasketCorrespondingiBoxx index

SSA

RTE 2034

-8%

-14%

2%

2%

-22%

3%

SSA

NRW 2032

10%

5%

5%

-6%

-3%

17%

SSA

EIB 2029

5%

-5%

-35%

-3%

-1%

373%

SSA

NIB 2029

2.72%

-5%

2.73%

2%

-1%

-7%

SSA

Kommuninvest 2029

-1%

1%

-2%

25%

-1%

-12%

SSA

KfW 2032

-27%

-359%

4%

-6%

-801%

-4%

SSA

Kunta 2029

8%

10%

-22%

6%

4%

-16%

SSA

EIB 2032

-9%

-359%

10%

-89%

-801%

18%

SSA

ICO 2026

47%

-9%

-17%

841%

-62%

36%

SSA

BPI 2027

-111%

-15%

-15%

-118%

26%

20%

SSA

SEK 2027 (SP)

76%

-15%

-5%

71%

26%

1%

CoveredCaja R. de Navarra 2029 (CO)

5%

42%

70%

10%

42%

1591%

40%

-51%

773%

135%

-39%

874%

-117%

10%

-4%

-231%

17%

13%

CoveredDZ Hyp 2029 (CO)Covered

Muenchener Hyp. 2030 (CO)Covered

NN Bank 2032 (CO)

30%

18%

-17%

11%

23%

-16%

Covered

BACA 2028 (CO)

23%

-100%

0%

14%

-33%

-1%

CoveredBPCE 2032 (CO)

6%

12%

4%

21%

32%

5%

CoveredBYLAN 2032 (CO)

27%

18%

0%

24%

23%

16%

AA

Berlin Hyp 2027 (SP)

-19%

-35%

-15%

-25%

-40%

-10%

AA

SB1 Oestlandet 2027 (SP)

9%

-9%

30%

24%

12%

62%

AA

NAB 2028

-1%

17%

5%

18%

17%

12%

A

Areal Bank 2028 (SP)

4%

8%

9%

18%

-9%

29%

A

ESB 2034

-12%

-14%

6%

-10%

-22%

15%

A

Gecina 2033

-19%

-2%

0%

-6%

16%

8%

A

Prologis 2034

6%

-2%

9%

-6%

16%

33%

A

SBAB 2027

4%

0%

34%

5%

0%

120%

A

Nordea 2027 (SNP)

-7%

2%

8%

7%

26%

124%

A

Segro 2026

-17%

-9%

-9%

-33%

14%

-37%

A

Segro 2030

-13%

-4%

-3%

-4%

0%

-18%

A

Bank of China 2025

9%

-8%

16%

20%

31%

37%

A

TenneT 2026

-11%

-9%

15%

6%

4%

10%

A

TenneT 2029

-8%

-10%

12%

-4%

3%

8%

A

TenneT 2033

-5%

28%

7%

0%

19%

9%

A

TenneT 2042

-6%

-5%

7%

-10%

-3%

9%

A

ASML 2032

11%

15%

-1%

5%

4%

-4%

A

Prologis 2031

0%

1%

3%

2%

6%

9%

A

Stedin 2030

-3%

-9%

-7%

13%

6%

10%

A

SBAB 2025 (SP)

-14%

2%

-4%

44%

30%

54%

BBB

VGP 2027

-3%

-2%

5%

2%

-1%

31%

BBB

VGP 2030

-1%

-4%

6%

3%

0%

30%

BBB

E.ON 2034

1%

-16%

7%

11%

-29%

20%

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative11

Continued
Rating
Group
EUR

USD

1 week change
Bond

Green Bond

VanillaBasket28 day change
CorrespondingiBoxx index

Green Bond

VanillaBasketCorrespondingiBoxx index

BBB

Logicor 2034

0%

-2%

7%

7%

16%

20%

BBB

ICADE 2030

-3.8%

-3.5%

6%

3%

0%

19%

BBB

CTP 2026

-3%

-9%

3%

-3%

14%

9%

BBB

NE Property 2030

-3.54%-3.53%

3%

-3%

0%

16%

BBB

Acciona 2032

-10%

-14%

1%

-12%

-15%

18%

BBB

P3 Group 2025

-5%

-9%

-1%

-3%

14%

17%

BBB

P3 Group 2029

-1%

2%

0%

5%

10%

19%

BBB

Thames 2028 (SS)

-7%

-14%

6%

-9%

-15%

55%

BBB

Thames 2032 (SS)

-1%

-14%

7%

-6%

-15%

47%

BBB

Iberdrola 2032

-23%

-14%

-3%

-61%

-15%

-17%

BBB

EDP 2029

-16%

1%

-3%

-28%

7%

-13%

BBB

Vonovia 2032

-14%

3%

-4%

-36%

9%

-13%

BBB

E.ON 2025

-33%

-8%

-12%

-37%

-10%

-5%

BBB

E.ON 2031

-23%

-8%

-9%

-20%

-4%

-9%

BBB

UPM 2029

3%

-1%

5%

23%

-4%

4%

BBB

RWE 2026

-1%

-12%

5%

-6%

15%

9%

BBB

RWE 2030

-1%

-6%

5%

-8%

2%

5%

BBB

ABN Amro 2032 (SNP)

-12%

-4%

-5%

4%

9%

6%

BBB

ABN Amro 2032 (SNP)

-9%

-5%

-6%

16%

8%

13%

BBB

Orsted 2028

-1%

0%

10%

4%

5%

30%

BBB

Orsted 2033

-2%

-4%

6%

3%

-8%

13%

BBB

VW 2025

3%

-8%

8%

-5%

-17%

11%

BBB

VW 2027

1%

-3%

6%

-4%

-20%

9%

A

SMFG 2029

0%

6%

6%

2%

9%

21%

A

Agri Bank of China (HK) 2025

-1%

14%

10%

31%

53%

19%

A

PSEG 2032

-5%

6%

-2%

-25%

-18%

-12%

A

Bank of China (Sing) 2025

-31%

40%

4%

-27%

58%

17%

A

CCB (London) 2025

-32%

40%

1%

-23%

58%

-10%

A

ICBCAS (HK) 2025

-26%

40%

-14%

-55%

58%

-2%

A

Bank of China (Ffurt) 2025

15%

40%

13%

14%

58%

21%

AA

Korea East-West Power 2025

-18%

1%

-5%

-7%

-24%

-6%

BBB

Sonoco 2032

5%

-3%

3%

15%

-3%

14%

BBB

INRCIN 2032

-1%

-5%

2%

-1%

6%

10%

BBB

Alexandria RE 2034

2.4%

10%

2.2%

18%

22%

16%

BBB

Verizon 2052

2%

-2%

5%

1%

-2%

10%

BBB

Welltower 2032

-2%

10%

-5%

2%

22%

16%

BBB

Equinix 2032

-2%

10%

-1%

11%

22%

18%

BBB

Shinhan Bank 2032

-5%

40%

9%

-7%

58%

22%

BBB

Jabil 2027

6.4%

6.3%

7%

7.8%

8.2%

21%

BBB

Industrial Bank (HK) 2025

-35%

40%

4%

-21%

58%

-3%

BBB

NXP 2033

3%

0%

5%

-6%

-7%

-3%

CoveredLBBW 2025 (CO)

14%

10%

N.A

-2%

10%

N.A

SSA

HK Airport 2027

-15%

0%

13%

-15%

16%

22%

SSA

EIB Korea 2032

8%

-11%

9%

22%

6%

18%

SSA

JBIC 2027

-8%

0%

2%

-7%

16%

-2%

SSA

JFM 2025

7%

-84%

-2%

-1%

-25%

3%

SSA

KEPCO 2025

-15%

-16%

1%

-9%

-35%

18%

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative12

Bonds generally often deliver price tightening in
the immediate secondary market since investors
may want to increase their position or open a
position in a bond they did not get allocated.
Timing is an important factor, because bondindices rebalance at each month end. Therefore,
if bonds are issued early in the month, there
could be an opportunity for managers to add
some off-benchmark performance before bonds
are added to indices. Once bonds enter indices,
except for credit events, liquidity can quickly
evaporate, and accurate spreads are quoted
on a bilateral basis. Our consideration of thesecondary market consequently only extends toone month after the pricing date of each bond.
To contextualise spread movements, we
compare each green bond to two alternatives.
Firstly, we match each green bond to a vanillabond or a basket of vanilla bonds sharing
similar characteristics, issued in the samequarter as the green bond. This comparison
is a proxy for the opportunity cost to theinvestor. Secondly, we compare each green
bond to a corresponding index to monitor theirperformance against the market.
It is always tricky to find bonds sharing similar
characteristics to green bonds priced in the samequarter, and this process presented additional
challenges as vanilla issuance in H1 declined
in some sectors. In the vanilla baskets, theperformance of individual bonds is measured
from the issue date of each bond. Since it isunlikely that the vanilla bonds are priced on
the same day as the green bond, this could
be expected to impact comparisons in thesecondary market particularly when markets arevolatile. This exercise is designed to illustrate
what an investor could have otherwise done with
their money in the vanilla bond market during
the same period. In H1, volatility sometimes
benefited the green bond, sometimes it did not.

After seven days
• 51% of green bonds had tightened by morethan their vanilla baskets: 47% of EUR and
61% of USD green bonds.
• 81% of green bonds had tightened by morethan their corresponding index: 80% of EUR
and 77% of USD green bonds.
Compared to H2 2021, a lower percentage ofgreen bonds tightened more than their vanillabaskets (53% in H2) and a higher percentage
tightened more than corresponding indices (70%in H2). Fewer individual green bonds tightenedon the break (64% compared to 75% in H2). Thisis expected given the volatility seen in H1.

26 out of 64 EUR green bonds had tightened against
both their vanilla basket and corresponding index
after a week. Among them were nine of the 14 EUR
real estate deals: Gecina 2033, Segro 2026, Segro
2030, Prologis 2031, VGP 2027, Icade 2030, NE
Property 2030, P3 Group 2029, and Vonovia 2032.
Vonovia 2032 tightened by 20bps (14%) a week
after pricing. The bond experienced higher bookcover and spread compression during bookbuilding compared to its vanilla basket but priced
with a normal new issue premium.
Seasoned green bond issuer Iberdrola priced a
EUR1bn USD1.1bn ten-year green bond in March(Iberdrola 2032). The bond did not beat its
vanilla basket on spread compression and booksize and priced with a normal new issue premium.
However, the bond tightened by 14bps (-23%)
seven days after pricing, more than both its vanillabasket (-14%) and corresponding index (-3%).
In USD, 12 out of 24 green bonds had
tightened against both their vanilla basket andcorresponding index after a week (see NB1).
These included seven of the eight bank issuers:
Agri Bank of China (HK) 2025, ICBCAS (HK)2025, Industrial Bank (HK) 2025, Bank of
China (Sing) 2025, and CCB (London) 2025.
China Construction Bank Corp (CCB (London)2025) priced a (USD1bn) three-year bond in
May. Climate Bonds could not obtain booksize data for this bond, but it tightened 43bps
in the primary market. There were not enoughbonds to build a yield curve, so a greenium
could not be determined. The bond tightenedby 15bps (-32%) seven days after pricing,beating both its vanilla basket (40%) andcorresponding index (1%).
NB1: Climate Bonds could not obtain data for thecorresponding index of LBBW 2025 (CO).

After 28 days
• 48% of green bonds had tightened by morethan their vanilla baskets: 47% of EUR and
57% of USD green bonds.
• 77% of green bonds had tightened by morethan corresponding indices: 75% of EUR and
86% of USD green bonds
The 28-day metrics for H1 2022 were similar to thoseof H2 2021 (which in turn were not vastly different
from H1 2021): 48% of bonds tightened more thantheir vanilla baskets against 52% in H2, while 77%
tightened more than corresponding indices in H1
against 73% in H2. 35 green bonds tightened morethan both vanilla baskets and corresponding indices.

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

In EUR, several utilities performed very well 28
days post pricing. Iberdrola, already mentioned
above, had tightened by 61% after 28 days. E.ON
priced a EUR1.5bn (USD1.7bn) dual tranche deal
split equally between 2026 and 2031 maturities.
Both bonds accumulated larger book cover thanvanilla baskets, but only the 2026 achieved larger
spread compression. The bonds priced with a
new issue premium but had tightened by 33%
and 23% seven days after pricing. After 28 days,the 2026 had extended that tightening to 36%
while the 2031 had retraced slightly to 20%. Bothbonds performed better than their vanilla baskets
and corresponding indices in the secondary market.
In USD, 13 out of 24 green bonds achieved
greater spread tightening compared toequivalents in the first month. Indian Railway
Finance (INRCIN 2032) priced its first greenbond, a USD500m, in January. The bond was
Certified under the Climate Bonds Low Carbon
Transport Standard and attracted a book coverof 2.6 times deal size (the vanilla basket was 3.5
times) while the spread tightened by 25bps inprimary (same as the basket). The bond hadtightened by 1% after a month, beating its basket(6%) and corresponding index (10%).
In H1 2022, secondary market performance
depended greatly on timing. Some bonds had
performed well after seven days but reversed
those gains 21 days later, and the opposite wasalso true. The vanilla baskets remain a goodproxy to demonstrate what else an investor could
have bought in the same quarter, but the index
comparisons are probably a better illustration ofrelative performance when markets are volatile,
because the timing is precisely matched.
Methodology notes: 1. Vanilla baskets
comprise the closest possible matches basedon the considerations highlighted on page 23
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 of which can
influence the behaviour of a bond. Each bond istherefore compared to an index sharing similar
characteristics; for example, VW 2025 was matchedwith the iBoxx EUR Corporates BBB 1-3 index.
Seven calendar days include five data observations.
28 calendar days include 20 data observations.

13

6. Green bond ETFs
At the end of H1 2022, there were 13 EUR or
USD green bond ETFs with combined fundassets of USD1.7bn, a slight decline of 3% on
the prior period. The prior observation period
was the first time we had seen any net outflows
from the individual funds in our sample, andin H1 2022 ten out of 13 funds suffered fromnet redemptions, while the remaining threedemonstrated growth. The strongest growthcame from the Lyxor Green Bond ESG Screened

Fund, which expanded its total fund assets by
339%. This ETF is based on the Solactive Green
Bond ESG EUR USD IG TR Index, which in turnis informed by the composition of Climate
Bonds’ GBDB. Intuitively, one would expect
fixed income to be out of favour in a rising rateenvironment, hence the additional capital thatsome of the green bond ETFs have attracted is apositive outcome.

Currency

Index

Launchdate

EUR

Solactive Green
Bond Index

01/02/2017

USD

S&P Green Bond
Select Index

USD

Size atlaunchInclusion in the Climate Bonds GBDB isdetermined according to the Climate Bonds
Green Bond Methodology. This was updated
in July 2022, and can be dowloaded atwww.climatebonds.net/market/green-bonddatabase-methodology .

Local 31
Dec 2021

USD 31
Dec 2021

Local 30
June 2022

USD 30June 2022

Changeon period

EUR5m

654.1

744.8

533.9

558.5

-25.0%

01/03/2017

USD5m

103.7

103.7

82.6

82.6

-20.4%

Bloomberg Barclays
MSCI Global Green
Bond Select Index

01/11/2018

USD25m

273.1

273.1

269.1

269.1

-1.5%

EUR

Bloomberg Barclays
MSCI European
GB Issuer Capped EUR
Index

01/11/2018

EUR20m

19.3

22.0

17.3

18.1

-17.4%

EUR

Bloomberg Barclays
MSCI Euro Green Bond
Index

01/04/2019

EUR10m

131.7

150.0

81.3

85.1

-43.3%

EUR

Solactive GreenESG Bond EUR
USD IG TR Index

01/10/2019

EUR4m

33.3

37.9

158.6

166.3

339.0%EUR

JP Morgan ESG Green
Bond Focus Index

01/02/2021

EUR23m

23.3

26.5

8.1

8.5

-67.8%

EUR

Bloomberg MSCIEuro Green Bond SRI
including Nuclear
Power Index

25/03/2021

EUR30m

45.4

51.3

48.4

50.7

-1.1%

CAD

S&P Green Bond U.S.
Dollar Select Index

01/06/2021

CAD6m

6.2

4.9

5.5

4.3

-12.2%

EUR

Bloomberg MSCIEUR Corporate
and Agency Green
Bond Index

24/06/2021

EUR20m

143.7

162.8

148.1

155.3

-4.6%

USD

Bloomberg MSCI USD
Corporate and Agency
Green Bond Index

24/06/2021

USD17m

106.4

106.4

233.4

233.4

119.4%

EUR

Solactive Euro
Government Green
Bond Index

01/07/2021

EUR48m

52.1

59.3

63.9

66.9

12.8%

EUR

Solactive EUR USD IG
Corporate Green Bond
TR Index

24/08/2021

EUR50m

51.6

58.8

46.2

48.4

-17.6%

1747.4

-3.0%

Total

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

1801.314

7. Spotlight: Sovereign Green Bond ClubNew sovereign green bonds came from debut
green bond issuer Austria (EUR4bn/USD4.3bn),
France which priced its first inflation-linked
green bond (EUR4bn/USD4.3bn), and Indonesia
which issued its fifth USD green bond
(USD1.5bn) in May.

1.5

1.0

0.5

0

Source: Bloomberg

Five sovereign green bonds were reopened in H1
2022. The French and German green bonds weretrading inside their conventional curves in thesecondary market and hence achieved a greenium.

When France reopened the 2044 green bond in Feb it was inside
the vanilla curve

Yield as 0f 03/02/2022

At the end of H1 2022, the Climate Bonds GBDB
included sovereign green bonds from 24 issuerswith a combined volume of USD212bn. This figure
includes USD34.4bn added in H1 2022, of which
USD26.3bn was either USD- or EUR- denominated.
USD16bn of that amount came from taps, while
USD10.3bn was from three new green bonds.

-0.5

-1.0
0

10

20

30

40

50

Duration
Green bonds

Vanilla bonds

Five green bonds were reopened in H1 2022
IssuerMaturity

Date of tap

Dutch State Treasury Agency

15/01/2040

14/06/2022

EUR5bnUSD5.2bn

EUR15.7bn

USD17.3bn

Federal Republic of Germany

15/08/2030

22/02/2022

EUR1.5bn

USD1.7bn

EUR8.0bn

USD9.3bn

15/08/2031

04/05/2022

EUR1.5bn

USD1.6bn

EUR8.0bn

USD9.1bn

15/08/2050

01/06/2022

EUR4bnUSD4.5bn

EUR10.0bn

USD11.9bn

25/06/2044

03/02/2022

EUR2.8bn

USD3.18bn

EUR14.2bn

USD16.8bn

EUR15bn

USD16.2bn

Republic of France

Size of tap(local)Total

Size of tap(USD)

Size as of
30/06/2022 (EUR)

Size as of
30/06/2022 (USD)

Sovereign Scorecard H2 2021
Austria

H1 2022
Pricing date
Tenor
Amount issued

FranceIndonesia

1.85% 23/05/2049

0.1% 25/07/2038

4.7% 06/06/2032

24/05/2022

25/05/2022

24/05/2022

27 Years

16 Years

10 Years

EUR4bn/USD4.3bn

EUR4bn/USD4.3bn

USD1.5bn

1

3

5EUR4bn/USD4.3bn

EUR49bn/USD56bn

USD3.75bn

1.6%

2.6%

0.8%

Total green bonds
Number of bonds
Total size of green bonds% of total sovereign debt **Market data from Bloomberg based on BICS Level 1 = sovereigns, residual maturity of at least one year as of August 2022

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

15

Austria

FranceIndonesia

Austria became the 13th
member of the EU27 to join
the Sovereign Green BondClub when it priced its firstgreen bond in May 2022. The
EUR4bn (USD4.3bn) deal had atenor of 27 years.

France added an inflationlinked green bond in May
2022, the first sovereignissuer to do so. The EUR4bn(USD4.3bn) deal attracted
an order book of EUR27.5bn
thanks to growing investor concerns over green
transition and rising inflation. The bond isindexed to the European consumer price index,
such that coupon payments offer investors
protection from rising inflation.

Indonesia priced its largest
global Sukuk in May 2022,
comprising a vanilla five-year
tranche worth USD1.75bn anda USD1.5bn green ten-year.
The USD deal attracted hugeinvestor interest and the green tranche
accumulated bids from 225 investors,
amounting to USD5.1bn and covering thebook 3.4 times. The spread tightened by
40bps during book building and priced with anormal new issue premium. In the secondary
market, the bond had tightened 13% after 7
days, and 17% after 28 days.

The bond attracted bids reaching EUR25bn,covering the transaction by 6.25 times. The
spread tightened by 3bps in the primary market,
and the Austrian Debt Management Officenoted a greenium of 2.5bps. Green investor
participation was strong with 70% of allocations
going to investors describing themselves as
green or socially responsible.
Austria has identified over EUR5bn of green
expenditures per year, so it can reasonably
be expected to return to the market. Its green
financing framework was published in April 2022
and included eight eligible project categories
consistent with the six environmental objectivesof the EU Taxonomy.

The bond priced slightly outside the FRTR
inflation-linked curve, but after a month had
moved inside. The order book included around230 names, and more than half of the bond wasallocated to green investors.

Indonesia has now priced five USD sovereign
green Sukuk with a total volume of USD5bn.

France was the largest sovereign green bondissuer at the end of June 2022 with EUR49.4bn(USD56bn) outstanding, spread over two bullet
bonds and the new inflation-linked deal.

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

16

The EU prices EUR11bn of green bonds• Confirm the European Commission’scommitment to sustainable finance;

In May 2022, a EUR6bn 2043 was priced. The
bond attracted bids of EUR78.25bn, covering
the transaction by 13 times. This is the second
highest book cover recorded by Climate Bonds(Prologis 2032 attracted a book cover of 14 times
in June 2020). The spread tightened by 2bps andthe bond priced on the yield curve; after one
month, the bond had moved inside the curve.

1.4• Further boost the green bond market andserve as an inspiration to other issuers;

1.2
1.0
0.8
Yield as 0f 05/04/2022• Allow investors to diversify their portfolio ofgreen investments with a highly rated liquid
asset, thereby potentially accelerating avirtuous circle of sustainable investments;

0.4
0.2
0
5

10

15

20

25

30

10

15

20

25

30

Duration

EU 2048 EUR -greenium
3.0
2.5
2
Yield as of 21/06/2022

EU benchmarks are large, liquid transactions
included in relevant broad market bond indicesand typically attract broad investor interest.
Among the 14 benchmarks priced in 2021,
book cover ranged from 3.3 times to 13.8, withan average of 8.7 times. A 15-year EUR2.17bn
EU SURE (Support to mitigate Unemployment
Risks in an Emergency) social transaction
attracted 16.1 times book cover in March 2022.

0.6

0• Strengthen the role of the European Union andof the Euro in sustainable finance markets.
Under the NextGenerationEU green bondframework, the funds will be used for ninebroad categories of expenditure, including
energy efficiency, clean energy, and climatechange adaptation, among others.

In late June, a third EU green bond was priced,
a EUR5bn 2048. Market conditions were alittle more volatile, but the bond attracted
book cover of 6.4 times and tightened by 2bps
during book building. The bond priced inside
its own yield curve, achieving a greenium,
and remained inside the vanilla curve in thesecondary market. 30% of the transaction was
allocated to investors describing themselves
as green or socially responsible.

EU 2043 EUR - on the curve• Help the European Commission access awider range of investors;• Bring new highly rated and liquid green
assets to the market, giving access to green
investments for a wide range of investors;

Around 70% of the bond was allocated toinvestors describing themselves as green orsocially responsible.

Source: Bloomberg

The European Commission has stated thatit expects its green bond programme tobring advantages for the EU and support
the development of the sustainable financemarket from several angles:5

The EU priced its first green bond in October
2021. The 2037 maturity was issued with an initialsize of EUR12bn, and by the end of H1 had beentapped twice to reach EUR17bn (USD19.8bn).
During H1 2022 the EU issued two more deals.

1.5
1.0
Source: Bloomberg

In 2020, the EU announced its EUR750bn
NextGenerationEU development programme
to combat the medium-term impacts of the
COVID-19 pandemic. Up to EUR250bn of thisamount will be sought from the green bondmarket, which will make the EU the largest green
bond issuer globally. At present, Fannie Mae isthe largest individual issuer with a cumulative
volume of USD101bn by end of H1 2022.

0.5
0
0

5

Duration
Vanilla bonds

Seasoned green bonds

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

New issue green bond17

8. Spotlight: Sustainability-linked bond pricing in the primary market.
Summary of findings
Climate Bonds examined qualifying
sustainability-linked bonds (SLBs) issued in 2021
and H1 2022 to determine whether there wasevidence of a greenium. Within the sample of 37
SLBs, 14 achieved a greenium comprising 11 USD
denominated, and three EUR. Eleven of the SLBs
obtaining a greenium were priced in 2021, andthree in 2022.

Rapid growth for SLBs
The SLB market has grown rapidly since Chinese
infrastructure company Beijing Infrastructure
Investment Co priced the first instrument in 2018with a coupon step-up linked to the achievementof social key performance indicators (KPI’s). By
the end of H1 2022, Climate Bonds had recorded
SLB volumes of USD176.6bn.

Methodology
Climate Bonds analysed SLBs to determine
whether they could help issuers achieve better
pricing outcomes in the primary market. For wantof better ideas, Climate Bonds applied the same
methodology as it uses for regular green bondpricing analysis.
Parameters for consideration were:• Original amount sold: at least USD500m• Currency: EUR or USD

Hallmark alignment• Pricing date: 01 January 2021 – 30 June 2022
53 USD bonds and 88 EUR bonds met
these requirements.
Climate Bonds constructed a yield curve foreach SLB using vanilla bonds of the same issuer
sharing similar characteristics (minimum size,
same seniority, no other thematic label, same
country of risk etc.), issued no earlier than 2014.
The analysis could only happen if there was one
vanilla bond with a shorter duration, and one
with a longer duration than the SLB.
Climate Bonds was able to construct yield
curves for 37 SLBs.
One exception to this methodology was the Tesco
2029, where the bond with longer duration had
EUR235m (USD315m) outstanding at the time of
the analysis.

• Credible Sustainability Performance
Targets (SPTs) tied to all greenhousegas (GHG) emissions (Scope 1, 2, & 3)
• Be calibrated ambitiously in line withsector-focused Paris aligned targets

They typically include a financial
mechanism to incentivise theachievement of objectives, such asa coupon step-up activated after astated period if the objectives are
not met.

Hallmark 2 & 3• Clear plans to achieve targets,
especially regarding operationalchanges, financing plans, andgovernance structures

When sustainability targets arecalibrated appropriately, SLBs canbe helpful in mobilising capital for
entity transitions. Entities can issue
both SLBs and UoP instruments.
If issuers intend to use SLBs astransition finance instruments, theyshould demonstrate alignment with
Climate Bonds Five Hallmarks for
Credible Transition, listed below.6

Hallmark 5• Annual independently verified
external reporting regarding actions
taken and performance against SPTs

Can SLBs help issuers achieve a greenium?
The sample is described below along with the outcomes.
EUR• Thematic label: SLB label• Maturity type: fixedHallmark 1

SLBs are general purpose debt
instruments tied to improved
sustainability performanceat the entity level.

Pricing period

USD

Greenium

NIP

Greenium

NIP

H1 2021

1

3

4

0

H2 2021

0

5

6

2

H1 2022

2

8

1

5

The SLBs found to have achieved a greenium were as follows
Pricing dateCurrency

20/01/2021

EUR

0.75

Tesco

2029

15/04/2021

USD

0.60

China Construction Bank
(HK)

2024

06/05/2021

USD

0.50

Orbia Advance Corp

2031

24/06/2021

USD

1.00

Enbridge2033

28/06/2021

USD

1.00

Suzano (Austria)

2032

07/07/2021

USD

1.25

Enel

2026

07/07/2021

USD

1.00

Enel

2028

07/07/2021

USD

1.00

Enel

2031

08/09/2021

USD

0.50

Suzano (Austria)

2028

28/09/2021

USD

0.75

Analog Devices Inc

2028

06/12/2021

USD

1.00

Newmont Corporation

2032

10/01/2022

EUR

1.25

Enel

2025

09/03/2022

EUR

0.50

A2A SPA2028

12/04/2022

USD

0.60

John Deere

2029

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

Original
amount (local)

Issuer Name

Maturity18

1. Tesco is a very relatable name and prior to its
SLB, the only other supermarket to price a EUR
benchmark with a thematic label was Dutch
multinational Ahold Delhaize with a EUR600m
6-year sustainability bond in issued in 2019.
2. The SLB was the largest bond on Tesco’s yield
curve at EUR750m (USD908m) when it as priced.
The longest bond (2047) on the curve had been
partially redeemed and did not reach benchmark
size (EUR235m/USD315m).

More USD SLBs achieved a greenium
Extending the analysis to include USD denominated
SLBs and into 2022, broadened the picture
considerably. Climate Bonds determined that ten out
of 12 USD SLBs priced in 2021 achieved a greenium
ranging from -4bps to -34bps. This reversed in
2022 as only one out of six USD SLBs achieveda greenium, which is expected in an economic
environment which does not favour fixed income
investments Among the EUR bonds, two out of
ten achieved a greenium in 2022.
This analysis is based on a small sample, but
the results are consistent with Climate Bonds
understanding of the sustainable debt market
and investor appetite.
Credible SLBs present opportunities for investors
to allocate capital to meet their sustainable
investment targets and include a broader range
of issuers, but the supply of large benchmark UoP
green bonds with adequate clarity and transparency
is consistently increasing in EUR. EUR investors are
comfortable with UoP green bonds and prefer themwhere available, though opportunities for sector
diversification remain scant.
The structure of an SLB would present a conundrum
for a dark green investor. While the buyer may benefit
from a coupon step up if the KPIs were not achieved,a dark green investor would become a forced seller,
and this could impact the price of the bond for
all types of investors. Dark green EUR investors
appear to be exercising extreme caution around
SLBs with some avoiding them completely.
In USD however, there have been fewer investors
with dedicated green bond mandates so far.
Among the relatively low number of USD UoP
green bonds with adequate transparency, most

2.5

1.5
1.0
0.5

Source: Bloomberg

Yield as of 20/01/2021

2.0

0
-0.5
0
Duration

2

Vanilla bonds

4

6

8

10

12

14

Green bondoriginate from non-US financial corporates. US
investors like familiar, relatable names from a
broad range of sectors, and the USD SLB market
has contributed to that.

Outlook
The results of this analysis suggest that SLBs canhelp issuers to achieve pricing benefits in the
primary markets. For now, this seems to be moreprevalent among USD denominated instrumentsfrom issuers which cannot easily access the UoP
market because they do not have the appropriate

Newmont Corporation
Newmont Corporation is the world’s largest
gold mining company, with global operations
extending to the production of copper, silver,lead, and zinc. The American company started
its sustainability journey in 2001 as a founding
member of the International Council on Metals
and Mining and is developing a roadmap toachieve its goal of reaching net zero by 2050.
In December 2021, Newmont became thefirst mining company to price an SLB, witha USD1bn deal maturing in 2032. Newmontachieved one of the single largest pricing benefits
in our sample, exhibiting a greenium of -31bps.
Three factors may have contributed
Newmont’s SLB greenium

expenditures or assets. It is a very positive
sign that investors are willing to support thetransition strategies from a broad range ofsectors. To grow the market credibly, SLBs
should always have ambitious KPIs and SPTs
calibrated in line with sector-specific pathways.
Where a financial incentive mechanism isincluded, it should be meaningful. The current
macroeconomic and geopolitical issues have
impacted all types of debt instruments, andClimate Bonds will continue to monitor SLB
pricing as the market develops.

1. The step-up penalty is 50bps. While this is
still quite low, it is double that of all except
three other SLBs in our sample
2. Prior to December 2021, Newmont had arelatively low USD4.6bn of outstanding vanillabonds, and its previous vanilla bond was
priced in March 2020
3. Newmont is a relatable name and the only
gold producing member of S&P500
Further, when assessed against Hallmark 1of Climate Bonds Five Hallmarks for Credible
Transition, Newmont’s SLB is among the mostcredible in our sample. Its SLB targets cover all
three scopes and are in line with TPI’s 1.5-degree
pathway for Diversified Mining. Newmont is
the only SLB in our sample to address Scope 3
emissions, and it is particularly pertinent as they
comprise 60% of the company’s total emissions.

Newmont 2032 USD SLB - greenium
3.0
2.5
2.0
1.5
1.0

Source: Bloomberg

Beyond this, two factors may have contributed to
Tesco’s SLB greenium:

Tesco 2029 EUR SLB - greenium

Yield as of 06/12/2021

An initial analysis of EUR SLBs priced in 2021
revealed only one greenium, which was for the
Tesco 2029 priced in January of that year. Tesco
achieved the largest outright greenium in thesample (-42bps) Tesco set a KPI to reduce Scope
1 and 2 GHG emissions. Stated sustainability
performance targets (SPTs) were to reduce Scope 1
and 2 emissions by 60% by 2025 and 85% by 2030
against a 2015 baseline, which were consistent witha trajectory to 100% by 2050. When the SLB was
priced, Tesco had already achieved a 50% reduction
towards its target, so Climate Bonds was sceptical.

0.5
00Duration

2

Vanilla bonds

Green bondGreen Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

4

6

8

10

19

Enel has not priced any new green EUR
bonds in the current decade. The green curve
comprises bonds issued in 2017 (EUR1.25bn/
USD1.3bn), 2018 (EUR1.25bn/USD1.5bn), and2019 (EUR1bn/USD1.1bn) which is not recent,but the benchmark sizes should help them toretain a degree of liquidity.
While Enel’s Scope 1 targets (used in this setof SLBs) are very ambitious and in line withboth Science Based Target Initiative’s (SBTI)
Absolute Contraction Approach and Transition
Pathway Initiative’s (TPI) 1.5-degree pathway
for electric utilities, Scope 3 emissions
comprise 55% of total emissions and are
not included. Of its Scope 3 emissions, 32%come from the sale and distribution of fossil
gaswhich Climate Bonds does not endorse.
Climate Bonds applauds Enel’s consistent useof the SLB structure instead of vanilla debt but
encourages it to be more material with its KPIs.

08/06/2021

EUR

Original
size (local)

Maturity

Outcome

1.00

2027

New issue premium
New issue premium

08/06/2021

EUR

1.25

2030

07/07/2021

USD

1.25

2026

Greenium

07/07/2021

USD

1.00

2028

Greenium

07/07/2021

USD

1.00

2031

Greenium

21/09/2021

EUR

1.25

2026

New issue premium

21/09/2021

EUR

1.00

2029

New issue premium

21/09/2021

EUR

1.25

2034

New issue premium

10/01/2022

EUR

1.25

2025

Greenium

08/06/2022

USD

1.00

2032

New issue premium

ENEL 2026, 2028, 2031, and 2041 SLBs USD - greenium
3.0

2.0

1.0

Source: Bloomberg

In September 2021, Enel priced three EUR
SLBs, they priced outside the existing SLB
curve, the green curve, and the vanilla curve,
exhibiting normal new issue premia. We also
observe that Enel’s green curve was inside
the existing SLB curve. This suggests thatat this time, EUR investors preferred the useof proceeds format. In January 2022, Enelretuned to the market with a trio of EUR SLBs
maturing in 2025, 2031, and 2035. Only the2025 could be plotted on the vanilla curve,
and achieved a greenium, but exhibited a newissue premium when compared to the green
and SLB curves. The longer dated bonds could
only be compared to the existing SLB curve,
and both priced outside it.

Currency

0
0

2

4

6

8

10

12

14

12

14

Duration

Enel 2026, 2029, and 2034 SLBs EUR - new issue premium
0.8
0.4
0
Source: Bloomberg

In July 2021, Enel priced four SLBs in USD.
These bonds priced with a greenium tothe vanilla curve. Enel has no green bonds
outstanding in USD.

Pricing date

Yield as of 07/07/2021

Enel is the largest issuer in the SLB market andClimate Bonds was able to plot at total of ten
Enel SLBs priced in 2021 and H1 2022 in EUR
or USD.

Yield as of 21/09/2021

USD investors liked Enel SLBs

-0.4
0

2

4

6

8

10

Duration

ENEL 25, 31, & 35 SLBs EUR- new issue premium to existing
SLB curve + green curve
1.2

0.4
0

Source: Bloomberg

Yield as of 10/01/2021

0.8

-0.4
0

2

4

6

8

10

12

14

Duration
Vanilla bonds

Seasoned SLBs

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

Green bonds

New SLBs

20

9. Spotlight: Green bonds exhibit better pricing dynamics in the secondary market
Bid/offer spreads are narrower for green bonds
16

Bid/offer spread (BOS)

The purpose of this spotlight is to determine
whether green bonds offered investors a different
liquidity profile in the secondary market,
compared to vanilla equivalents in H1 2022.
The data used in this analysis was provided by
Climate Bonds’ partner Tradeweb. Tradeweb
monitors trading activity of all types of bonds
including those bearing thematic labels. Climate
Bonds conducted analysis of secondary market
trading of green bonds in H1 2021 and concluded
that a limited supply of green bonds compared tovanilla ones facilitated better pricing dynamics.7

14

Green Bond (Aligned)

12Green Bond (Non-aligned)

10

Vanilla8
6
4

For this spotlight, Climate Bonds analysis
was limited to bonds sharing the following
characteristics.

January2022

February
2022

March
2022

Turnover and execution quality• Sector classification: utilities, real estate

Turnover is the volume traded in each period
divided by the outstanding amount of each bond.

• Pricing date: between 01/01/2021 and
31/12/2021• Currency: EUR• Original size: at least EUR500m• Credit quality: lowest credit ratingfrom Moody’s, S&P, or Fitch must be
investment grade• Seniority rank: senior unsecured• Coupon: fixed• No thematic label except green. Social,sustainability, and sustainability-linked bonds
were excluded from this analysis.
The resulting sample was split into three
categories: green (aligned), green (non-aligned),and vanilla. Those in the green (aligned) category
are bonds labelled green by the issuer andincluded in the Climate Bonds GBDB. The green(non-aligned) category includes bonds labelledgreen by the issuer but not included in the Climate
Bonds GBDB. The sample is described below
While vanilla is is the biggest category, the green(aligned) category is sufficiently large for the data
to be meaningful.

Overall, the sample of green bonds (aligned)
exhibited the largest turnover during the first six
months of 2022. This confirms that green bonds
can, and do trade actively in the secondary market,
offering flexibility to investors. The sample of green
bonds (non-aligned) exhibited the lowest turnover
during the period. The sample includes just fourbonds, but the difference between the two numbers
points to the importance of selecting appropriate
activities for inclusion in the eligible use of proceeds
and disclosing them with adequate clarity.
Category

TurnoverGreen (aligned)

0.057

Green (non-aligned)

0.031

Vanilla0.042

Bid/offer spreads are narrower
for green bonds.
The bid/offer spread (BOS) is the difference
between the composite dealer bid price andthe composite dealer ask price, as calculated by
Tradeweb. A narrower BOS suggests there is aneasier ability to trade in or out of the bond.

Sample categories
Category

Number ofbonds

VolumeEUR bn*Average size
EUR bn*Years tomaturity at
issueGreen (aligned)

41

24.1

0.6

9.2

Green (non-aligned)

4

3.3

0.8

9.1

Vanilla

70

45.6

0.7

9.0

Total or average
Liquidity quality score

115

72.9

0.6

9.1

Category

Average of score

Average of bid-score

Average of ask-score

Green (aligned)

4.3

4.8

4.3

Green (non-aligned)

7.3

5.0

7.0

Vanilla

4.7

4.8

5.1

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

April
2022

May
2022

June
2022

Source: Tradeweb

The average BOS was narrower for green(aligned) bonds than vanilla on every single day
in H1 2022. The difference was negligible forthe first two months of the year, but from March
onwards, the BOS widened for all categories
of bonds. The widening was less aggressive
for green (aligned). This confirms that on
average, the market for green bonds is more
liquid compared to that of vanilla counterparts
offering buyers more flexibility to sell in thesecondary market.

Liquidity quality score
The liquidity quality score (LQS) is a dual-sided
indicator of the liquidity of a bond leveraging
proprietary Tradeweb information and machinelearning techniques. It indicates the potential
ease of trading the bond and cost of liquidity.
Overall, the LQS of green bonds (aligned) did notexhibit large differences compared to vanilla bonds.
However, the ask liquidity was lower for green
bonds compared to the vanilla sample whichsuggests that green bonds were more difficult tobuy. This is expected given there are fewer green
bonds compared to vanilla, and buyers of green
bonds tend to be stickier, wanting to hold thebonds until maturity.

Summary
The evidence presented above suggests that
EUR utility and real estate bonds priced during2021 in the green (aligned) category offeredbetter liquidity compared to those in the green(non-aligned), and vanilla categories in H1 2022.
It seems that on average, green bond positions
can be liquidated more easily, offering investors
flexibility where it is needed.
These conclusions are broadly similar to thosereached last time Climate Bonds conductedanalysis along these lines and appear to confirm
that there is still a shortage of large green bonds
with adequate transparency over the UoP. While
supply of such bonds has increased, demand has
increased by a greater magnitude.

21

10. Outlook

Bonds and interest rate rises are not friends, butduring H1 the supply of green bonds declined
just 1% on the prior period and USD236bn ofgreen bonds were added to the Climate Bonds
GBDB. Green bonds were issued in 30 currencies,
with 68% coming from deals issued in USD(USD47.4bn) and EUR (USD114.6bn).
This analysis is based on a sample of 93 bonds,
the most in any observation period so far, andincluded deals from three sovereign issuers.
80% of the volumes were EUR denominatedwith the remaining share in USD. Green bonds
in both currencies continue to perform better
than baskets of vanilla peers and corresponding
indices, on average.
Most of the USD bonds that qualified for inclusionin this paper originated from non-US domiciled
issuers (18 out of 25), highlighting the lack ofrobust supply from US issuers. In August 2022,
the Inflation Reduction Act (IRA) was signed into
law by President Biden. While some provisions
do not contribute to climate change, others
create potential opportunities for entities toissue green bonds. The IRA outlines a spending
plan of USD369bn on renewable energy andelectric vehicles, hydrogen hubs, energy efficientbuildings, and nuclear. The green bond market
can support this development and definitionsof appropriate assets are already in place or are
being designed for all these activities. The resultsof this research series have demonstrated that green
bonds priced in USD have historically performed wellon all metrics and the market is ripe for scaling.
Sovereign green bonds deliver a very clear
signal of commitment to climate ambitions andbring myriad benefits including local market
developments. Austria became the 13th memberof the EU27 to join the Sovereign Green Bond
Club. The Netherlands, Germany, and France,
all reopened existing positions in green bonds,
extending their access to cheaper financing.
The remaining 14 members of the EU must start
actively preferencing green expenditures andfund them through thematic debt to send asignal to the market and attract investment fromthe private sector.

H1 2022: 70% of green bonds were EUR or USD
120
100
80
60

USD Billions

In H1 2022, macroeconomic and geopoliticalissues overwhelmed financial markets but must
not distract from the ongoing and longer-termclimate crisis. Bonds of all types have sufferedduring the period, and this is the first time thatthe green bond market has experienced theimpacts of rising interest rates. The green bondmarket is a well-developed source of capital andClimate Bonds expects it to support the prioritisingof sustainable development, facilitating debt
financing for climate mitigation and adaptation
and resilience assets, projects, and expenditures.

40
20
0
EUR

USD

CNY

CAD

SEK

JPY

HKD

DKK

NOK

GBP

Other

Source: Climate Bonds Initiative

Two fifths of USD green bonds
qualified for analysis

Two thirds of EUR green bonds
qualified for analysis

Non-investment grade 5%

Loan
10%

Not enough data 3%
Loan 2%Tap
14%Structure
17%

Structure
9%

Included39%

Too small
17%

Source: Climate Bonds Initiative

The analysis of SLB pricing in the primarymarket suggests that the bond market isrewarding entities able to demonstrate robusttransition plans with better pricing. SLBs
can offer sustainable fixed income investors
access to a more diverse set of issuers. Climate
Bonds emphasises the need for a complete
and inclusive transition, and issuers must playtheir part by ensuring that SLBs are supported
by credible transition plans and backed byambitious targets.
Climate Bonds analysis in partnership with
Tradeweb confirms that green bonds maintainbetter liquidity in the secondary market
compared to vanilla equivalents. Considering
the volatility seen in H1 2022, this could be a very
useful aspect for investors, and may help to justify
the presence of a greenium in the primary market.

Green Bond Pricing in the Primary Market H1 2022 - Climate Bonds Initiative

Too small
6%
Included
65%

Source: Climate Bonds Initiative

More large green bonds with adequatetransparency were eligible for inclusion in thispaper than ever before, and Climate Bonds’
analysis indicates that this was well absorbed by
the market. This is a sign of a more marked shift
in investor preferences towards green bonds.
The geopolitical and macroeconomic tensions
that emerged in H1 are expected to extend into
H2 and beyond and may reasonably be expected
to make capital-raising more difficult. The greenlabel offers special appeal to investors, and thegrowing dedicated investor base continues tooffer a unique source of support.
This analysis is based on a limited number of green
bonds, chosen according to the parameters outlined
on page 23. Green bonds issued in other currencies,
structures, formats, and sizes may perform differently
from those discussed in this paper.

22

Methodology
This paper includes labelled green bonds issued
during H1 2022. Labelled green bonds meetingthe following specifications are included:• Announcement date between 1 January 2022
and 30 June 2022
• Currency: EUR or USD• Benchmark size i.e., >= USD500m• Investment grade rated• Minimum term to maturity of three years at issue• Consistent with the Climate Bonds Taxonomy
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.

Climate Bonds Initiative © September 2022
Author: Caroline Harrison

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 havebeen invested in the same quarter in which thegreen bond was issued. The number of bonds
in each basket ranges from one to ten bonds.
Bonds behave differently depending on when
they are issued and that geopolitical events canaffect bond prices from one day to the next.
This proxy was designed to circumvent the factthat vanilla bonds and green bonds with similar
characteristics are rarely issued on the same day.

Endnotes

Suggested citation: Harrison, C., Green Bond
Pricing in the Primary Market H2 2021, Climate
Bonds Initiative, September 2022

www.climatebonds.net

Contributor: Matthew MacGeoch
Editorial support: Miguel Almeida

1. MSCI https://www.msci.com/market-classification
2. Based on benchmark spreads of iBoxx indices: USD IBoxx Corporate
AAA, AA, A, and BBB.
3. Mexico City Airport 2026 achieved a book cover of 10 times the deals
size in 2016, but was later removed from the Climate Bonds GBDB.
4. Mexico City Airport 2046 exhibited spread compression of 55bps in2016 but was later removed from the Climate Bonds GBDB.
5. https://ec.europa.eu/info/strategy/eu-budget/eu-borrowerinvestor-relations/nextgenerationeu-green-bonds_en
6. Transition Finance for Transforming Companies | Climate Bonds Initiative
7. Harrison, C., Green Bond Pricing in the Primary Market H1 2021,
Climate Bonds Initiative, September 2021 https://www.climatebonds.
net/files/reports/cbi_pricing_h1_2021_03b.pdf

If you would like to discuss this paper in moredetail please contact:caroline.harrison@climatebonds.net.

Graphic Design: Godfrey Design, Joel Milstead
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
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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 H1 2022 - Climate Bonds Initiative

23