0

GREEN BOND PRICINGIN THE PRIMARY MARKET:
January - June 2021

10

20

30

H1
(Q1-Q2)
2021

40

Report highlights• Report includes 75 green bonds with a
combined face value of USD75.9bn issued
between January and June 2021 (H1 2021)• Continuing evidence supporting green as 29 outof 36 bonds price on curves or with a greenium• Green bonds in both EUR and USD
performed well on all metrics in the
primary market, on average• Allocations to green investors increased
by a massive 18% reaching 66%• The Sovereign Green Bond Club:
four issuers added six new bonds• Spotlight: Green bond liquidity
in the secondary market

With funding support by Lyxor Asset Management, IFC, Tradeweb
Green Bond Pricing in the Primary Market: January - June 2021

1

Introduction
This is the twelfth report in our pricing series, inwhich we observe how green bonds perform in
the primary markets. This report includes bonds
issued in the first six months of 2021 (H1 2021).

EUR is the dominant currency with 56 bonds
totalling EUR51bn (USD61.2bn), while 19 USD
denominated bonds had a combined issue sizeof USD14.1bn.

Our methodology is designed to capture themost liquid portion of the green bond market
and is therefore limited to USD and EUR
bonds with a minimum original issue size of
USD500m. Developed market (DM), emerging
market (EM) and supranational issuers(SNAT) are included.1 The full methodology is
explained on page 30.

Report highlights

1. Market developments
In a post-covid inflationary environment, investors
were naturally cautious about overpaying for
assets which could be hurt by rising interest
rates. However, rates did remain low in H1, andtechnical factors such as continuing support from
central banks and the impacts of other pandemic
support, contributed to rising bond prices.
Corporate bond spreads narrowed and those ofbroad market BBB indices in both EUR and USD
tightened by 17% in H1 2021.2• Overall, 66% 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 33 bonds
in our non-sovereign sample. 26 priced
on or inside their issuer’s yield curves
exhibiting a greenium.
See more on page 10• Sovereign Green Bond Club: Four
issuers added six new bonds worth
a combined total of USD18.9bn. The
three sovereign issuers with yield
curves all achieved a greenium.
See more on pages 16• Spotlight: The green label andsecondary market liquidity – wecompare the secondary market
behavior of green and vanilla utilities
in 2020 and conclude that the greenlabel can offer enhanced liquidity
See more on page 20

EUR corporate credit spreads tightened in H1
AAA

100

AA

A

BBB

80

60

Asset Swap Spread

During this period, USD226.1bn of green
bonds were added to the Climate Bonds
Green Bonds Database, the most in any
half year, and equivalent to 76% of the 2020
full year issuance (USD298.9bn). This paper
includes 34% of that amount that met theabove requirements (USD75.9bn), split
between 75 green bonds from 62 issuers.

• Green bonds achieved higher book coverand spread compression than vanillaequivalents, on average.
See more on page 4• After 7 days, green bonds had, on
average, tightened by more thancorresponding indices. 28 days after
pricing, green bonds had, on average,
tightened more than vanilla baskets
and matched indices
See more on page 12

40

20

0
January2021

February
2021

March
2021

April
2021

May
2021

June
2021
Source: Refinitiv

USD corporate credit spreads tightened in H1
AAA

160

AA

A

BBB

140
120
100

Benchmark Spread

80
60
40
20
0
January2021

February
2021

March
2021

April
2021

May
2021

June
2021
Source: Refinitiv

Green Bond Pricing in the Primary Market: January - June 2021

2

The Sovereign Green Bond club continues
to expand with two new EUR and four new
USD sovereign green bonds being added to
the Climate Bonds Green Bond database in
H1. Sovereign issuers can add scale, liquidity,
momentum, and profile to the green bondmarket, and offer a crucial source of capital toenable the achievement of the goals of the Paris
agreement. For these reasons, and because
market dynamics differ for sovereign issuers, wewill examine sovereign issuance in a separate
section in this and future pricing papers.

New Issuers in H1 2021
In H1 2020 62 entities issued 75 qualifying bonds.
Among those were 15 first time green bondissuers, 13 of which issued EUR denominatedbonds, while the remaining two were USD.
UBS finally printed its first green bond at theend of June with a EUR500m (USD594m) 5-year
senior unsecured bond. The bond obtained
Certification under the Climate Bonds Standard,
according to the Low Carbon Buildings Criteria
VGP NV, a European provider of logistics andsemi-industrial real estate printed its inaugural
green bond at the end of March. The proceedsof the EUR600m (USD713m) 8-year bond were
earmarked to finance or refinance eligible
assets including Energy Efficiency, Low Carbon
Buildings, Low Carbon Transport, Water, Waste,
and ICT. The issuer has stated its intention tobuild out a green yield curve.

Excluding sovereigns, 43 repeat visitors
issued 54 green bonds in H1.
Repeat issuance enables issuers as well as
investors to leverage economies of scale. Issuers
incur a marginally higher cost for their initial
green bond as most of them carry out an internal
audit to determine which assets and projects toinclude in their green bond, as well as external
reviews. Investors benefit from buying bonds
from repeat issuers as the due diligence on theissuing entity will be conducted for the first bondand reviewed for subsequent deals.

Record monthly issuance of EUR & USD green bonds
40
35
30
25
20
15
10
USD Billions

Against this backdrop, green bonds amounting
to USD226.1bn were added to the Climate Bonds
Green Bond Database during this period, withrecord issuance each month. EUR (USD105.5bn)
and USD (USD63bn) denominated bonds
together contributed three-quarters to the total
amount. While supply has increased, demand forgreen bonds is growing all the time, and from avariety of sources. Among the investors publicly
committing to responsible investment were theGerman Savings Banks and we highlight how EIB
collaborated with this investor group on page 9.

50January
2019

February

March

2020

April
2021-H1May

June

Included in analysis
Source: Climate Bonds Initiative

Following its debut with a pair of USD bonds
in September 2020, real estate investment
trust Equinix returned to the market with both
EUR and USD deals. The EUR bonds came firstwith a EUR500m (USD594m) 2027 maturity
and a EUR600m (USD713m) 2033 priced in late
February, the longer dated tranche having been
upsized from the planned EUR500m (USD594m).
A USD1bn 10-year was added in May. Equinix
has a solid transition strategy in place including
science-based targets incorporating scope
1,2, and 3 emissions. In January 2021, it joined
European cloud infrastructure and data centre
providers and European trade associations toform the Climate Neutral Data Centre Operator
Pact and Self-Regulatory Initiative.3 The Pact
is a commitment to ensure that European
data centres are carbon neutral by 2030 byimplementing measures such as improved
energy efficiency, water conservation, recycling
hardware, and reusing heat where practicable.

Remarks:• Seniority rankings of financial corporate bonds
are denoted using the following abbreviations:
Senior Preferred = SP; Senior Non-Preferred= SNP; Covered = CO. As per our standard
methodology, the payment rank of the green
bond is matched, where practicable, whenselecting vanilla bonds with which to compare
the performance.
• Due to a lack of suitable comparable bonds,
some bonds in our sample were pairedwith bonds issued in either the following or
preceding quarter from their quarter of issue.
A complete list of the bonds used ascomparators is given on page 30.

Three South Korean issuers returned to the green
bond market, and all enjoyed strong pricing
dynamics. Electric vehicle (EV) battery producer
SK Battery priced USD700m 5-year in January.
Auto manufacturer Hyundai issued a USD600m
5-year bond in February, and in late June, LG
Chem issued USD1bn split evenly between 5
and 10-year maturities. Such issuers bring muchneeded sector diversity to the green bond market
and offer investors the opportunity to lend to
relatable entities that are contributing to thedevelopment of a net zero economy.

Green Bond Pricing in the Primary Market: January - June 2021

3

2. Spread compression and book size: green bonds in both EUR and USD attracted larger book coverand exhibited larger spread compression on average, than vanilla equivalents• USD: Average oversubscription
was 4.7x for green bonds and 2.5x
for vanilla equivalents. Spreadcompression averaged 29.9bps
for green bonds and 24.8bps forvanilla bonds.

• EUR: Average oversubscription
was 2.9x for green bonds, and 2.6x
for vanilla equivalents. Spreadcompression averaged 20.4bps
for green bonds and 19.6bps forvanilla bonds.

Green bonds are oversubscribed, and experiencespread tightening as part of the pricing process,just like vanilla bonds. To help determine
whether investors attach any value to the greenlabel, green bonds are compared to carefully
selected vanilla equivalents.

EUR: Green bonds acheived greater spread compression on average, compared to vanilla equivalents
SSA

CoveredTimes oversubscribed

AAA

0

AA

2

A

4

•

BBB

6

8

NRW Bank 2031

Green Bond•

Vanilla bondTimes oversubscribed

0

2

4

6

8

TenneT 2027

Japan FOM 2028

TenneT 2031
EUR Greenbond averagebook cover:2.9x

Hamburger Hoch.2031
EIB 2030
Rentenbank 2031

EUR Greenbond averagebook cover:2.9x

TenneT 2041
Gecina 2036
UBS AG 2026

KfW 2029

Digital Intrepid 2031

DNB Bolig. 2031 (CO)Acea 2030

Credit Ag. Italia 2033 (CO)Vattenfall 2029

Berlin Hyp 2028 (CO)CTP 2027

BCPE 2030 (CO)LeasePlan 2026

Eika Bol. 2031 (CO)de Volksbank 2028 (SNP)BPI France 2028

Daimler 2033

BayernLB 2028 (SNP)Intesa SP 2028 (SP)EUR Vanillabond averagebook cover:2.6x

Sparebank 1 SMN 2028 (SP)D. Kreditbank 2026 (SP)Mun Hyp 2029 (SNP)EUR Vanillabond averagebook cover:
2.6x

UPM-Kym. 2031
Vonovia 2031
Ferrovie dS 2028

Prologis 2033

E.ON 2032

Nordea 2031 (SNP)

VGP 2029

Neste OYJ 2028

PKN Orlen 2027

Nidec 2026

Belfius Bank 2027 (SNP)

Enexis 2033

RWE 2031

CCB 2024

CTP 2025

Red Electrica 2033

CTP 2029

SBAB Bank 2026 (SP)de Volksbank 2026 (SNP)HESLAN 2029 (SNP)

Terna 2029

USD: Green bonds acheived higher book cover than vanilla equivalents on average
Times oversubscribed

0

2

4

6

8

Times oversubscribed

Sumitomo MFG 2024

Deutsche Bank 2026 (SP)

Sumitomo MTB 2026

Brookfield 2031

DTE 2028 (SS)

Equinix 2031

SK Battery 2026

NextEra Energy 2028

Hyundai Cap. 2026

Green Bond Pricing in the Primary Market: January - June 2021

0

2

4

6

8

USD Green bondaverage bookcover: 4.7x
USD Vanilla bondaverage bookcover: 2.5x

4EUR green bond pricing
EUR green bond order books were around 30%
lower on average compared to H2 2020 as supply
continued to increase and investors did not wantto overpay for anything that could be hurt byrising interest rates. The average book cover for H1
was 2.9x, compared to 4.2x in H2 2020. Likewise,
spread compressions for EUR green bonds were,at an average of 20.4bps, less dramatic than the
average of 24bps seen in H2 2020.
Individually, just 40% of EUR green bonds
achieved larger oversubscription than vanillaequivalents. That compares with 70% in H2
2020. Among our sample of 54 green bonds,
two achieved the same oversubscription as
vanilla counterparts (Intesa SP 2028 (SP), andde Volksbank 2026 (SNP)), nineteen attracted
larger book cover than equivalents, 21 attracted
lower book cover than equivalents, and four were
excluded from the analysis (see NB1).
Just under half (48%) of EUR green bonds
experienced larger spread compression comparedto vanilla equivalents. Two out of 54 achieved thesame amount of spread compression as equivalents(Vonovia 2031, and Sparebank 1 SMN 2028 (SP)),
25 tightened more, and 27 tightened less.
Book cover
The largest book covers were achieved by four
debut green bond issuers all of which issued in Q1.
SSA issuers occupied two of the four top spots.
Debut issuer Japan FOM 2028 had the largest
book cover of 8x for its EUR500m (USD604m)
January placement
Italian municipal utility Acea Spa attracted bookcover of 6.5x for its 2030 bond, the longer leg of
its two-tranche deal, which was upsized from
EUR500m (USD594m) to EUR600m (USD727m).
According to the issuer, investors were attracted
to its concrete commitment to specificsustainability targets.
The first green bond from German local authority
issuer Hamburger Hoch 2031 was priced in
April. The EUR500m (USD607m) deal attracted abook of 6x taking joint third place.
Polish oil refiner and petrol retailer PKN
Orlen issued its debut green bond in May, a
Climate Bonds Certified 2027 maturity with aframework referencing the EU taxonomy andfinancing renewable energy and clean transport
assets. During the roadshow for the EUR500m(USD611m) bond, the issuer was interrogatedabout its long term, sustainable growth strategy
and plans to dispose of its coal assets. Investors
were evidently satisfied with the transition plan,since the book reached 6x the issue size which
was the joint third largest among the EUR green
bonds in our H1 sample.
Spread compression
Acea 2030 achieved spread compression of
40bps which was the joint-largest among the H1

sample. This bond priced on its yield curve andwent on to tighten more than equivalents in thesecondary market demonstrating value for boththe issuer and investors. US real estate company
Equinix issued a pair of EUR green bonds towards
the end of February, exploiting interest rate
differentials between the EUR and USD markets.
The Equinix 2027 tightened by 40bps sharing
the top spot, while the Equinix 2033 took third
place with 37bps. Since these are the only two
EUR Equinix bonds, there is no yield curve.
However, both bonds performed better thanequivalents in the immediate secondary market.
European property company CTP NV issued
three EUR green bonds in H1 increasing its
exclusively green yield curve to five bonds. The
proceeds were used to prepay and refinance its
secured portfolio which had been bank-funded.
The completion of this exercise means that
CTP has reduced its funding cost from 2.2% to
1.2%. The first of the three H1 bonds was priced
in mid-February, a EUR500m (USD594m) 2025
maturity, followed in late June by a 2027 and a2029 maturity each of which was also EUR500m(USD594m). The CTP 2027 tightened by 37.5bps
taking second place among the EUR H1 sample.
NB1: Four EUR bonds were excluded from bookcover analysis. Equinix 2027 and 2033, and Bankof China 2024 did not disclose book building data.
Ned. Water 2051 achieved book cover of 2x but
there was no data for the vanilla basket.

USD green bond pricing
The H1 2021 USD green bond sample achieved
the largest recorded average book cover of 4.8x,
beating the previous high of 4.1x observed in H1
2019. Just nine out of 15 bonds in USD sample
had data for both legs of the analysis (see NB2),
and seven of those nine achieved larger bookcover than corresponding vanilla bonds. 14 USD
bonds had spread compression data, and again,a new peak of 29.9bps was recorded beating the
25bps seen in H2 2020. Sumitomo MTB 2026
matched the spread compression of its vanillapair, nine green bonds tightened more than theirpairs, while the remaining four did not.
Book coverSouth Korean car manufacturer Hyundai Cap.
2026 attracted a book that was 7.9x its issue sizeof USD600m for its second USD bond. Hyundai is
one of a handful of auto manufacturers that has
issued green bonds (see spotlight in our H2 2020
publication), having visited the market 16 times
in a variety of currencies since its debut in 2016.
Continuing the auto-theme EV battery developer
SK Battery America achieved 7.5x book coverfor its USD700m 2026 green bond. Proceedsof the bond will be rolled into Energy Efficient
Buildings. SK Battery America was established by
its South Korean parent as a US production basefor EV batteries. SK Innovation ranked as the fifthlargest EV battery manufacturer in 2020, with aGreen Bond Pricing in the Primary Market: January - June 2021

5.5% share of the global market. Clients include
Hyundai Motor, Volkswagen, and Ford Motor Co.4
Sumitomo Mitsui Trust Bank priced its second
green bond in mid-March, a USD500m 2026 maturity,and managed to cover its book by 7.2x. The bond
was issued as part of a two-tranche deal, the larger
portion of which was a USD1.75bn 3-year maturity
and attracted a book cover of 1.7x. It has beensuggested that smaller deals will always attract abook cover of greater multiples irrespective of its
use of proceeds. While this may be true in this case,the green deal still attracted a larger commitment of
USD3.6bn, compared to USD3bn for the vanilla deal.
The proceeds of the green bond will be split between
Low Carbon Buildings, Renewable Energy, Low
Carbon Transport, and Water.
Spread compression
Spread compression data was available for all bondsin the USD sample except one (see NB3). Sumitomo
MTB 2026 had the same amount of spreadcompression as its vanilla counterpart (30bps).
Among the nine green bonds tightening more thantheir vanilla equivalents, a trio of South Korean
based corporates were the top performers. SK
Battery 2026 powered into first place, withspread narrowing of 45bps during book building.
LG Chem priced two green bonds at the endof June, each worth USD500m and maturing in
2026 and 2031. Both bonds tightened by 40bps
during book building, charging into second
place. LG Chem is concentrating its development
agenda on auto and energy storage system (ESS)
batteries, water treatment filters, and improving
their performance. The proceeds of the bonds
were earmarked for Low Carbon Buildings, Low
Carbon Transport, Water, and Industry.
Hyundai Cap 2026 drove into third place, with
its green bond achieving spread compression of
37.5bps.
None of these issuers had USD yield curves
hence we cannot remark on whether theyreceived a pricing benefit for their green bonds.
NB2: Six USD bonds were excluded from the bookcover analysis. Bank of China (Lux) 2026, Bank of
China (Sing) 2024, Kaiser Foundation Hosp 2041,
and LG Chem 2026 and 2031 did not disclose booksize. Efforts were made to contact these issuers
to which they did not respond. EIB 2031 achieved
book cover of 3.87x, but there was no data for thevanilla basket.
NB3: There was no spread compression data
available for Kaiser Hosp 2041.
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 fivebonds. For an explanation of the methodology,
see page 30, and for summary statistics of thebaskets, see page 30.

5EUR: Green bonds acheived greater spread compression on average, compared to vanilla equivalents
Sovereign

SSA

Times oversubscribed

Covered

0

AAA

AA

-5 -10 -15 -20 -25 -30 -35 -40 -45

NRW Bank 2031

EUR Greenbond averagebook cover:-20.4bp

Japan FOM 2028
Hamburger Hoch.2031
EIB 2030

A

BBB

•

Green Bond

Times oversubscribed

Vanilla bond-5 -10 -15 -20 -25 -30 -35 -40 -45

TenneT 2027

EUR Greenbond averagebook cover:-20.4bp

TenneT 2031
TenneT 2041
Gecina 2036

Ned. Water 2051

UBS AG 2026

Rentenbank 2031

Digital Intrepid 2031

KfW 2029

Acea 2030

DNB Bolig. 2031 (CO)Vattenfall 2029

Credit Ag. Italia 2033 (CO)CTP 2027

Berlin Hyp 2028 (CO)LeasePlan 2026

BCPE 2030 (CO)de Volksbank 2028 (SNP)

Eika Bol. 2031 (CO)Equinix 2033

BPI France 2028

Equinix 2027

BayernLB 2028 (SNP)

Daimler 2033

Sparebank 1 SMN 2028 (SP)0•Intesa SP 2028 (SP)EUR Vanillabond averagebook cover:-19.6bp

D. Kreditbank 2026 (SP)Mun Hyp 2029 (SNP)
Prologis 2033

EUR Vanillabond averagebook cover:-19.6bp

UPM-Kym. 2031
Vonovia 2031
Ferrovie dS 2028

Nordea 2031 (SNP)

E.ON 2032

Neste OYJ 2028

VGP 2029

Nidec 2026

PKN Orlen 2027

Enexis 2033

Belfius Bank 2027 (SNP)CCB 2024

RWE 2031

Bank of China 2024

CTP 2025

Red Electrica 2033

CTP 2029

SBAB Bank 2026 (SP)de Volksbank 2026 (SNP)HESLAN 2029 (SNP)

Terna 2029

USD: Green bonds acheived greater spread compression on average, compared to vanilla equivalents
Times oversubscribed0-5 -10 -15 -20 -25 -30 -35 -40 -45

Times oversubscribed

EIB 2031

Hyundai Cap. 2026

Sumitomo MFG 2024

Deutsche Bank 2026 (SP)

Sumitomo MTB 2026

Brookfield 2031

DTE 2028 (SS)

Equinix 2031

Bank of China (Lux.) 2026

NextEra Energy 2028

Bank of China (Sing) 2024

LG Chem 2031

SK Battery 2026

LG Chem 2026
USD Vanillabond averagebook cover:-24.8bp

USD Greenbond averagebook cover:-29.9bp

Green Bond Pricing in the Primary Market: January - June 2021

0

-5 -10 -15 -20 -25 -30 -35 -40 -45

USD Vanillabond averagebook cover:-24.8bp

USD Greenbond averagebook cover:-29.9bp

6

3. Green allocations: 56% was allocated to investors describing themselves as green
The amount allocated toinvestors describing themselves
as green or socially responsible
increased by 18% to 66%.
The 58 non-sovereign issuers
included in this analysis were
contacted and invited to disclose
what percentage of their deal was
allocated to investors describing
themselves as green or socially
responsible (green investors).
The results of this outreach wereas follows:• 34 issuers representing 40 bonds shared
the data• Seven issuers representing seven bonds
replied but were unable to disclose the data
• Nineteen issuers representing 22 bonds did
not reply
Based on the responses we received, theaverage allocation to investors describing
themselves as green was 66%, the highest
we have seen in any period and an increase of
18% on H2 2020. Allocations ranged from 26%(SBAB Bank 2026 (SP)), to 100% (EIB 2030, seebox). Multiple respondents remarked that thequality, quantity, and granularity of their orderbooks contributed to favourable pricing. First
time green bond issuer VGP (VGP 2029) notedthat most of the investors they spoke to were
sharply focused on VGP’s green strategy, and its
compliance with their own governance criteria.
In this regard, the green label attracted extra
support for the bond.

• Broad market investors: benchmark sized(EUR500m+) green bonds, which are increasing
in number, attract attention from all types ofinvestors, since they will qualify for inclusion inbroad market fixed income indices. Broad market
indices do not actively exclude green bonds.
• The growth of green labelled ETFs is addressedon page 15 and such products provide a broad
range of investors access to green bonds via
the secondary market.

Green bond frameworks incorporating the
EU taxonomy
The EU Taxonomy offers an opportunity for
improved data standardisation, and several
issuers noted that including the EU Taxonomy
eligible project categories in their green bondframework had helped to attract a seam ofcommitted dark green investors. Such issuers
included de Volksbank which was among thefirst to do so, Deutsche Kreditbank, whoseframework also incorporated the current draft ofthe EU Green Bond Standard, and Ferrovie dello
Stato which issued a Certified Climate Bond
under the Low Carbon Transport Criteria.

Standardisation of investor categories

The focus on sustainable investing has
skyrocketed in the last 12 months. In May 2021,
Fitch Ratings noted that green bond fund assets
under management (AUM) had increased by 80%
year-on-year to reach EUR22bn (USD26bn) at theend of Q1 2021. This compares to the broader
market, which has seen bond fund AUM increaseby 4% over the same period.5 Such funds would
likely be restricted to buying bonds bearing thegreen label. In addition to explicitly labelledgreen funds other sources of demand are also
growing including:Among those who did not want to disclose,
Belfius Bank described ‘very strong’ participationfrom green investors in its 100 strong order book.
Vonovia was happy with its transaction but could
not disclose the split of investors as there wasinsufficient transparency on which portfolios
ended up absorbing the allocations.

• The ECB remains the largest buyer of
EUR denominated bonds including thoselabelled green.

Methodology notes: Green investor participation
is provided by issuers. Where the allocation issplit between dark, medium, and light green
investors percentages for dark and medium
green are included in this analysis. There is no
standard methodology for defining a ‘green’
investor and we acknowledge that this is subject
to interpretation. There is no way to monitor how
investors split their allocations of green bonds
among their different portfolios.

E.ON could not disclose the split of investors but
mentioned that they were happy with the qualityof the order book which included substantial
demand from investors with long term
sustainability objectives. This was E.ON’s firstgreen bond under its framework that includes
EU Taxonomy criteria, published in 2021 which
also maps eligible projects under the ICMA GBP
and the EU Taxonomy. Investors communicatedto E.ON that they appreciated the clarity andconsistency provided by its new framework.6

Sources of demand continue to grow• Funds with softer mandates bearing labels
such as Sustainable, ESG, SDG, Paris Aligned
and so on which often include a preference
for green bonds where available. Many fundmanagers are launching new funds as well as
rebranding existing funds.

The only USD issuer to provide data was Deutsche
Bank (Deutsche Bank 2026 (SP)). EIB and Equinix
replied that they did not publish or have the data,
and the rest did not respond.

The EU is leading efforts to standardise the definitionof a green investor. From 1 January 2022 European
investment firms describing their products as green,or socially responsible, will be required to disclose
the percentage of their investments in compliancewith the EU taxonomy, i.e., consistent with a net zeroeconomy by 2050. This will give green bond issuers aclear benchmark to measure the relevant credentials
of bidders and offer asset owners more transparency
in the manager selection process. However, we
asked issuers whether they had started to see any
ramifications of this, and none replied that they had.

Green Bond Pricing in the Primary Market: January - June 20217

66% of green bonds were allocated to green investors
Declared green investor

Rating GroupEUR

Not declared green investor

0%

20%

SSA

NRW Bank 2031
EIB 2030
Rentenbank 2031
KfW 2029

COV

DNB Bolig. 2031 (CO)Berlin Hyp 2028 (CO)Average 66% was allocated to green investors
40%

60%

80%

100%

40%

60%

80%

100%

BCPE 2030 (CO)Sparebank 1 SMN 2028 (SP)A

D. Kreditbank 2026 (SP)Mun Hyp 2029 (SNP)
Prologis 2033
Nordea 2031 (SNP)

Enexis 2033
Red Electrica 2033
SBAB Bank 2026 (SP)TenneT 2041
TenneT 2031
HESLAN 2029 (SNP)
TenneT 2027
Gecina 2036
Digital Intrepid 2031
Acea 2030
Vattenfall 2029
CTP 2027
Stora
Enso2026
2030
LeasePlan
Equinix 2027
Equinix 2033
de Volksbank 2028 (SNP)
Daimler 2033
Intesa SP 2028 (SP)BBB

UPM-Kym. 2031
Ferrovie dS 2028
VGP 2029
PKN Orlen 2027
RWE 2031
CTP 2029
CTP 2025
de Volksbank 2026 (SNP)USD
Deutsche Bank 2026 (SP)

BBB

0%

20%

Green Bond Pricing in the Primary Market: January - June 2021

8German Savings Banks andEuropean Investment Bank
collaborate on ESG

EIB02030 EUR5- on the vanilla
new issue20
premium 25
10 curve,15
to the green curve

0.5 0.4
0.4
0.3 0.2
0.2
The deal was exclusively marketed to and
0.1 0
entirely placed with one category of investor:
0.0
German Sparkassen (Savings Banks).
The Saving Banks are regional institutions
-0.1
-0.2
providing banking services to retail clients,-0.2
local public authorities, and small andmedium sized enterprises that constitute the -0.3
-0.4
domestic borrowing community.
-0.4
The German Savings Bank Association-0.5(DSGV) recently published its commitment-0.6
to climate-friendly and sustainable business -0.6
practices which has been signed by 213-0.7
members, including the three bookrunners
-0.8
-0.8
in the CAB deal: Dekabank, Helaba and

30

0Duration

5

10

15

20

25

30

0

5

10

15

20

25

30

5

10

15

20

25

30

+1 month EIB EUR - inside the vanilla curve, on the green curve.

9Collectively, the German Savings Banks
have EUR1tn (USD1.18tn) in assets, hence
the implementation of their commitment
could be a key contribution to the growthin demand for the green label. With thetransaction, the EIB engaged with the Savings
Banks to underline the importance of theircommitment on ESG issues.
The granularity of the transaction was
highlighted by LBBW: “The granularityand high quality of the order book, which
consisted of close to 30 savings banks andsector institutions, is a notable outcome of theYield as of 12/04/2021

0.5 0.4
0.4
0.3 0.2
0.2
0.1 0
0.0
The EIB’s EUR CAB due 2030 helps to fulfil-0.1 -0.2
this element of the commitment. The CAB
documentation provides for the allocation-0.2
of proceeds to EIB’s lending to activities that
-0.3
contribute to climate change mitigation in-0.4
line with evolving EU Sustainable finance-0.4
legislation, including the EU Taxonomy-0.5
Regulation. This approach was also
-0.6
recommended by the Sustainable Finance-0.6
Committee of the German Federal Government-0.7
in its final report published in February.
-0.8
-0.8

0
Duration

Source: Bloomberg

LBBW.8 This Commitment includes making
business operations climate neutral by 2035,
and encompasses the economic, social, andenvironmental elements of sustainability. It isapplicable to all business units and includes
targets and measures for retail banking, humanresources, business operations, financing,
local sponsorships, and crucially, own
investments. In relation to the last point, it isstated that their own investment portfolios will
be managed “in accordance with recognised
sustainability criteria”.

Source: Bloomberg

Yields as of 11/03/2021

In mid-March 2021, the European Investment
Bank (EIB) priced a new EUR500m Climate
Awareness Bond (CAB) due 2030 – the ninth
reference point on EIB’s green EUR curve.7

New issue green bonds

Vanilla bonds

Seasoned green bond

Vanilla bonds issued on the same day as the green bondtransaction. Put it another way, these are moresavings banks than we have seen in any otherorder book for the past two years.”10
As we have consistently seen with EUR bonds
from EIB since, the bond priced on the vanilla
curve, with a new issue premium to the green

Green Bond Pricing in the Primary Market: January - June 2021

curve. After one month, the bond had moved
inside the vanilla curve and onto the green
curve demonstrating value for both issuer andinvestor.

9

4. The greenium: 26 out of 33 green bonds priced on or inside 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, geo-political issues, and the fall-out
from global pandemics.

The new issue premium is the extra yield that abuyer receives, and a seller pays for a new bondcompared 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.
Sometimes, a bond may be issued with a higher
price, and thus have a lower yield compared to
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
have termed it “greenium”. This is an excellent
outcome for any issuer because it means that it
costs less to fund its green bond compared toits vanilla debt. Even when a bond prices on its
yield curve, this is still the absence of a new issuepremium and therefore positive for the issuers
cost of funding.

Green bonds performed well in H1
In H1 2021, we were able to build yield
curves for 33 out of the 69 bonds in our nonsovereign sample, of which 20 issuers (covering
24 bonds) had already issued green bonds
sharing similar characteristics.

Within our sample of 33 green bonds:
EUR

USD

Total

Greenium6

5

11

On the curve

12

3

15

New issue premium

55Indeterminate2

2

Pricing outcomesGreen bonds exhibiting a greenium
in H1 2021
EUR

Daimler 2033
Ned. Water 2051
Red Electrica 2033
TenneT 2041

Brookfield 2031 USD - greenium

4.0

UBS AG 2026

4.0

USD

Bank of China (Lux.) 2026

3.0Bank of China (Sing) 2024

2.5

Equinix 2031
2.0

1.5
1.0

1.0

0.5 0
0

Duration

55

10
10

15
15

20
20

15
15

20
20

Source: Bloomberg

Yield as of 07/04/2021

2.0

Sumitomo MFG 2024 USD - greenium

3.0

3.0

2.5
2.0

Sumitomo MFG 2024
Brookfield 2031

3.5
3.0

E.ON 2032

In H1 2021 79% of green bonds priced on or
inside their yield curve. This is a continuationof the strong investor support we witnessedin H2 2020 when an identical number of bonds
priced on or inside their yield curve. In anothersimilarity with H2 2020, USD bonds showed
consistently strong pricing outcomes with alleight bonds in our admittedly small sample
pricing on or inside their own yield curves. These
included North American non-bank financial
institution Brookfield Asset Management which
priced its first green bond in April 2021, andSumitomo MFG which brought a 2024 green
bond in January, its first in USD.

2.0

1.0

1.0
Source: Bloomberg

Yield as of 04/01/2021

1.5

0.5
0

0.0 0
0

Duration

New issue green bonds

55

10
10
Vanilla bonds

Seasoned green bond

Vanilla bonds issued on the same day as the green bondGreen Bond Pricing in the Primary Market: January - June 2021

10

Gecina 2036 EUR - on the green curve

Gecina rebrands all debt as green

3

6

9

12

15

6

9

12

15

1.0
0.8

0.8

0.6
0.4

0.4

0.2
0.0

0
Source: Bloomberg

Yield as of 22/06/2021

In May 2021, French real estate company Gecina
reclassified its debt portfolio under the green
theme. Gecina labelled its 15 outstanding bonds
worth a combined EUR5.6bn (USD6.8bn) as green
and committed to issue all future bonds under
the green label.11 The ambitious framework
was published in April 2021 and reviewed by
Sustainalytics. Relabelling bonds contributes bothscale and liquidity to the secondary green bondmarket and sends a signal to investors that Gecina
has audited its activities according to climate
compatibility. Gecina has committed to reachingnet-zero by 2030. The company issued a new
EUR500m (USD594m) 15-year green bond in June.
The order book was 1.6x oversubscribed, and thebond experienced spread compression of 27.5bps
in the primary market. The bond priced in linewith Gecina’s green yield curve. In the immediate
secondary market, the bond performed verystrongly, with the spread tightening 13.9% in
the first week, and 27.2% after a month which
was more than comparable bonds or thecorresponding index and demonstrated value forboth issuer and investor.

-0.2
-0.4

-0.4
3
Duration
New issue green bonds

Vanilla bonds

Seasoned green bond

Vanilla bonds issued on the same day as the green bond

The reclassification of Gecina’s debt is amanifestation of its CANOP-2030 (Carbon Net
Zero Plan). Gecina is targeting net-zero emissions
for its operations by 2030.12 Climate Bonds isfinalising a framework which will allow entities to
Certify such entity level transition plans.
Methodology notes: We use yield on issue
date, 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, weoverlay any seasoned green bonds (orange), andfinally, we add our subject bonds (green). Vanillabonds 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 offour suitable comparable bonds.
Comparable bonds used for this exercise must fit
the specification for green bond selection outlined
on page 30, 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 2010.

Green Bond Pricing in the Primary Market: January - June 2021

11

5. Performance in the immediate secondary market• Seven days after pricing, 46%of green bonds had tightenedmore than comparable vanillabaskets; 67% had tightened morethan their corresponding index.

• 28 days after pricing, 57% of
green bonds had tightened morethan comparable vanilla baskets;
70% had tightened more thantheir corresponding index.

% change 1 week
Rating
Group
EUR

SSA

Covered

AA
A

BBB

Bond
NRW Bank 2031
Japan FOM 2028
Hamburger Hoch. 2031
EIB 2030
Ned. Water 2051
Rentenbank 2031
KfW 2029
DNB Bolig. 2031 (CO)Credit Ag. Italia 2033 (CO)Berlin Hyp 2028 (CO)BCPE 2030 (CO)Eika Bol. 2031 (CO)BPI France 2028
BayernLB 2028 (SNP)
Sparebank 1 SMN 2028 (SP)D. Kreditbank 2026 (SP)Mun Hyp 2029 (SNP)
Prologis 2033
Nordea 2031 (SNP)
Neste OYJ 2028
Nidec 2026
Enexis 2033
CCB 2024
Bank of China 2024
Red Electrica 2033
SBAB Bank 2026 (SP)HESLAN 2029 (SNP)
TenneT 2027
TenneT 2031
TenneT 2041
Gecina 2036
UBS AG 2026
Digital Intrepid 2031
Acea 2030
Vattenfall 2029
CTP 2027
LeasePlan 2026
de Volksbank 2028 (SNP)
Equinix 2033
Equinix 2027
Daimler 2033
Intesa SP 2028 (SP)UPM-Kym. 2031
Vonovia 2031
Ferrovie dS 2028
E.ON 2032
VGP 2029
PKN Orlen 2027
Belfius Bank 2027 (SNP)
RWE 2031
CTP 2025
CTP 2029
de Volksbank 2026 (SNP)
Terna 2029

Green Bond

% change 1 month

VanillaBasket128.0%-14.5%-36.1%
2.5%-17.3%
6.6%-13.7%
24.5%
17.2%
14.7%
0.6%
-20.6%-17.3%-17.7%
-0.3%
-8.8%
-0.2%
1.3%
0.58%
2.5%
-2.7%
-3.5%
-8.7%
-9.7%
5.8%
-12.2%
-7.8%
-3.0%
-9.3%
-5.9%
-13.9%-3.6%-11.4%
-1.4%
-8.4%
-2.4%
-3.3%
-1.7%
-10.9%
-6.5%
-9.4%
-4.0%
-3.9%
-0.2%
-6.6%
-7.6%
3.4%
-13.3%-4.78%
1.2%
-1.9%
-2.3%
-1.7%
3.2%

Green Bond Pricing in the Primary Market: January - June 2021

In H1 2021, 69% of individual green bonds in our
sample had tightened seven days after pricing;after 28 days that had increased to 86%.

32%
-14%
-65.0%
-32%
-10%
-22%
-17%
-12.5%-12.5%
2.9%
11%
33%
-2%
4.0%
-3.6%
-2.1%
0.5%
-10%
0.9%
-6.9%
1.1%
-3%
-4.6%
-4.6%
-3%
1%
-10%
-14%
-9%
-9%
-2%
-2%
n/a
1.0%
1.0%
-7%
3.6%
4.0%
-7%
-7%
-9.5%
-3.6%
-11.9%
n/a-11.9%
0.4%
-2.2%
-7%
-4.42%
-9%
-7%
-3%
-4%
-14%

CorrespondingiBoxx Index

Green Bond

-14.8%-85.8%
39.1%-10.8%
1.0%
0.4%
-5.3%
2.9%
-36.4%
0.7%
10.9%
6.5%
2.3%
-155.3%
0.7%
-0.9%
1.5%
2.0%
0.60%
-1.1%
1.6%
-0.8%
-3.4%
-2.7%
8.8%
-3.5%
-0.6%
-1.8%
-1.1%
-1.1%
-4.4%
-4.6%
-6.0%
4.2%
-1.6%
0.3%
-0.4%
2.7%
2.4%
2.7%
0.2%
0.4%
0.6%
0.7%
0.2%
-8.1%
-4.5%
-0.7%
-4.81%
-3.9%
1.2%
2.0%
3.2%
1.8%

132.0%-22.3%-49.9%-2.3%-12.3%-10.3%-17.9%-16.8%-10.2%-13.7%-33.8%-25.1%
7.0%-16.3%-0.7%-16.5%-5.5%-2.6%-10.0%
2.7%-16.2%-6.1%-10.7%-7.0%-3.7%-18.1%-8.3%-3.2%-15.2%-9.4%-27.2%-23.4%-7.3%-24.4%
-7.2%
-2.9%
-6.5%
2.6%
-8.5%
-4.5%
-24.7%-10.0%-2.7%-3.9%-17.8%-10.4%
3.7%-14.5%
-0.5%
-3.9%
-4.6%
0.9%
-8.0%
-12.9%

VanillaBasket61%-13%-68.3%
-35%
-21%
89%
-12%
-75.6%-75.6%-45.5%
4%
-262%
-5%
-3.5%
-5.5%
-2.5%
8.6%
-11%
-3.3%
-3.1%
-7.6%
-5%
-3.2%
-3.2%
-5%
0%
-9%
-17%
-11%
-11%
-9%
-17%
2%
-8.1%
-8.1%
-2%
0.7%
-3.5%
-7%
-2%
-10.8%-5.5%-10.5%
2%
-7.7%
-6.1%
-5.2%
-3%
-1%
-11%
-10%
-9%
-1%
-17%

CorrespondingiBoxx Index-13.4%-51.6%
44.6%-16.7%
18.9%
2.2%
0.4%
-40.2%-29.6%
-6.4%
4.6%
2.8%
15.6%
-297.7%
1.9%
-3.3%
0.6%
-0.7%
-5.4%
-7.1%
-6.0%
0.7%
1.7%
5.6%
5.9%
-9.5%
-4.2%
-5.5%
-5.1%
-5.1%
-8.3%
-11.1%
-5.3%
-5.3%
3.3%
4.5%
0.4%
2.9%
3.1%
2.9%
-6.6%
-6.3%
-6.1%
-6.0%
-8.1%
-9.8%
-7.6%
-3.5%
-7.9%
-8.6%
-3.6%
-4.3%
-1.0%
-5.4%

12

% change 1 week
Rating
Group
USD

SSA
AA
A

BBB

Bond

Green BondEIB 2031
Kaiser Foundation Hosp 2041
Sumitomo MFG 2024
Sumitomo MTB 2026
DTE 2028 (SS)Bank of China (Lux.) 2026
Bank of China (Sing) 2024
SK Battery 2026
Hyundai Cap. 2026
Deutsche Bank 2026 (SP)Brookfield 2031
Equinix 2031
NextEra Energy 2028
LG Chem 2031
LG Chem 2026

Many bonds deliver price tightening in theimmediate 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 benchmark indices. Once bonds
enter indices (except for credit events), liquidity
can quickly evaporate, and accurate spreads arequoted on a bilateral basis. Our consideration of
the secondary market consequently only extends
to one 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 vanilla bondor a basket of vanilla bonds sharing similar
characteristics, issued as closely as possible to
the green bond. This comparison is a proxy forthe opportunity cost to the investor. Secondly, we
compare each green bond to a matched index tomonitor their performance against ‘the market’.

After seven days
• 46% of green bonds had tightened by morethan their vanilla baskets: 46% of EUR and 48%
of USD green bonds.
• 67% of green bonds had tightened by morethan their corresponding index: 72% of EUR
and 76% of USD green bonds.
Compared to H2 2020, a lower percentage
of green bonds tightened more than theirbaskets (52% in H2 2020) and indices (56% in
H2 2020). A similar number of individual green
bonds tightened on the break compared to H2(69% compared to 70% in H2 2020), and thelower relative numbers may be due to stronger
dynamics in the primary market as we had notedin H2 2020.

-45.4%-15.1%-16.6%
-7.1%
5.2%
n/a
n/a
-4.5%
-4.5%
3.6%
4.6%
3.9%
5.7%
9.7%
12.8%

% change 1 month

VanillaBasket-19.3%-16.0%
-3.2%
13.8%
17.7%
3.5%
0.2%
-3.1%
-2.2%
0.0%
4%
-0.6%
-2.2%
0.3%
3.4%

CorrespondingiBoxx Index

Green Bond

-2.4%
-3.3%
-2.9%
3.2%
-0.8%
-4.2%
-4.3%
1.4%
-7.0%
-0.8%
-0.7%
-0.1%
0.3%
1.4%
-0.5%

-23.5%-12.5%-5.7%-27.1%-4.0%-14.0%-13.2%
-2.5%
-6.6%
-7.8%
1.7%
1.9%
-12.0%
15.6%
18.5%

In EUR 18 out of 52 bonds had tightened against
both their vanilla basket and matched index
after a week (see NB1). Among them was Ned.
Water 2051 which had narrowed by 17% one
week after pricing. This bond also priced inside
its own yield curve. The debut green bond from
Norwegian credit institution Eika Boligkreditt AS(Eika Bol 2031 (CO)) had tightened by 21% after
a week, beating both its comparable bond andcorresponding index. This bond tightened morethan its basket but had lower spread compression
in primary. The bond was longer than other bondson the yield curve, hence a greenium could not
be determined. In the corporate space threebonds enjoyed double digit percent tightening
in the first week and performed better than bothcomparables: PKN Orlen 2027 (-13.3%) Gecina2036 (-13%) and Equinix 2033 (-10.9%). These
three bonds were issued by entities with welldefined transition strategies in place.
In USD, five out of 13 green bonds had tightenedagainst both their basket and matched index after
a week (see NB2). EIB 2031 (-45%) tightened
the most, beating both basket and index, having
achieved a greenium in the primary market.
Among private sector issuers, Sumitomo MFG
2024 (-16.5%), Sumitomo MTB 2026 (-7.1), SK
Battery 2026 (-4.5%), and Hyundai Cap. 2026(-4.5%) all tightened more than both vanillabaskets and indices, Only Sumitomo MTB 2026
had a yield curve, and did achieve a greenium,
the other bonds exhibited strong dynamics
during book building and we can therefore saythat these are examples of bonds achieving value
for both issuer and investor.
NB1: There was no one week data forcorresponding vanilla baskets for two EUR bonds:
Vonovia 2031, and Digital Intrepid 2031.
NB2: There was no one week data for two USD
bonds: Bank of China (Lux.) 2026, and Bank of
China (Sing) 2024.

Green Bond Pricing in the Primary Market: January - June 2021

VanillaBasket-78.4%-16.4%
40.7%
9.5%
27.8%
3.5%
-0.02%
-1.4%
2.9%
0.0%
2%
0.9%
-8.6%
3.2%
2.4%

CorrespondingiBoxx Index
-2.8%
-1.6%
-3.2%
4.1%
-1.9%
-13.4%-15.1%
-5.6%
-6.0%
-9.2%
1.1%
-2.2%
-5.8%
1.4%
4.9%

After 28 days
• 57% of green bonds had tightened by morethan their vanilla baskets: 54% of EUR and 67%
of USD green bonds.
• 70% of green bonds had tightened whencompared to corresponding indices: 74% of
EUR and 53% of USD green bonds
The 28-day metrics for H1 were similar to those of
H2 2020: 57% of bonds had tightened more thantheir baskets in H1 compared to 56% in H2 2020,
while 70% tightened more than corresponding
indices in H1 against 67% in H2 2020. 32 green
bonds tightened more than both vanilla baskets
and corresponding indices.
In EUR, public sector entities KfW 2029 (-17.9%)
and Rentenbank 2031 (-10.3%) both tightenedmore than baskets and indices. Ferrovie ds
2028 also did well in the first month, tightening
by 17.8%, ahead of both comparable metrics. In
the primary market, what we could determine
about performance of those bonds was mixed,
as Ferrovie ds 2028 did not have a yield curve,
KfW 2029 priced with a new issue premium, andRentenbank 2031 priced on the curve. Both KfW
2029 and Rentenbank 2031 attracted higher bookcover and achieved larger spread tightening
compared to vanilla equivalents.
Among the private sector green bonds performing
better than both baskets and indices, Gecina 2036
had tightened by 27.2% after a month taking the top
spot followed by Daimler 2033. The German autocompany made its green bond debut in September
2020 and followed up with a EUR1bn (USD1.2bn)
2033 maturity priced in early March 2021. The bondpriced with a greenium and went on to achieve
24.7% tightening in its first month. Acea 2030
tightened by 24.4% in the first month having enjoyedstrong primary pricing dynamics and pricing on
its yield curve. These are examples of green bonds
offering clear benefits to both issuer and investor.

13

In USD, six out of 15 green bonds achieved
greater spread tightening compared toequivalents in the first month. Sumitomo MTB
2026 demonstrated the largest spread tighteningof 27.1%. Bank of China (Lux.) 2026 and Bankof China (Sing) 2024 took the second andthird spots with 14% and 13.2% of tightening
respectively having both priced with a greenium.
In H1 2021, green bonds continued to perform
well in the immediate secondary market.
Outright, more green bonds had tightened after
seven and 28 days than had not. On a relativebasis, green bonds also appeared to demonstratevalue for investors. After seven days, more green
bonds had tightened by a greater magnitude
than their corresponding indices, and after 28
days, more green bonds had tightened by morethan both vanilla baskets and indices.

Methodology notes
1. Vanilla baskets comprise the closest possible
matches based on the considerations highlighted
on page 30. We have created this proxy to illustrate
what else an investor could have done with theirmoney 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, and credit rating all of which
can influence the behaviour of a bond. Each bondis therefore compared to an index sharing similar
characteristics, for example, Verizon 2030 is matchedwith the iBoxx USD Corporates BBB 7-10 index.
Seven calendar days include five data
observations. Twenty-eight calendar days include
20 data observations.

Green Bond Pricing in the Primary Market: January - June 2021

14

6. Green bond ETFs
Global ETFs experienced net inflows of around
USD639.8bn in H1 2021, setting another new
record. Investors were keen to exploit therecovery driven equity rally and ongoing low
interest rates. Existing green bond ETFs added tothe solid growth achieved in 2020, and two newfunds were launched, including one for Canadian
Dollar investors, bringing the total to eight.
At the end of H1, the total fund assets in green
bond ETFs amounted to EUR1bn (USD1.2bn).
More than half of that amount is in the mostestablished green bond ETF, the Lyxor Green
Bond DR UCITS which increased its total fundassets by 4.7% in H1.

We expect that existing green bond ETFs willcontinue to add assets, and that new ones will be
introduced, reflecting the increased awarenessand investor preference towards investingsustainably. This will inevitably contribute to
demand pressures faced by green bonds in bothprimary and secondary markets and a broader
range of investors will be exposed to green
bonds.

The VanEck Vectors Green Bond ETF experienced
the most aggressive growth of the green bondETFs, increasing its total fund assets by 68% in H1.
The iShares Global Green Bond ETF and Franklin
Liberty Euro Green Bond Fund each added 36%.

Our green bond ETF has seen an uptick ininflows this year, thanks to greater adoption
among a broad set of investors andincreasing awareness of how climate risks
can potentially impact long-term returns.
In many ways the growth of our ETF mirrors
the overall green bond market in that it is
growing quickly but we believe is still inthe very early days of scaling up to its true
potential. Along with this market growthcomes more opportunity to segment theinvestable universe based on risk and returnobjectives, which provides more ways toincorporate green bonds within an overallsustainable portfolio and should broaden
their appeal further. For example, we areseeing more U.S. based investors looking
for a US dollar only green bond exposure
to avoid currency risk and maintain an
attractive yield, and that is now possible todo while maintaining diversification.
William Sokol, Product Manager ETFs,
VanEckETF name

Currency

Index

Launchdate

Lyxor Green Bond DR
UCITS ETF

EUR

Solactive Green Bond Index

February 2017

Van Eck Vectors Green
Bond ETF

USD

S&P Green Bond Select Index

iShares Global Green
Bond ETF

USD

UC MSCI European Green
Bond ETF

Total Assests
31 Dec 2020

Total Assets
30 June 2021

EUR5m

EUR548.7

EUR574.7m

March 2017

USD5m

USD56.9m

USD95.8m

Bloomberg Barclays MSCI Global
Green Bond Select Index

November
2018

USD25m

USD156.5m

USD213.2m

EUR

Bloomberg Barclays MSCI European
GB Issuer Capped EUR Index

November
2018

EUR20m

USD21.0m

EUR20.8m

Franklin Liberty Euro
Green Bond ETF

EUR

Bloomberg Barclays MSCI Euro
Green Bond Index

April 2019

EUR10mEUR 79.2m

EUR107.8m

Lyxor Green Bond ESG
Screened

EUR

Solactive Green ESG Bond EUR USD
IG TR Index

October 2019

EUR4m

EU20.2m

EUR26.1m

L&G ESG Green Bond
UCITS ETF

EUR

JP Morgan ESG Green Bond Focus
Index

February 2021

EUR22.9**NEW**

EUR23.2

Horizons S&P Green Bond
Index ETF

CAD

S&P Green Bond U.S. Dollar SelectIndex

June 2021

CAD6.2**NEW**

CAD6.3

Green Bond Pricing in the Primary Market: January - June 2021

Size atlaunch15

7. Spotlight: The Sovereign Green Bonds ClubAt the end of June 2021, the Climate Bonds Green
Bond Database included sovereign green bonds
with a cumulative volume of USD110bn from 16
nations. Most of this was denominated in EUR(USD95bn/EUR83bn), while USD took second
place (USD11.6bn). In H1 2021, the EUR or USD
denominated green bonds of five sovereignissuers was added. All five of the issuers havevisited the green bond market before.

EUR• France priced its second green deal;• France also tapped its existing 2039 green
bond for EUR1.5bn(USD1.8bn) in January. At
the end of H1 2021, The total size of this bondwas EUR28.9bn (USD31.4bn);

FranceIn March 2021, France
priced its second green
bond (GrOAT) with amaturity of 2044. The
initial size was EUR7bn(USD8.3bn) which isstandard for long-dated French sovereigns. Since
2017, France has printed eight bonds with atenor of at least 20 years, and the initial size has
been EUR7bn (USD8.3bn) for six of those while

Times covered

10

Size at issue

8
6

USD

4
USD Billions• Chile tapped its 2031 green bond for EUR400m(USD485m) in January 2021. The bond is now
EUR1.9bn (USD2.2bn) in total.

• Hong Kong added three new deals

In preparation for its second green bond, theFrench Tresor opened dialogue with hedge
funds who had traditionally submitted inflatedorders which were not representative of theirresulting allocations. As a result of these
discussions, the order book was smaller thanit had been for similar transactions but offeredimproved market transparency.

Book cover for long dated French Treasuries• Germany issued its third EUR green bond;• Indonesia added its third green bond;the remaining two bonds launched with EUR5bn(USD5.9bn) each.

2
0
2039
Green

2040

2044
Green

2048

2050

2052

2053

2072

Source: Climate Bonds Initiative

Sovereign Scorecard

H1 2020

FranceGermany

Indonesia

Hong Kong

France 0.5% 24/06/2044

Germany 0% 15/08/2050

Indonesian Sukuk 3.55%
09/06/2051

Hong Kong
0.625% 02/02/2026,
1.375% 02/02/2031,
2.375% 02/02/2051

Pricing Date

16/03/2021

11/05/2021

02/06/2021

26/01/2021

Tenor

23 Years

29 Years

30 Years

5, 10, and 30 Years

Original Size

EUR7bn/USD8.3bn

EUR6bn/USD7.3bn

USD0.75bn

USD1bn, USD1bn, USD500m

Size as of
30/6/2021

EUR9.3bn/USD11bn

EUR6bn/USD7.3bn

USD0.75bn

USD1bn, USD1bn, USD500m

Number of bonds

2

3

3

4

Total size
green bonds

EUR38.2bn/ USD42.1bn

EUR17.5/USD20.9bn

USD3.5bn

USD3.5bn% totalsovereign debt*

1.8%

1.2%

0.8%

9.8%

Total green bonds*Green bonds as a % of outstanding debt with greater than one year residual maturity as of 12/08/2021

Green Bond Pricing in the Primary Market: January - June 2021

16

FRTR 2044 EUR - greenium0a 2039 maturity with an initial size of EUR7bn(USD8.3bn). It has been reopened 11 times
through auctions (10) and syndicate (1) andby January 2021 had reached EUR28.9bn(USD31.4bn). As of June 2021, the GrOAT 2039
was the largest individual green bond.

20

30

40

50

10

20

30

40

50

Yield as of 16/03/2021

1.0
0.8
0.8
0.6
0.4
0.4
0.2 0
0.0
-0.2 -0.4
EUR4bn (USD4.7bn) of the EUR7bn (USD8.3bn)-0.4(56%) was allocated to investors describing
themselves as green or socially responsible.
-0.6 -0.8
France priced its first GrOAT in January 2017,-0.8 010

Source: Bloomberg

The GrOAT 2044 priced with a greenium. This
was the first time a new French treasury had
priced inside its own yield curve, demonstrating
the maturity of the green bond market andthe commitment of the green investmentcommunity. Consistent with the commitment
made by the French Tresor to provide adequate
liquidity to its green bonds, the new bond wastapped for EUR2.3bn (USD2.7bn) on 5 May of
May 2021. The bond was still trading inside its
yield curve hence the French Tresor continued tobenefit from cheaper funding.

Duration

Bond reopened: FRTR 2044 EUR - inside curve

10

20

30

40

50

10

20

30

40

50

Source: Bloomberg

Yield as of 05/05/2021

0
1.2 0.8
France is one of the most sophisticated sovereign 1.0
green bond issuers. All government expenditures
are evaluated according to their compliance with 0.8 0.4
the EU Taxonomy which helps policy makers to
0.6
prioritise green projects.
0.4 0
0.2
0.0 -0.4-0.2-0.4 -0.8-0.6 0Duration
New issue green bonds

Vanilla bonds

Seasoned green bond

Vanilla bonds issued on the same day as the green bond

Germany

We compare the book cover and issue size ofthe 30-year green Bund with that of its vanilla
twin. At the end of June 2021, the vanilla twin
was EUR28bn (USD33bn). The initial EUR2bn(USD2.3bn) was issued in August 2019 via
auction. It was the first 30-year European

2050 green Bund has exhibited consistently lower yields
compared to vanilla twin
0.5
Green

Vanilla

0.4

0.3

0.2

0.1
Yield

In May 2021, Germany
priced its third greenbond, a Bund witha maturity of 2050 and
an initial size of EUR6bn(USD7.3bn). Germany
has already issued
two green bonds: a 10-year tenor (Bund) in
September 2020, and a 5-year tenor (Bobl) in
November of that same year. As with those, the
new green issue was partnered with a vanilla twin
sharing similar characteristics except that theuse of proceeds was not explicitly earmarked forgreen projects.

0
12 May2021

Green Bond Pricing in the Primary Market: January - June 2021

19 May2021

26 May2021

2 June2021

9 June2021

16 June 23 June
2021
2021

30 June2021
Data: Bloomberg

17Germany 2050 EUR - Greenium
0.2

0.4
0.3 0.2
0.2
0.1 0
0.0
-0.1 -0.2-0.2-0.3 -0.4-0.4-0.5 -0.6-0.6-0.7 -0.8-0.8 00Duration

Source: Bloomberg

Yield as of 11/05/2021

Government bond offering negative yield
which impacted the order book, and the bondattracted relatively low interest from investors.
The bond was then reopened multiple times by
auction, and notably, a syndicated tap of EUR6bn(USD7.3bn) in October 2020 which attracted
record demand of EUR31.5bn (USD37.2bn).
In contrast, when the 30-year green Bund
was priced in May 2021, a combination of an
adjustment in investor expectations, the use of a
syndicate, and the green label attracted an orderbook of EUR38.9bn (USD45.9bn), a new record,
covering the transaction’s EUR6bn (USD7.3bn)
initial size by 6.5x. The green book attracted
284 investors, while the vanilla twin reopening
attracted 120. The German Finance Agency
decided not to publish the split between green
and non-green investors since its objective is toattract new investors and issuers to the green
bond market. The demand and final allocation
included a broad range of investors with a higher
number of real money accounts compared to thevanilla twin.

5

10

15

20

25

30

5

10

15

20

25

30

+1 month Germany: green curve inside vanilla curve

00.2

10

15

20

25

30

5

10

15

20

25

30

Source: Bloomberg

Yield as of 11/06/2021

0.3
The green 30-year priced with a greenium, and at 0.2 0.2
0.1
the end of June, it had consistently maintained
a lower yield of more than 3bps compared to its 0.0 0
vanilla twin. On 30 June, volatility for the prior 30,-0.1
and 60 days had been slightly lower for the green-0.2
twin compared to its vanilla counterpart. This is -0.2
consistent with findings published in our H2 2020 -0.3
report, where we noted that green bonds can-0.4 -0.4
provide a more stable investment compared to-0.5
vanilla equivalents.
-0.6 -0.6-0.7 -0.8-0.8 05

Duration
New issue green bonds

Vanilla bonds

Seasoned green bond

Vanilla bonds issued on the same day as the green bond

Germany 2051 volatility
Green 2051

Vanilla 2051

Difference30-Days

11.213

11.264-0.05060-Days

11.87011.874-0.004

Data from Bloomberg as of 30/06/2020. The price volatility of a given period equals the annualized
standard deviation of the relative price change for the relevant number of the most recent trading days
closing price, expressed as a percentage.

Green Bond Pricing in the Primary Market: January - June 2021

18

Hong Kong green bonds exhibited strong dynamics in the primary market
Maturity

Original
AmountissuedBook
cover

Spreadcompression

Spreadchange 7 days
post issuanceComparable
index

Spread change
28 days post
issuance

Comparable
Index

Index used forcomparison

2026

USD1bn5x27.5bps

-29%

3.27%

-24%

-7.33%

iBoxx USD Sovereigns &Sub-Sovereigns 3-5 years

2031

USD1bn5x

22.5bps-17%-4.14%-35%-8%

iBoxx USD Sovereigns &Sub-Sovereigns 7-10 years

2050

USD500m

7x27.5bps

-15%

-4.1%

-25%

-3.6%

iBoxx USD Sovereigns &Sub-Sovereigns 10+ years

Duration

5
5

10
10

15
15

20
20

15
15

20
20

+1month: Indonesia green curve inside vanilla curve

Indonesia

4.0

Yield as of 02/07/2021

4.0
In early June 2021,
Indonesia priced its fourth
3.5
USD green Sukuk, a
3.0
USD750m Sukuk maturing
3.0
in 2051. Indonesia issued
2.5
green Sukuk in 2018
2.0
(USD1.25bn 2023), 2019 (USD750m 2024), and
2.02020 (USD750m 2025) and is the largest issuer
of green labelled Sukuk (Saudi Electricity is the
1.5
second largest having issued two bonds worth
1.0
1.0
USD1.5bn in 2020).
Like previous Indonesian green Sukuk, the bond 0.5
enjoyed strong dynamics in the primary market.
0
It achieved book cover of 4.5x and priced with a 0.000
greenium. A month later, the green yield curve
remained inside the vanilla curve. Participation ofgreen investors was 57% which was a substantial
increase from 34% achieved for Indonesia’s lastgreen bond priced in 2020.

Source: Bloomberg

4.0

4.0
3.5
3.0
3.0
2.5
2.0
2.0
1.5
1.0
1.0
0.5
0
0.0 0
0

Duration

New issue green bonds

5
5

10
10
Vanilla bonds

Source: Bloomberg

In January 2021, Hong
Kong added three new
USD denominated green
bonds to its existing 2024
maturity green bondpriced in May 2019. The
2026, 2031, and 2050
maturities reflect the commitment of the Hong
Kong Monetary Authority to build a green yield
curve. All three bonds exhibited very strong
dynamics in the primary market and went on
to tighten further in the secondary market after
both seven and 28 days. In each case, the green
bond tightened by a greater magnitude than its
comparable index. The only other bond sharing
the HKINTL ticker is the 2024 green bond, hence
we could not build a yield curve. Around 55% of
the bonds were allocated to investors describing
themselves as green.

Indonesia 2051 USD - greenium

Yield as of 02/06/2021

Hong Kong

Seasoned green bond

Vanilla bonds issued on the same day as the green bondGreen Bond Pricing in the Primary Market: January - June 2021

19

8. Spotlight: The green label and secondary market liquidity
The burning question
The purpose of this spotlight is to determine
whether green bonds offer investors better
liquidity compared to vanilla equivalents.
Evidence of superior liquidity could help to justify
the presence of a greenium in primary markets.
The question we want to answer is:
If an investor bought an EUR Utility bond in 2019,
what difference would the green label have madeto its liquidity in 2020?
We have limited the pricing date to the year prior
to the observation period. Broadly speaking,and in the absence of specific credit events, theliquidity of bonds tends to decrease over time.
The findings of our research demonstratethat green bonds traded more frequently,
and exhibited narrower bid/offer spreads, inother words green bonds maintained higher
liquidity, in the secondary market compared tosimilar bonds without the green label. Theseobservations held true during March 2020 which
presented some particularly difficult market
conditions as the scale of the COVID pandemic
became clear.

Motivation
2020 was characterised by some of the mostchallenging social conditions in living history
which had unprecedented ramifications infinancial markets. In the EUR market, yields roseas the market sold-off aggressively between
20 February and 23 March (the sell-off). Credit
markets stabilised towards the end of Marchas central banks detailed massive support
frameworks. The ECB announced its EUR750bn(USD881bn) Pandemic Emergency Programmeon 20 March adding a further EUR600bn(USD705bn) on 4 June.13

Description of sample
Applying the methodology described above resulted in a sample of 46 bonds.
Green

VanillaNumber of bonds

17

29

Average years to maturity at issue

9.9

10.2

EUR626m (USD735m)

EUR639m (USD751m)

13

18

Average size at issue
Number of issuers

Methodology
Inclusion criteria:• Sector classification: utilities• Pricing date: between 01/01/2019 and31/12/2019• Currency: EUR• Original size: at least EUR500m(USD587m)• Credit quality: lowest credit ratingfrom Moody’s, S&P, or Fitch must be
investment grade• Seniority rank: senior unsecured• Coupon: fixed. No sustainability-linked
bonds• Eligible collateral for Eurosystem credit
operations with the ECB

Credit rating
distribution

Amountoutstanding

Numberof bonds

A

6%

2

AA-

5%

2

BBB+

24%

6

BBB

58%

17

BBB-

6%

2

100%

29

A-

21%

4

BBB+

37%

5

BBB

32%

6

BBB-

10%

2

Total green

100%

17

VanillaTotal vanilla
Green

Observation period: 01/01/2020 to
31/12/2020

Data provided by Tradeweb

During the sell-off, liquidity dried up for all typesof bonds and higher dealing spreads madeit harder to sell assets. Lack of liquidity is afeature of risk aversion, but market participants
informed us anecdotally that green bonds didpreserve sufficient liquidity to be transacted.
We examined the data to determine whether
there was evidence to support these claims. We
concentrated on the utility sector because there
was a critical mass of both green and vanillabonds. The utility sector is regarded as one of themost recession proof.

Green Bond Pricing in the Primary Market: January - June 2021

20

Results of analysis

More green bond trades were observed in 11 out of 12 months

We looked at monthly trading data for each bondin the sample and compared the results. The
results demonstrated that for bonds bearing agreen label:

25

15

2. Bid/offer spread was narrower every monthin 2020

10

4. Average turnover was greater in 7 out of 12 months

Green Bond trades

1. Average number of trades was higher for 11
out of 12 months

3. Average bid/offer spread range was narrower
for green bonds

0Jan

The average bid/offer spread was narrower forgreen bonds every month in 2020. While thedifference was subdued in January and February,
as soon as the markets came under pressure,green bond spreads narrowed. The biggest
difference, of 9% (0.75bps), was observed in themonth of April. This suggests that on average,
the market for green bonds was more liquidcompared to that of vanilla counterparts.

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Green bonds consistently exhibited narrower bid/offer spreads in 2020
Absolute difference

0
-0.1
-0.2
-0.3
-0.4

Basis points

-0.5
-0.6
-0.7
-0.8
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: Climate Bonds Initiative

Vanilla and green bond bid/offer spread range
20
Vanilla spread
Vanilla average

18

Green spread
Green average

16

3.Average bid/offer spread range wasnarrower for green bonds

14

Another interesting measure, aside from theaverage bid/offer spread shown in 2. above is thebid offer range. This shows the dispersion of thebid/offer spread across the observed universe
and is the difference between the largest andsmallest bid/offer spread numbers in the sample.
If the range is tight, the sample offers morepredictability. If the range is broad, this increases
uncertainty. The bid/offer spread range wasconsistently narrower for green bonds.

12
10
8
6
4
Basis points

The largest average range for vanilla bonds wasobserved in December, with a 11.7bps range
between the smallest and largest average
spreads. For green bonds, the widest range wasseen in March, at 5.5bps.

Feb

Source: Climate Bonds Initiative

2. Bid/offer spreads were narrower
for green bonds.
The bid/offer spread is the difference between thehighest price that a buyer is willing to pay and thelowest price that a seller is willing to accept andis a measure of market liquidity. A narrower bid
ask spread suggests a greater number of buyers
and sellers. For data consistency, our analysis was
based on bid/offer spreads as of end of day.

Green

5

1. Average number of green bond trades
was higher for 11 out of 12 months in 2020.
On average, green bonds in our sample tradedmore frequently than vanilla equivalents during
the observation period. The only exception was
July. In March 2020 there were, on average, 48%
more green bond trades. The largest difference
was May 2020, in which green bonds traded 2.4
times more frequently (average trades per bondwas 14 for green bonds against 6 for vanilla).

Vanilla

20

2
0
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: Climate Bonds Initiative

Green Bond Pricing in the Primary Market: January - June 2021

21

More green bond trades in 11 out of 12 months

Individually, most bonds in each category
exhibited total annual turnover of less than 40%
in 2020.

Summary
Returning to the original burning question:
If an investor bought an EUR Utility bond priced in
2019, what difference would the green label havemade to its liquidity in 2020?

Monthly turnoverCollectively, green bonds exhibited larger
turnover in 7 out of 12 months. The largest
difference was in May when green bonds
achieved 60% more turnover compared to vanillaequivalents.
This suggests that green bonds can and do tradeactively in the secondary market, emphasisingthat they can offer flexibility to investors.

Green

2.0%

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

VanillaDifference

0.4%

1.8%

0.3%

1.6%

0.2%

1.4%

0.1%

1.2%

0

1.0%

-0.1%

0.8%

-.02%

0.6%

-0.3%

0.4%

-0.4%

0.2%

-0.5%

0

-0.6%
Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep

Oct

Nov

Turnover difference

4. Average monthly turnover was higher
for green bonds in 7 out of 12 months

Dec

The evidence presented above suggests that
EUR Utility bonds sold in 2019 bearing the greenlabel did offer more liquidity compared to those
without the label in 2020.
Green bonds in our sample traded more
frequently, offered narrower bid/offer spreads,
and the bid/offer spreads remained in aconsistently narrower range compared tovanilla equivalents. Green bonds also exhibited
higher turnover than vanilla bonds in 7 outof 12 months. In other words, green bonds inour sample maintained higher liquidity in thesecondary market compared to similar bonds
without the green label.
It seems that on average, green bond positions
could be liquidated more easily, offering
investors flexibility where it was needed.
While investors may pay more for green bonds in the
primary market, flexibility in the secondary market
could help to justify the existence of the greenium.
These differences are almost certainly
attributable to the ongoing lack of supply in thelabelled green bond market. At present, there
will always be a buyer for a green bond because
demand has grown so rapidly. We expect thisimbalance to persist as more investors realise
the importance of incorporating sustainability
considerations into the investment process.

Green Bond Pricing in the Primary Market: January - June 2021

22

9. Outlook
During the second half of 2021, USD226.1bn
worth of green bonds were added to the Climate
Bonds Green Bonds Database, a record for any
six-month period. Green bonds were issued in
30 currencies, with EUR (47%) and USD (28%)
together taking three quarters of the total.

after both seven and 28 days, and more thanvanilla baskets after 28 days. There were multiple
examples of green bonds performing strongly
in the primary market and continuing to tighten
in the secondary market offering value to bothissuers and investors.

Our sample for H1 included 75 bonds, the most
we have ever looked at in a half year period. The
USD (19 bonds) sample remains a fraction ofthat of EUR (56 bonds). USD bonds continue tolack the required disclosure and transparency,
and data availability is comparatively poor.
Nonetheless, the USD bonds that we looked atdemonstrated very strong pricing dynamics,
with six out of eight non-sovereign bonds withyield curves pricing with a greenium, and theremaining two pricing on their yield curve. The
USD Indonesia 2051 bond also priced with agreenium, and Indonesia now has a green USD
yield curve which sits inside its vanilla one.

Our work on green bond pricing has indicatedthat green bonds tend to tighten by more thanequivalents in the immediate secondary market,
and there is also emerging evidence of green
bonds having lower volatility. Our collaboration
with Tradeweb reveals that in 2020, qualifying EUR
green utility bonds issued in 2019 appeared to offer
investors more flexibility in the secondary market
too. Our analysis demonstrated that the numberof trades was higher for the green bond sample
in 11 out of 12 months, the bid/offer spread was
narrower in every month, the average bid/offer
spread range was narrower for green bonds, andthe average turnover was greater for green bonds
in seven out of 12 months. This suggests thatinvestors attach a value to the green label, andthe secondary market performance and flexibility
could help to justify the existence of a greenium.

Overall, performance in H1 demonstrated yet
again that green bonds can offer value to bothissuers and investors continuing the strong
trends seen in H2 2020. Qualifying bonds
attracted, on average, larger book cover thanvanilla equivalents, and experienced moreaggressive spread compression. The number ofbonds pricing on or inside their own yield curves
remains high at 26 out of 33 plus a further three
sovereign bonds. In the immediate secondary
market, USD and EUR green bonds tightened,on average, more than corresponding indices

Climate change is influencing investment
decisions and more investors are committing togreen and responsible investment strategies as
witnessed by the 18% increase in the amount ofgreen bonds allocated to investors describing
themselves as green or responsible. Moreinstruments are needed to support increased
capital flows. The high volume of green bonds

issued in H1 suggests that the Climate Bonds’
goal of USD1tn in annual issuance is well withinreach. The number and variety of green bondissuers continues to grow, enabling investors tobuild more diverse portfolios of green securities.
Defined transition frameworks will further broaden
the inclusion of a wider variety of entities.
Th recent IPPC report provides even more
overwhelming and urgent evidence that the
impact (and associated costs) of going over
1.5 degrees is much greater than the costs of
avoiding them.14 The IEA Net Zero report provides
a pathway towards net zero by 2050 with
ambitious targets for the growth of renewableenergy and green hydrogen as well as a complete
shift away from fossil fuels. The IPCC report also
shows the need to invest much more in resilient
infrastructure. It is now clear that even with
rapid declines in emissions, there will be a timelag before these are reflected in temperatures,
meaning decades of floods, forest fires and otherclimate-related disasters lie ahead. The need tobuild and finance resilient assets is clear.
Countries representing over 60% of the global
economy have now made commitments to
net zero, many of these have also made targets
for 2030 indicating that the structural changes
needed to the economy are not far in the future
but are beginning today. Over 20 countries aredeveloping green finance taxonomies in supportof or in addition to net zero targets to show whichinvestments are eligible to facilitate a transition.

EUR and USD remained the dominant currencies for labelled green bonds in H2 2020
3%

3%
10%

EUR 47%

6%

EUR
20%

Included in analysis
58%

Excluded
Non-investment grade

3%

Other
5%

Late entry
Structure

1%

1%
10%

Too small

15%
GBP
3%

Asset type

22%
SEK
8%

CNY
8%

USD 28%Tap

USD

Insufficient data
Non investment grade45%
CAD 2%
JPY 2%
SGD 2%
AUD 1%
Green Bond Pricing in the Primary Market: January - June 2021

1%

23

All these factors move in support of greater green
bond issuance from sovereigns, looking to meettheir mitigation targets and finance more resilient
assets as well as corporate entities requiring
the financing to alter their business models insupport of 2030 and 2050 climate targets.
This analysis is based on a limited numberof green bonds, chosen according to theparameters outlined on page 30. Green bonds
issued in other currencies, structures, formats,and sizes may perform differently from those
discussed in this paper.
Climate Bonds started monitoring green bondpricing in 2016, and after four and a half years(30 June 2021), 442 securities had been includedin the analysis. As the profile of green bonds
has evolved in the intervening period, pricing
dynamics have also changed. Observations madefour years ago will almost certainly not pertain to
the current market which is rapidly developing.
Climate Bonds will continue to monitor the
behaviour of green bonds in the primary and
immediate secondary market.

Green Bond Pricing in the Primary Market: January - June 2021

24

EUR summary statistics of bonds used for comparison
Bonds sharing similar characteristics to green bonds in our sample

Q1 Green bonds priced between 1 January and 31 March

Numberof Bonds

Average Coupon(Par Weighted)

Maturity

Deal Size
EURbn

Pricing date

DNB Boligkreditt AS 0.01% 21/01/2031 (CO))

1

0.01

10

1.5

14-JanCredit Agricole Italia SpA 0.125% 15/03/2033 (CO)

1

0.125

12

0.5

08-MarBanks 10 Years (CO)

3

0.01%

10

0.7

Jan-MarBayerische Landesbank 0.125% 10/02/2028 (SNP)

1

0.125

7

0.5

03-Febde Volksbank NV 0.375% 03/03/2028 (SNP)

1

0.375

7

0.5

24-FebA Banks 7 Years (SNP)

2

0.23

7

0.9

Jan

SpareBank 1 SMN 0.01% 18/02/2028 (SP)

1

0.01

7

0.5

11-FebIntesa Sanpaolo SpA 0.75% 16/03/2028 (SP)

1

0.75

7

1.25

09-MarA Financials 7 Years (SP)

3

0.16

7

0.9

Feb

Deutsche Kreditbank AG 0.01% 23/02/2026 (SP)

1

0.01

5

0.5

15-FebA Financials 5 Years (SP)

3

0.03

5

0.8

Feb-Mar

Nordea Bank Abp 0.5% 19/03/2031 (SNP)

1

0.5

10

0.5

15-MarCooperatieve Rabobank 0.625% 25/02/2033 (SNP)

1

0.625

12

0.75

18-FebLeasePlan Corp NV 0.25% 23/02/2026 (SU)

1

0.25

5

1

15-FebPSA Banque France 0% 22/01/2025 (SU)

1

0

4

0.5

12-JanMuenchener Hypothekenbank 0.375% 09/03/2029 (SNP)

1

0.375

8

0.5

03-Mar

Nykredit Realkredit AS 0.375% 17/01/2028

1

0.375

7

0.75

15-Feb

Berlin Hyp AG 0.01% 24/01/2028 (SS)

1

0.01

7

0.5

16-MarAAA Consumer Finance 6-8 Years (CO)

3

0.01

7

0.75

Jan

OP Mortgage Bank 0.05% 25/03/2031 (SS)

1

0.05

10

0.75

18-MarAAA Consumer Finance 10 Years (CO)

2

0.01

10

0.625

Feb-Mar

CTP BV 0.75% 18/02/2027

1

0.75

6

0.5

11-Feb

Equinix Inc 0.25% 15/03/2027 (SU)

1

0.25

6

0.5

24-FebGrand City Properties SA 0.125% 11/01/2028

1

0.125

7

1

05-JanEquinix Inc 1% 15/03/2033 (SU)

1

1

12

0.6

24-FebLEG Immobilien SE 0.875% 03/30/2033

1

0.875

12

0.5

16-MarDigital Intrepid Holding BV 0.625% 15/07/2031 (SU)

1

0.625

10

1

05-JanVonovia SE 0.625% 24/03/2031 (SU)

1

0.625

10

0.6

17-MarICADE 0.625% 18/01/2031

1

0.625

10

0.6

11-JanPrologis International Funding II SA 0.75% 23/03/2033 (SU)

1

0.75

12

0.5

09-MarSimon Intl Finance SCA 1.125% 19/03/2033

1

1.125

12

0.75

19-MarDaimler AG 0.75% 11/03/2033

1

0.75

12

1

04-MarA-BBB Autos 8-12 Years

2

0.38

10

0.625

Jan

Green Bond Pricing in the Primary Market: January - June 2021

25

Q1 Green bonds priced between 1 January and 31 MarchContinued from page

Numberof Bonds

Average Coupon(Par Weighted)

Maturity

Deal Size
EURbn

Pricing date

Neste OYJ 0.75% 03/25/2028

1

0.75

7

0.5

18-MarAker BP ASA 1.125% 12/05/2029*

1

1.125

8

0.75

05-MayAcea Spa 0.25% 28/07/2030

1

0.25

9

0.6

21-JanVattenfall AB 0.125% 12/02/2029

1

0.125

8

0.5

05-FebCadent Finance Plc 0.625% 19/03/2030

1

0.625

9

0.625

12-Mar

Nidec Corp 0.046% 30/03/2026

1

0.046

5

0.5

30-MarWolters Kluwer NV 0.25% 30/03/2028

2

0.25

7

0.9

23-MarE.ON SE 0.6% 01/10/2032

1

0.6

11

0.75

25-MarBBB Utilities 10-12 Years

5

0.74

11

0.50

Jan-Mar

UPM-Kymmene OYJ 0.5% 22/03/2021

1

0.5

10

0.5

15-MarHolcim Finance Lux SA 0.625% 06/04/2021

1

0.625

9

0.5

30-MarJapan Fin Org Municipal 0.01% 02/02/2028

1

0.01

7

0.5

27-JanCorp Andina de Fomento 0.25% 04/02/2026

1

0.25

5

1.25

28-JanNRW.Bank 0% 03/02/2031

1

0

10

0.5

25-JanAA+ Regionals 10 Years

1

0

10

1

Jan-MarEuropean Investment Bank 0.01% 15/11/2030

1

0

9

0.5

11-MarAAA Development Banks 7-10 Years

3

0

9

2.28

Jan

VGP NV 1.5% 08/04/2029

1

1.5%

8

0.6

31-MarBalder Finland OYJ 1% 20/01/2029

1

1.0%

8

0.6

13-JanFerrovie dello Stato 0.375% 25/03/2028

1

0.375

7

1

18-MarAlstom SA 0% 11/01/2029

1

0

8

0.75

05-JanHamburger Hochbahn AG 0.125% 24/02/2031

1

0.125

10

0.5

17-Feb

Kommunekredit 0% 03/03/2031

1

0

10

1

24-Feb* Green bond issued in Q1 2020 paired with vanilla bond(s) priced in Q2

Green Bond Pricing in the Primary Market: January - June 2021

26

Q2 Green bonds priced between 1 April and 30 June

Numberof Bonds

Average Coupon(Par Weighted)

Maturity(Years)Deal Size
EURbn

Pricingdate

DNB Boligkreditt AS 0.01% 21/01/2031 (CO))

1

0.01

10

1.5

14-JanCredit Agricole Italia SpA 0.125% 15/03/2033 (CO)

1

0.125

12

0.5

08-MarBanks 10 Years (CO)

3

0.01%

10

0.7

Jan-Mar

KfW 0% 15/06/2029

1

0

8

4

07-Apr

EIB 0% 28/09/2028

1

0

7

3

11-MayEnexis Holding NV 0.375% 14/04/2033

1

0.375

12

0.5

07-Apr

Red Electrica 0.5% 24/05/2033

1

0.5

12

0.6

10-MayEurogrid GMBH 0.741% 21/04/2033

1

0.741

12

0.5

13-AprChina Construction Bank Lux. 0% 22/04/2024

1

0

3

0.8

15-AprBank of China Lux. 0% 28/04/2024

1

0

3

0.5

21-Apr

CCB Europe SA 0% 28/06/2024

1

0

3

0.8

22-JunNeder Waterschapsbank 0.5% 04/26/2051

1

0.5

30

0.5

19-AprAAA SSA 30 Years **

3

0.32

30

0.53

Jan-MarBPI France 0% 25/05/2028

1

0

7

1.25

29-AprInstitut Credito Oficial 0% 30/04/2027

1

0

6

0.5

14-JunAA SSA 5-7 Years

3

0.06

6.3

0.75

Apr-JunIle de France Mobilites 0.95% 28/05/2041

1

0.95

20

0.5

25-MaySociete du Grand Paris 0.875% 10/05/2046

1

0.875

25

2

29-AprFreie Hansestadt Bremen 0.5% 06/05/2041

1

0.5%

20

0.5

29-Apr

SBAB 0.125% 27/08/2026 (SP)

1

0.125

5

0.5

20-MayA Banks 5 Years (SP)

2

0.09

5

0.5

Apr

SELP Finance SARL 0.875% 27/05/2029

1

0.875

8

0.5

20-MayCTP NV 1.25% 21/06/2029

1

1.25

8

0.5

14-JunBBB Real Estate 8 Years

3

0.74

8

0.75

May-JunBPCE SFH 0.125% 03/12/2030 (CO)

1

0.125

9

1.5

25-MaySwedish Covered Bond 0.01% 03/14/2030 (CO)

1

0.01

9

0.01

07-JunLand. Hessen-Thueringen 0.375% 04/06/2029 (SNP)

1

0.375

8

0.5

26-May

LB Baden-Wuerttemberg 0.375% 05/07/2029 (SNP)

1

0.375

8

0.5

27-AprBelfius Bank SA 0.375% 08/06/2027 (SNP)

1

0.375

6

0.5

01-JunDe Volksbank NV 0.25% 22/06/2026 (SNP)

1

0.25

5

0.5

15-JunBBB Banks 5-Years (SNP)**

2

0.71

5

0.75

Feb-Mar

ACEF Holdings 0.75% 14/06/2028

1

0.75

7

0.5

07-JunUnibail-Rodamco-Westfld 0.75% 25/10/2028

1

0.75

7

0.65

17-MayEIKA Boligkreditt AS 0.125% 16/06/2031 (CO)

1

0.125

10

0.5

08-JunCovered Bonds 10 Years

2

0.04

10

0.875

Apr-JunGreen Bond Pricing in the Primary Market: January - June 2021

27

Q2 Green bonds priced between 1 April and 30 June
Continued from page

Numberof Bonds

Average Coupon(Par Weighted)

Maturity(Years)Deal Size
EURbn

Pricingdate

CTP NV 0.5% 21/06/2025

1

0.5

4

0.5

14-JanEuronext NV 0.125% 17/05/2026

1

0.125

5

0.6

Jan-MarBanque Fed. Cred. 0.25% 29/06/2028 (SP)

1

0.25

7

0.75

17-JunYorkshire Building Society 0.5% 01/07/2028 (SP)

1

0.5

7

0.6

22-JunGecina 0.875% 30/06/2036

1

0.875

15

0.5

22-JunBBB Real Estate 12 Years

3

1.17

12

0.7

May-Jun

UBS 0.01% 29/06/2026

1

0.01

5

0.5

22-JunCredit Suisse AG London 0.25% 05/01/2026

1

0.25

5

1.5

17-MayCaisse Nat. Reassurance 0.75% 07/07/2028 (SUB)

1

0.75

7

0.5

30-JunMutuelle Assurance 0.625% 06/21/2027 (SUB)

1

0.625

6

0.5

14-Jun

Polski Koncern Naftowy 1.125% 27/05/2028

1

1.125

7

0.5

20-MayAker BP ASA 1.125 (Not EM)

1

1.125

8

0.75

05-MayIle de France Mobilites 0.4% 28/05/2031

1

0.4

10

0.5

25-MayLand Hessen 0.01% 18/06/2031

1

0.01

10

0.6

11-JunAAA SSA 10 Years

2

0.03

10

0.5

Apr-JunTenneT 0.125% 09/12/2027

1

0.125

6

0.65

26-MayEWE AG 0.25% 08/06/2028

1

0.25

7

0.5

01-JunTerna Spa. 0.375% 23/06/2029

1

0.375

8

0.6

16-JunFluvius System OP 0.25% 14/06/2028

1

0.25

7

0.5

07-JunTenneT 0.5% 09/06/2031

1

0.5

10

0.5

26-MayTenneT 1.125% 09/06/2041

1

1.125

20

0.65

26-MayRWE AG 0.625% 06/11/2031

1

0.625

10

0.6

01-JunBBB Utilities 10-12 Years**

5

0.74

11

0.5

Jan-MarLandwirtsch. Ren. 0% 30/06/2031

1

0

10

1

23-JunAsia 0.1% 17/06/2031

1

0

10

1

08-Jun** Green bond issued in Q2 2020 paired with vanilla bond(s) priced in Q1

Green Bond Pricing in the Primary Market: January - June 2021

28

USD Summary Statistics of bonds used for comparison
Bonds sharing similar characteristics to green bonds in our sample
Q1 Green bonds priced between 1 January and 31 March

Numberof Bonds

Average Coupon(Par Weighted)

Maturity(Years)Deal Size
EURbn

Pricing
date

Sumitomo Mitsui Financial Group 0.508% 12/01/2024

1

0.58

3

0.5

04-JanToronto-Dominion Bank 0.55% 04/03/2024

1

0.55

3

0.75

01-MarSK Battery America Inc. 2.125% 26/01/2026

1

2.125

5

0.7

19-JanPioneer Natural Resource 1.125% 14/01/2021

1

1.125

5

0.75

14-JanHyundai Capital Services 1.25% 08/02/2026

1

1.25

5

0.6

01-FebBBB Autos 5 Years

3

1.32

5

1.1

Jan-Feb

Deutsche Bank NY 1.686% 19/03/2026

1

1.69

5

0.8

16-MarBPCE SA 1% 20/01/2026

1

1

5

1.75

12-JanSumitomo Mitsui TR BK LT 1.55% 25/03/2026

1

1.55

5

0.5

18-MarLSEGA Financing Plc 1.375% 06/04/2026

1

1.375

5

1

25-MarDTE Electric Co. 1.9% 01/04/2028

1

1.9

7

0.575

22-MarA Utilities 10 Years

2

2.2

10

0.65

Feb-MarQ2 Green bonds priced between 1 April and June 30

Numberof Bonds

Average Coupon(Par Weighted)

Maturity(Years)Deal Size
USDbn

Pricingdate

Brookfield Finance Inc. 2.72% 15/04/2031

1

2.724

10

0.5

07-AprBlue Owl Finance LLC 3.125% 10/06/2031

1

3.125

10

0.7

03-JunBank of China (Lux) 1.4% 28/04/2026

1

1.4

5

0.5

21-AprAgricultural Bank of China (HK) 1.25% 17/06/2026

1

1.25

5

0.5

09-JunBank of China (Sing.) 0.8% 28/04/2024

1

0.8

3

0.5

21-AprAgricultural Bank of China (HK) 0.7% 17/06/2024

1

0.7

3

0.5

09-JunEquinix Inc. 2.5% 15/05/2031

1

2.5

10

1

03-MayBBB Real Estate 10 Years

2

0.00

0

0

Jun

EIB 1.625% 13/05/2031

1

0.016

10

1.5

06-MayAsia Development Bank 1.25% 09/06/2028

1

1.250

7

1.5

02-JunNextera Energy Capital 1.9% 15/06/2028

1

1.90

7

1.5

02-JunPuget Energy Inc. 2.379% 15/06/2028

1

2.38

7

0.5

03-JunKaiser Foundation Hospital 2.81% 01/06/2041

1

2.81

20

1.25

08-JunUnited Health Group Inc. 3.05% 15/05/2041

1

3.05

20

1.5

17-MayLG CHEM 2.375% 07/07/2031

1

2.375

10

0.5

28-JunHyundai Capital America 2% 15/06/2028

1

2

7

0.85

10-JunLG CHEM 1.375% 07/07/2026

1

1.375

5

0.5

28-JunHyundai Capital America 1.5% 15/06/2026

1

1.5

5

0.85

10-JunGreen Bond Pricing in the Primary Market: January - June 2021

29

Methodology
This paper includes labelled green bonds issued
during H1 2021. Labelled green bonds meetingthe following specifications are included:• Announcement date between 01/01/2021 and
30/06/2021• 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 Green Bond
Database
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 are compared to a US treasury curve.
All historical data is from Refinitiv EIKON.

Comparable baskets include bonds issued in
the same quarter as the subject green bond.
Comparable bonds must fit the parametersdescribed above except that they are notlabelled and the use of proceeds is not explicitly
green. Baskets comprise the closest possible
matches based on the following considerations
in order of priority: a) currency, b) market type
(EM/DM/Sukuk), c) no other thematic label,d) seniority, e) maturity, f) credit rating and g)
sector, among bonds issued in the same quarter.
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 five bonds.
We acknowledge that bonds behave differently
depending on when they are issued and that
geo-political events can affect bond prices fromone day to the next. This proxy was designed tocircumvent the fact that vanilla bonds and green
bonds with similar characteristics are rarely
issued on the same day.

Endnotes
1. MSCI https://www.msci.com/market-classification
2. iBoxx USD Corporate BBB and iBoxx EUR Corporate BBB
3. https://www.climateneutraldatacentre.net/
4. https://batteryindustry.tech/sk-battery-america-sells-1-bn-greenbonds-at-lower-rates/
5. Fitch Ratings research on the growth in green bond funds
6. E.ON green bond framework
7. XS0301665310 maturity date of 2012 hence eight such bonds areoutstanding
8. https://www.dsgv.de/en/social-commitment.html
9. https://sustainable-finance-beirat.de/
wp-content/uploads/2021/03/210319_
SustainableFinanceCommiteeRecommendations.pdf
10. LBBW deal review
11. FX rate as of 01/06/2021
12. https://press.gecina.fr/news/gecina-targets-net-zero-carbon-forits-operational-portfolio-by-2030-with-its-can0p-2030-plan-45e3343e9-1.html
13. Foreign exchange rates used Section 8 are as of 15/08/2021 andare given as an indication only.
14. https://www.ipcc.ch/sr15/

With funding support by Lyxor Asset Management, IFC, Tradeweb

Climate Bonds Initiative © September 2021

Author: Caroline Harrison

Suggested citation: Harrison, C., Green Bond
Pricing in the Primary Market H1 2021, Climate
Bonds Initiative, September 2021

Editor: Bridget Boulle
Design: Godfrey Designwww.climatebonds.net
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
an individual or organisation, based in whole or in part on any information contained within this, or any other Climate Bonds Initiative public communication.

Green Bond Pricing in the Primary Market: January - June 202130