Market Blog #2/2018: Three new Sovereign GBs: More on NAB Certified RMBS; Green
Bond Pioneer Awards coming soon!
Highlights:
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Indonesia’s Sovereign GB is Asia’s first, while Tropical Landscape Finance Facility is Indonesia’s
first green bond issuer. Hong Kong announces world’s biggest Sovereign program
Belgium’s green OLO generates strong investor demand and becomes second largest sovereign
green bondMore on NAB’s Certified green RMBS tranche
US Muni debut from Pennsylvania with Ligonier Valley School District’s green bondFebruary trends: practically all proceeds allocated to Renewable Energy and Low Carbon
Buildings; Sovereign issuance takes the lead among issuer types

Green bond deals across the globe

2018 Issued
19.7 Bn

USD Bn0345 Bn100

200

369 Bn300

400

Total Outsanding
500

Total Issued

Click here to see the full list of February’s new and repeat issuers

At a glance
February started off slowly and monthly green bond issuance totalled only USD4.4bn, 44% lower thanJanuary and 37% below February 2017’s total. Some big deals announced towards month’s end and tosettle in early March, put the trend back on track to achieving, and possibly exceeding, last year’s
equivalent monthly figures.

February also saw three new issuers, which is fantastic, but repeat issuers accounted for 95% of themonth’s volume with development banks EIB and KfW contributing 22%. Renewable energy and Low
Carbon Buildings are still the most prominent use of proceed sectors, accounting for 56% and 43% of
issuance respectively.
The march of the Sovereigns continues. Poland’s repeat sovereign issuance represents 29% of the
February's green bond volume. Indonesia and Belgium’s sovereign green bonds add up to USD6.5bn, orthe equivalent of 50% of March 2017’s total issuance. Hong Kong’s ambition to become Asia's green
finance hub were boosted by their budget announcement of the world’s biggest sovereign green bondprogram.
Lastly, the Climate Bonds Conference, Europe’s largest single green bond event kicks off in less than two
weeks. Will you be joining us? And don’t forget the coveted Green Bond Pioneer Awards, now in their
3rd big year.

>See the full list of new and repeat issuers here.

Certified Climate Bonds
NAB RMBS tranche (AUD300m/USD233m)
The National Australia Bank (NAB), one of Australia’s ‘big 4’ banks, issued AUD2bn Residential
Mortgage-Backed Securities (RMBS). The securitisation includes a green tranche of AUD300m(USD233m)(link is external). The green bond is Australia’s first to obtain Certification under the Climate
Bonds Standard for Residential Low Carbon Buildings. The certification is a confirmation of Australianmarkets' commitment to best practice standards in green bond issuance.
DNV GL provided the Pre-Issuance Verification Statement.

New issuers – February
Pennsylvannia's Ligonier Valley School District (USD10m), issued a 15-year bond, the first green muni
from the state. The USD10m Series A (Green Bond) is part of a USD13.8m deal which will finance the
School District’s initiatives under its Energy Efficiency Project, according to the prospectus. Of the
USD16.7m of identified improvements, USD13.6m have associated quantifiable energy consumption
benefits, according to Moody’s. The projects are largely consistent with the energy efficiency andsustainable water and wastewater management categories of the GBP, but given that not all projectcomponents have a quantifiable positive benefit, the district elected to take a conservative approachand only label USD10m as green bonds. The green bond was awarded a GB1 rating by Moody’s.
To calculate the expected energy consumption savings, LVSD’s partner Constellation Energy Groupgenerated a consumption baseline through a review of the district's current utility bills, and thencompared expected energy generation to the baseline. Beginning in March 2021, 12 months after
expected project completion, Constellation will start issuing annual reports with the actual energy andfinancial savings by project component.
Climate Bonds view: Well done to the Keystone State in its green muni debut. The multi-tranche deal
structure provides a template for issuers who may wish to finance a variety of projects, but not all would

qualify for a green label. We also view positively the promise to report annually on actual energy andfinancial savings relative to an established consumption baseline. We’re looking to USD20bn from the
US muni sector this year, a small but welcome start.
Foncière Inéa (EUR100m/USD123m), a French real estate company, issued a green private placementbond, a first from a mid-sized French issuer. Proceeds will be allocated to the acquisition of certified
commercial buildings close to public transport. The deal benefits from an SPO from Vigeo Eiris (notpublicly available).
Climate Bonds view: Having reviewed the eligibility criteria outlined under the green bond framework(not publicly available), we are satisfied that the placement is in line with the Climate
Bonds Taxonomy and the building certification level is aligned with the higher end of industry practice.
Indonesia’s TLFF I Pte Ltd (USD95m), a financing vehicle for the Tropical Landscapes Finance Facility,
issued a 15-year multi-tranche sustainability bond deal, as part of a USD350m project. The TLFF projectis a JV between France’s Michelin and Indonesia’s Barito Pacific Group. Proceeds will finance asustainable rubber plantation on heavily degraded land in the Jambi and East Kalimantan provinces ofIndonesia. The plantation will cover 34,000ha out of 88,000ha, while the remaining land will be used forconservation, aquaculture, land restoration and smallholder plantations, including bamboo, cocoa,
coconut, coffee, palm and rubber. The deal benefits from a USAID guarantee and the issuer obtained
a Vigeo Eiris second party opinion.
Climate Bonds view: There are social components to this issue, but the sustainable agriculture basis
combined with conservation of nature corridors for endangered species and the planned restoration of
degraded land fit in with the Nature Based Assets category of the Climate Bonds Taxonomy. Sustainable
land use appears to be the prevalent use of proceeds and we would hope to see this confirmed in futurereports.

New Issuers – priced in February, settled in March
Kingdom of Belgium (EUR4.5bn/USD5.5bn) closed a 15-year Green government bond (OLO) on
5th March. This is the country’s first green OLO and the second largest sovereign green bond issued todate after the French Green OAT bond in January 2017. The proceeds will finance primarily cleantransport (85%) with EUR2.2bn to be invested in domestic passenger trains for the benefit of SNCB andrailway projects, according to the Belgian Debt Office.
Eligible categories under the Green OLO Framework also include living resources and land use,
renewable energy, circular economy and energy efficiency, as well as related federal state expendituresthat can contribute to meeting Belgium’s climate policy objectives. In its SPO, Sustainalytics recognises
the importance of government incentives in driving emission reductions in the public and private
sectors, especially through energy efficiency improvements, and expresses a positive view regarding
such expenditures.
Climate Bonds view: We agree with Sustainalytics’ view that it makes sense to fund supportive
government incentives and would hope to see evidence of their impact on GHG reductions in futurereporting. For energy efficiency renovations in buildings, we note that communicating threshold levelsin the framework would contribute to its transparency and clarity, albeit this is not so crucial for now
given the focus on transport.

Republic of Indonesia (USD1.25bn) closed a 5-year green sovereign sukuk on 1 March. This is the first
Asian sovereign green bond and the second Indonesian green bond. Proceeds can finance eligible
projects under a wide range of categories, according to the green bond framework.
In the second party opinion CICERO identifies concerns on several fronts regarding eligible projects. For
instance, CICERO awarded the Green Buildings category a “Light Green”, stating that the type of building
certification does not ensure energy efficiency improvements since “it is possible to achieve a Bronze ora Silver Greenship certificate with no energy efficiency credits.” For Sustainable Management of Natural
Resources, CICERO expressed concerns that some projects may involve deforestation, assessing thiscategory as a “Light to Dark Green”.
Climate Bonds view: We agree with CICERO that there are potential concerns and would like to see
more clarity and transparency around all investment projects in future reporting. Now that the bond has
been issued, ministries and agencies can apply for funding, so it remains to be seen which projects will
be shortlisted and approved. We would also like to find out what share of proceeds are ultimately
allocated to projects that do not align with the Climate Bonds Taxonomy – such as social programs (e.g.
public health management, food security), rerouting roads, green tourism and R&D investments.
>See the full list of new and repeat issuers here.

Repeat issuers
February:
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CACIB: INR440m; TRY9.5m/USD2.5m; TRY6.8m/USD1.8m
EIB: AUD400m/USD321m
Fabege AB: SEK1bn/USD122m
KfW: SEK5bn/USD632m
MidAmerican Energy: USD700m
Midpeninsula Regional Open Space District: USD50m
Province of Ontario: CAD1bn/USD813m
Republic of Poland: EUR1bn/USD1.2bn

March to date:••

Modern Land (China) Co: USD350m
Province of Québec: CAD500m

New issuers – previously pending
If issuers do not provide sufficient information on the use of proceeds, the bonds are tagged as“pending”. If and when satisfactory additional information becomes available, we may include them inour database.
Eidsiva Energi (NOK750m/USD94m), a Norwegian energy company, issued a 6-year green bond in
October 2017. Proceeds will be allocated to wind and hydro power projects, energy efficiency projects
related to district heating, connection of renewable energy to the grid, transmission and distribution
network upgrades, and smart grids. Fossil fuel energy generation projects are excluded. The deal
benefits from a CICERO(link is external) SPO.

Climate Bonds view: The bond was placed on Climate Bonds’ Pending list at issue while we obtained
further information on Norwegian hydro power plants. Based on information provided by CICERO, wehave concluded that the deal meets our inclusion criteria.
Östersund Municipality (SEK800m/USD96m), Sweden, issued a 5-year green bond in November 2017.
Proceeds will be allocated to projects of municipality owned companies Östersundhem AB and
Jämtkraft. In its SPO CICERO notes that the issuer expects proceeds to fund primarily renewable energy
and energy efficiency in buildings, although the framework covers a wide range of categories. The
criteria for eligible building projects cover (a) FEBY, a Swedish Passive House standard, Svanen, theNordic Swan Ecolabel awarded to energy-efficient small houses, flats and pre-school buildings, andMiljöbyggnad Silver as well as (b) major renovations which lead to a reduced energy use of at least a
35% per m2Atemp per year.
Climate Bonds view: This is another bond from the booming Nordic public sector, the subject of a
recent Climate Bonds report. The bond was placed on Climate Bonds’ Pending list at issue while weconsidered possible investment in hydro power plants and the production of hydrogen from electrolysis
or other residual flows. We have now concluded that the deal meets our inclusion criteria. We further
note positively the promotion of a passive house standard and the minimum 35% energy use reduction
required for refurbishments.

New bonds – pending and excluded
We only include bonds with at least 95% proceeds dedicated to green projects that are aligned with the
Climate Bonds taxonomy in our green bond database. Though we support the Social Development Goals
overall and see many links between green bond finance and specific SDGs, the proportion of proceeds
allocated to social goals needs to be no more than 5% for inclusion in our database.
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ANZ (EUR750m/USD938m) – Excluded: SDG bond with 39% of proceeds allocated to sustainable
development project categories, including healthcare, education, socio-economic advancement
and empowerment.

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City of Barcelona (EUR35m/USD43m) – Excluded: sustainability bond with proceeds allocated tocategories including socioeconomic advancement, affordable housing and employment
generation.

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Community of Madrid Spain (EUR1bn/USD1.2bn and EUR48m/USD54m) – Excluded:
sustainability bonds with proceeds financing a wide range of project categories, including
affordable housing, education, healthcare.

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Guangzhou Yuexiu Group (RMB2bn/USD314.5m) – Excluded: aligned with PBOC green bondguidelines but excluded as 60% of proceeds will be allocated to working capital. The other 40%
will be allocated to finance a paper recycling facility, wastewater treatment and a timber
plantation, which is not FSC certified.

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Iberdrola (EUR5.3bn/USD6.5bn) – Excluded: labelled green syndicated loan, which benefits froma Vigeo Eiris review. Excluded as proceeds will finance the company’s general sustainability
program rather than specific categories that align with the Climate Bonds Taxonomy.

•World Bank (IBRD) (USD350m; SEK1.2bn/USD150m) – Excluded: sustainability bonds with use ofproceeds financing healthcare projects in Argentina and Switzerland, waste management in six
urban districts in China, water and sanitation infrastructure improvements in India and coral reef
rehabilitation support in Indonesia.

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Fulcrum Sierra Biofuels LLC (USD150m) – Excluded: labelled green US Muni bond issued in
October 2017 and added to our pending list while waiting for a prospectus to be made publicly
available. The bond is being excluded due to insufficient information on the bond use ofproceeds.

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Virginia Small Business Financing Authority (USD40m) – Excluded: labelled green US Muni bondissued in December 2017. As no prospectus or other documents specifying use of proceed
allocation has been made publicly available, the bonds is being excluded due to insufficient
information.

Trends of the month
February volume by issuer type
8

Loan

7

Sovereign

6

Government-backed entity

5

Local government

4

Development bank3

Non-financial corporate

2

Financial corporate

1

ABS

0
2018

2017

Repeat issuers account for 95% of February's green bond volume
Credit Agricole CIB
EIB
Fabege AB
KfW
MidAmerican Energy
Midpeninsula ROSD

NAB
Province of Ontario
Republic of Poland

0
USD Billions

1

2

3

4

New Issuers

Green bonds in the market••••

California Infrastructure & Economic Development Bank: USD449.2m – priced, closes 8 March
Prologis European Logistics Fund: EUR300m – priced, closes 15 March
Brookfield Renewable Partners: USD350m note received a green evaluation score of E1/90 from
S&P Global Ratings
Growthpoint Properties (property development) is set to issue their first green bond on 9 March– and become the first corporate green bond issuer in South Africa

Investing News
Generali Group, the largest Italian insurance company, announced it will divest from coal companies andincrease green investments by EUR3.5bn by 2020.
Spanish bank BBVA recently pledged to direct EUR100bn to finance green and sustainable projects by
2025, including through the potential issuance of sustainability bonds.
The Green Climate Fund has committed to direct an additional USD1.09bn towards mitigation andadaptation projects in developing countries.
Natixis repackaged France’s sovereign green OAT into a green structured note of EUR7bn (USD8.6bn).

Lots of Green Gossip
The Belgian Debt Agency announced that the newly issued green OLO is expected to grow to USD10bn
by 2022 through subsequent taps.
Moody’s assigned a Green Bond Assessment of GB1 (Excellent) to Lebanese bank Fransabank SAL’s
USD60m debut green bond, expected to close in March.
Moroccan Al Omrane group recently announced their plan to issue green bonds amounting to up to 1
billion dirhams (USD272m). Issuance of the bonds is expected to start in July.
Lima Stock Exchange (BVL) Chairman Marco Zaldivar announced that Peru is set to launch its green bondguidelines in March.
After receiving positive investor interest for Ghana’s planned sixth Eurobond, Finance Minister Ken
Ofori-Atta stated the country’s interest in issuing green bonds.
During the announcement of Hong Kong’s Fiscal Budget 2018-2019, Financial Secretary Paul Chan Mopo proposed the launch of a green bond programme with a ceiling of HKD100bn (USD12.8bn). The
government also announced the introduction of a Green Bond Grant Scheme to subsidise issuers that
qualify under the Green Finance Certification Scheme, recently launched by the Hong Kong Quality
Assurance Agency.

Reading and Reports
CBI recently released the “Green Bond Pricing in the Primary Market” report, which analyses theperformance of green bonds issued in Q3 2017.
In case you missed it, our latest Quarterly Newsletter covers the expansion of our Standards program tocover new sectors eligible for green bond certification through 2018.
Look for some big announcements over the next month.

Moving Pictures
You can watch our top 5 policy highlights for 2017 here (0:44secs).
Take only 0:45secs to hear our CEO Sean Kidney talk to EFNTV on how Sweden is at the forefront ofsustainability.
For your weekend viewing, watch an up close 36:50secs of Sean Kidney speaking in depth on Financing
Solar PV with Debt Capital from the recent Making Solar Bankable conference in Amsterdam.
And don’t miss our 60sec Super Trends for 2018 from early January. We’re pleased to see some of themcoming to fruition already.

‘Till next time,
Climate Bonds

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