GREEN BOND PRICING
H2
IN THE PRIMARY MARKET: (Q3-Q4)
2022

July-December 2022

Report highlights• Sample includes 72 green bonds with a
combined face value of USD79bn, priced
between July and December 2022
• Green bonds in both EUR and USD
performed well on all metrics in the
primary market, on average• Issuers said the green label
supported deals• Green bond ETF assets achieved net
growth of 11% on the prior period• Spotlight: Relative values: where thegreenium persists

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative11. Introduction

By mid-January 2023, USD204.5bn worth of green
bonds priced in H2 2022 had been added to the
Climate Bonds Green Bond Database (GBDB),
a 29% decline from H1 2022 (USD287.7bn as ofJanuary 2023). This report includes 39% of theamount recorded in the Climate Bonds GBDB
for H2, that met the above requirements, i.e.,
USD79bn split between 72 green bonds from 58
issuers. EUR was the dominant currency with 56
bonds amounting to EUR66.1bn (USD66.7bn),
while 16 qualifying USD denominated bonds
had a combined issue size of USD12.3bn.
Sovereign green bond performance isassessed separately in the Sovereign Green
Bonds Club section of this report. Sovereigns
are subject to different pricing dynamics thanbonds from other issuer types and we address
their performance on an absolute basis.

Market developments
Macroeconomic conditions posed challenges fordebt issuers in H2 2022. At the beginning of July,
European growth forecasts were downgraded,inflation forecasts were revised upwards asenergy costs continued to rise, and the EUR
currency headed towards parity with the USD.
That level was eventually breached in August,and by October, a Europe wide recession was
looking more likely. EUR corporate bond spreads
reached their 2022 highs in early July and while
spreads had retraced somewhat by year end,
all categories except AAA (-4%) ended the year
significantly wider: AA by 65%, A by 92%, and BBB
by 91%. In the USD market, the highs came in
October as prospects of a US recession increased,
and corporate spreads ended the year wider in all
categories, albeit more subdued than EUR: AAA
widened by 6%, AA by 15%, A by 40%, and BBB
by 37%.
Against this backdrop, issuers continued to visit
the bond market, but with caution illustrated
by multi-day periods with no new issuance, andreports of deals being pulled at the last minute.
Numerous green bond issuers emphasisedthat the green label supported deal
placement in volatile markets.

Category

EUR

USD

SSA

10

1

Covered

6

N/A

A

10

10

BBB

24

5

Sovereign + EU

6

N/A

Total

56

16

Hungary 2027 was priced in EUR as opposed toits local currency (HUF) but we include it in thesame section because there were no comparable
bonds priced during the observation period. The
European Union (EU) a supranational issuer, isalso subject to peculiar pricing dynamics and isagain discussed separately.

Report highlights:• Green bonds achieved higher bookcover and spread compression thanvanilla equivalents, on average.
See more on page 4• Overall, 67% of green bonds wereallocated to investors describing
themselves as having green or
responsible investment mandates.
See more on page 7• Yield curves could be built for 50
bonds in our non-sovereign sample.
Ten priced inside their issuer’s yield
curves, achieving a greenium.
See more on page 9• After 7 and 28 days, green bonds had
tightened by more than comparable
vanilla baskets and corresponding
indices, on average.
See more on page 9• Green bond ETFs: total fund assets
in EUR and USD green bond ETFs
ended the period at USD1.9bn, a netincrease of 11.2% on the prior period.
See more on page 12• Sovereign Green Bond Club: Austria,
Belgium, Germany, Hungary, Italy,
and the EU priced green bonds
together worth USD23.7bn.
See more on page 13• Spotlight: Relative values: where
the greenium persists — we compare
bonds bearing thematic labels withvanilla equivalents and note that on
average, thematic bonds price closer
to their yield curves.
See more on page 15

EUR Corporate Credit Spreads
250

AAA

AA

A

BBB

200
Asset Swap Spread

Our methodology is designed to capture themost liquid portion of the green bond market
and is thus limited to USD and EUR bonds witha minimum original issue size of USD475m(lowered in H2 2022 to catch EUR500m deals).
Developed market (DM), emerging market (EM)and supranational issuers (SNAT) are included.1
The full methodology is explained on page 17.

Description of sample H2 2022

150
100
50
0
March
2022

January
2022

May
2022

July
2022

September
2022

November
2022

July
2022

September
2022

November
2022

Source: Refinitv

USD Corporate Credit Spreads
250

AAA

AA

A

BBB

200
Asset Swap Spread

This is the 15th report in our pricing series, inwhich we observe how green bonds performin the primary market. This report includes
green bonds priced in the last six months of2022 (H2 2022).

150
100
50
0
January
2022

March
2022

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

May
2022

Source: Refinitv

2

Auto manufacturers pile into
the green lane
Auto manufacturers are now using thegreen label more frequently to support thedevelopment of green technologies and in
2022 Climate Bonds recorded green deals from
Chinese auto company BAIC Motors, Ford, Kia
Corp, General Motors, GMAC, Honda, Hyundai,
Renault, Volvo, and Volkswagen. As noted in
the H2 2020 iteration of this paper, auto-makers
are now entirely focused on clean solutions
hence there is huge potential to relabel existing
debt as green as it rolls off.2 We also expect theaffordability of low carbon vehicles to facilitate
a deluge of green auto loan ABS deals over the
next few years.
Historically, the green corporate bond market has
lacked diversification potential, being dominatedby bonds from issuers operating in the finance,
utility, and real estate sectors. Seasoned debt
issuers with strong sustainability strategies
operating in other areas can magnetise investor
interest for green bonds, and this extends to theauto sector.
This report includes six bonds from three auto
manufacturers: In EUR Renault 2027, VW
2025, VW 2028, VW 2030, plus one deal, ALD
2027 from French car leasing company ALD
Automotive, and in USD GM 2029, and GM
2032. All of these deals were strongly supported
by investors describing themselves as green
with eventual allocations for ALD, Renault, andVW reaching at least 80% (see page 7). ALD
Automotive priced its first green deal at the end

Green issuance volumes declined by 7% in 2022
100
2021
80

2022

60

40

USD Billions

Green bond volumes recorded in the Climate
Bonds GBDB in 2022 declined slightly by 7%
compared to 2021 but maintained a steadycontribution of around 3% to total market
volumes. H2 green issuance reached USD293.6bn,compared to USD355.4bn in H1, with September
being the most prolific month of the year at
USD75.9bn. November came a close second withvolumes of USD72.8bn, an increase of 8.6% on
the year. None of the bonds contributing to the
USD26.9bn priced in December were eligible forinclusion in this report.

20

0
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: Climate Bonds GBDBof June 2022 following the publication of its
Green and Positive Impact Bond Framework.3
The Framework was aligned with best practicein compliance with the EU Green Bond Standard
and proceeds of the deal were reserved forbattery electric vehicles (BEV). The issuer
reported that investors were attracted to thedeal by the strong sustainability strategy and thediversification play would have contributed too.
Renault also priced its first green bond at theend of June with proceeds earmarked to financeor refinance BEV and charging infrastructure.
The issuer acknowledged that the green label
contributed to the successful execution of
the deal during a particularly volatile period.
Volkswagen priced its three tranche EUR2.5bn(USD2.6bn) deal in early November bringing its
total green liabilities to EUR7.4bn (USD6.8bn),
the largest of any auto manufacturer. Around
80% of each tranche was placed with green
investors underscoring the appetite for thissort of paper. Volkswagen’s Green Finance
Framework, revised in October 2022,
highlighted BEVs as the only category of eligible
expenditures, consistent with the Group’s longterm target of carbon neutrality by 2050.4

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

Remarks:• Three bonds priced in late Q2 were
included in this analysis because they
were not added to the Climate Bonds
GBDB in time for inclusion in the prioriteration of this paper. They are ALD
2027, KFW 2029, and Renault 2027.
The bonds are compared with vanillaequivalents also priced in Q2.
• Seniority rankings of financial corporate
bonds are denoted using the following
abbreviations: Senior Preferred (SP),Senior Non-Preferred (SNP) and Covered(CO). As per our standard methodology,
the payment rank of the green bond ismatched when selecting vanilla bonds
with which to compare the performance.
• The methodology for the selection of thebonds used as comparators is given on
page 17.

3

2. Spread compression and book size: green bonds in both EUR and USD attracted larger book coverand exhibited larger spread compression than vanilla equivalents, on average• EUR: Average oversubscription was 3.6 times forgreen bonds versus 3.0 times for vanilla equivalents.
Spread compression averaged 21bps for green bonds
and 19bps for vanilla bonds.

• USD: Average oversubscription was 5 times forgreen bonds and 3 times for vanilla equivalents.
Spread compression averaged 25bps for green bonds
and 18bps for vanilla bonds.

EUR Book cover

USD Book coverCategory

Number ofgreen bonds
beating
vanillabasketGreen
bondsampleVanillabasketaverage
book
cover

Green
averagebook
cover

Category

Number ofgreen bonds
beating
vanillabasketGreen
bondsampleVanillabasketaverage
book
cover

Green
average
book
cover

SSA

10

7

2.9

2.5

SSA

1

1

3.8

1.6

Covered

6

5

3.2

1.7

A

10

8

6.1

3.3

A

10

5

2.8

2.3

BBB

5

2

2.8

3.2

BBB

24

12

4.3

3.9

Total

16

11.0

4.9

3.0

Total

50

29.0

3.6

3.0

Five EUR green bonds achieving largest book cover
Deal
size
EURbn

Reported
order
book
EURbn

Book
cover

Vanillabasketbook
cover

EDP 2030

0.50

6.5

13.0

Statkraft
2029

0.50

4.9

9.8

Eurogrid
2031

0.75

BBB

SSE Plc
2029

0.65

5.6

8.6

4.0

SSA

EIB 2030

4.00

33

8.3

3.8

Category

Short
Name

BBB
A
BBB

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

EUR green bond pricing
EUR green bonds accumulated larger orderbook cover in H2 2022 (3.6 times) compared toH1 (3.1 times). This increased appetite extended
to vanilla bonds which recorded average bookcover of three times in H2 against 2.4 times in
H1, undoubtably exacerbated by the market
volatility and relative scarcity of new bonds inthe second half of the year. Spread compression
during book building also rose to an averageof 21bps in H2 against 18bps in H1 for green
bonds, and 19bps compared to 16.bps in H1 forvanilla bonds.
While the book cover attained by green bonds
was greater in H2 compared to H1, individually,
58% of green bonds (28 out of 50) experienced

6.5

8.7

Five USD green bonds achieving largest book cover
Deal
size
USDbn

Reported
order
book
USDbn

Book
cover

Vanillabasketbookcover

NTT 2027

0.5

4.4

8.8

2

A

NTT 2024

0.5

4.3

8.6

2

A

NTT 2025

0.5

3.9

7.8

5

A

Gaci 2027

1.3

10.3

6.8

2

A

Gaci 2032

1.3

8.5

6.8

2

Category

Short
Name

3.6

A

4.0
7.1

greater oversubscription compared to vanillaequivalents, which is similar to the prior two
observation periods.
59% of green bonds (27 out of 46) achievedlarger spread compression that their vanillaequivalents, a higher share than H1 2022 (53%).
Bonds in the sample excluded from this analysis:
VW 2030 achieved book cover of 3.1 times but its
vanilla basket did not have data for that point.
Four bonds achieved the same amount oftightening as their respective vanilla counterparts:
SNCF 2027 (0bps), Caixa Bank 2029 (SP) (20bps),
TenneT 2042 (20bps), and Amprion 2027 (40bps).
Book coverFour utility companies were among the EUR
deals achieving the largest book cover in H2. The
fifth spot was taken by EIB.
France’s EDP 2030 attracted an order book of
EUR6.5bn, covering the EUR500m (USD490m)
deal 13 times. According to the issuer, this was
the largest reported book cover for an investment

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

grade deal since June 2020 and is the second
largest recorded by Climate Bonds for a green
corporate bond (the high remains Prologis
2032 with a book cover of 14 times the EUR
deal size in June 2020). The proceeds of the deal
were earmarked for renewable energy projects,
consistent with EDP’s objective of becoming
100% green by 2030.
Norwegian hydropower company Statkraft
2029 built an order book for it’s EUR500m(USD510m) deal of 9.8 times its size, only beaten
by four historical green bond deals recorded
by Climate Bonds. Statkraft will mobilise theproceeds for renewable energy and cleantransportation. Its Green Bond Financing
Framework states an intention to be among the
top-three most climate-friendly European-based
power generators, and to be carbon neutral by
2040 for scope 1 and 2 emissions, (but makes nomention of scope 3).5
German electric utility Eurogrid 2031 covered
its EUR750m (USD750m) 8.7 times. It was thesecond green bond from the company, indirectly4owned by Belgium’s Elia and KfW, with proceeds
earmarked for improvements to offshore andonshore grid transmission of renewable energy.
SEE plc 2029 returned to the EUR green bondmarket for the third time and obtained an orderbook 8.6 times the EUR650m (USD667m) final
deal size. The July deal was boosted by thetiming, following an eight-day run of no newissues in the EUR market, plus the company’s firstquarter trading update which slightly exceeded
expectations. The issuer mentioned that thedeal attracted very high participation from green
investors which helped to squeeze the spread,and Climate Bonds calculated that the deal camewith a normal new issue premium.
The order book of EIB 2030, an EUR4bn offering
priced in mid-September, reached EUR33bn, 8.3
times the deal size. This is joint fourth largest
book cover recorded by Climate Bonds for adeal from an SSA issuer, the largest being theEuropean Union, which managed to cover thebook of its EU 2043 deal by 13 times in April 2022.
SSA green bonds achieving book cover of thismagnitude demonstrate how far the market hasdeveloped, as in the initial stages, strong pricing
dynamics were often attributed to the smaller orcapped deal sizes rather than the green label.
Spread compression
The bonds delivering the largest spreadcompressions in EUR all originated from theprivate sector, with EDP 2030 taking the top spot
obtaining 55bps. Prologis 2032 (priced June2020) and Daimler 2030 (priced September2020) are the only EUR green deals on Climate
Bonds record to have exceeded this level ofprice revision with 65bps and 57bps respectively.
Iberdrola 2025 also managed 55bps in April
2020. The EDP 2030 deal demonstrated strong
pricing dynamics across the board, achieving
the largest book cover and spread compressionof the observation period, and tightening in thesecondary market. Climate Bonds could notbuild a yield curve for this deal, so cannot remark
on whether this strong demand translated into
cheaper funding.

European multi-national real estate company
Vonovia priced a two-part ESG deal in midNovember which included a social bond andan EUR750m (USD777m) green deal (Vonovia2030). The latter achieved spread tightening of
50bp, having attracted book cover of 6.5 times.

Spread compression was also more aggressive
for green bonds at 25bps against 18bps for thevanilla sample. These numbers were both smaller
than the H1 sample, which exhibited 29bps and22.5bps of tightening for the green and vanilla
samples respectively.

A debut green bond transaction from one of
the four German transmission system operatorscomprised Amprion 2027 and Amprion 2032.
The bonds underwent spread compression of
40bps and 45bps respectively. The issuer wasvery happy with the timing of the transaction,and remarked that strong participation from the
ESG investment community (85%) contributed tothe success of the deal. Climate Bonds could notbuild a yield curve but the issuer described the
new issue premium as negligible. Investors areevidently willing to support the transformation
and upgrade of the grid system, a criticalcomponent of a climate neutral energy future.

Eleven out of 14 green bonds (79%) achievedlarger book cover than vanilla counterparts. Elevenout of 13 green bonds (85%) experienced more
spread compression compared to equivalents.

Dutch financial services company Achmea 2025
also obtained 45bps of spread compression,leveraging a book cover of 4.8 times. The proceedsfrom the deal will support its lending activities forcommercial and residential real estate.
Volkswagen (VW) priced a trio of bonds in earlyNovember following the publication of its
updated green finance framework in Octoberreferenced above. Green deals from VW have ahistory of aggressive spread revision in primary,and VW 2025 and VW 2030 each tightened by
42bps, while VW 2028 deal managed 39.5bps.
The deals did not achieve a greenium, but
Climate Bonds calculated that the 2028 and 2030
tranches each priced fewer than 5bps outside theyield curve, while the 2025 priced slightly wider.

USD green bond pricing
USD green bonds achieved higher book coverand more aggressive tightening than vanillabonds, on average. The H2 2022 sample achieved
an average book cover of five times, more thanthe 3.8 times observed in H1, while vanilla bonds
increased their book cover to 3 times from 2.7
times in the prior period.

EUR Spread compression (swap spreads)
Category

SSA

Green
bond
sample10

Numberof greenbonds
beating
vanillaequivalent
5

Bonds in the sample excluded from this analysis:
There was no comparable bond for GACI 2122, so
neither book size nor spread compression could
be compared to anything.
Two bonds in the USD sample achieved the same
spread compression as their vanilla baskets: NTT
2025 (30bps), and PepsiCo 2032 (25bps).
Book cover
In July 2022, Japan’s Nippon Telegraph andTelephone (NTT) priced a USD1.5bn deal spreadequally over three tranches. NTT has alreadyissued green with two EUR and four JPY deals
outstanding, but this was its first time dialing intogreen USD. The trio of NTT 2024, NTT 2025, andNTT 2027 picked up exceptional interest frominvestors, with the tranches achieving book coverof 8.6, 7.8, and 8.8 times respectively. This dealcame in the busiest USD new issue week sinceApril, and the green label certainly bolstered
the appeal. Proceeds were earmarked for 5-G
related investments, research and developmentof telecom infrastructure Innovative Optical andWireless Network (IOWN), and renewable energy
projects including wind and solar. More than
three quarters of the deal was allocated to US
domestic investors, suggesting plenty of appetite
for corporate paper with robust green credentials.
Saudi Arabia’s sovereign wealth fund, the Public
Investment Fund (PIF) also priced a three-tranche
deal in its green debut in late September. The
longest dated tranche, GACI 2122, was the first
century bond to hit the green bond market, andattracted a book of 6.4 times its size. The shorter

USD spread compression (treasury spreads)

Greenaveragespreadcompression

Vanillabasketaveragespreadcompression

-2.5

-4.3

Category

Green
bond
sampleNumber ofgreen bonds
beating
vanillaequivalentGreenaveragespreadcompression

Vanillabasketaveragespreadcompression

SSA

1

1

-30.0

-28.5

A

10

6

-23.7

-21.6

Covered

6

4

-4.0

-3.6

BBB

5

4

-25.0

-9.4

A

10

4

-21.2

-23.5

Total

16

11

-24.8

-15.4

BBB

24

14

-32.7

-27.1

Total

50

27

-20.9

-19.0

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

5

dated GACI 2027 and GACI 2032 each gathered
enough interest to cover their USD1.25m deal
sizes by 6.8 times. Eligible investment categories
included renewable energy, energy efficiency,
sustainable water management, pollution
prevention and control, green buildings, andclean transportation. The PIF will be responsiblefor developing 70% of Saudi Arabia’s renewableenergy and has stated it will make up to USD10bnof investment in green projects by 2026, so
Climate Bonds expects more green bonds fromthis issuer.
Spread compression
Spread compression data was available forall bonds in the USD sample and five of themachieved 30bps. These included all three of thedeals from NTT addressed above. Climate Bonds

could only put the NTT 2027 onto a yield curve(the other tranches being too short), and the deal
was priced with a small new issue premium.
KEPCO 2026 and EDP 2027 also obtained
spread revisions of 30bps. The KEPCO 2026
was priced in late September during the shorttenure of UK Prime Minister Liz Truss. Efforts
to reassure markets included an intervention
to buy long-dated paper which was eventuallyextended to Asian dollar bonds. Climate Bonds
acknowledges that the knock-on effects of this
could have influenced the pricing dynamics ofthe KEPCO deal, but notes that a green deal
from the same issuer priced in H1 2022 achieved
spread tightening of 40bps, hence the name isattractive to dollar investors more broadly. The
AA rating, state ownership, short tenor, and greenlabel collectively contributed to that. The bondwas the longest on its USD yield curve so Climate
Bonds could not determine whether it had priced
with a greenium.
Seasoned green bond issuer EDP brought it’s
USD500m 2027 bond in early October following avery quiet week in the new issuance market. The
book was four times covered allowing for 30bps
of tightening with very low attrition.
Methodology notes: Baskets comprise bondsthat most closely match the green bonds and areissued during the same quarter. The baskets inthis publication include between one and sevenbonds. For an explanation of the methodology,
see page 17.

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

Bond

Pricing date

IPT

Primary Spread

Compression
green bondCompression
vanilla basket

BBB

EDP 2030

04/10/2022

175

BBB

Vonovia 2030

15/11/2022

280

120

-55

-30

230

-50

-25

BBB

Amprion 2032

14/09/2022

190

145

-45

-40

BBB

Achmea 2025

22/11/2022

135

90

-45

0

BBB

VW 2025

07/11/2022

150

108

-42

-30

Compression
green bondCompression
vanilla basket

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

Bond

Pricing date

IPT

A

NTT 2024

20/07/2022

120

90

-30

-15

A

NTT 2025

20/07/2022

130

100

-30

-30

A

NTT 2027

20/07/2022

150

120

-30

-11

SSA

KEPCO 2026

29/09/2022

150

120

-30

-29

BBB

EDP 2027

03/10/2022

275

245

-30

-25

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

Primary Spread

6

3. Green allocations: 67% allocated to investors describing themselves as green
Climate Bonds invited the 51 non-sovereignissuers included in this analysis to disclose
what percentage of their deal was allocated toinvestors describing themselves as green orsocially responsible (green investors). The resultsof this outreach were as follows:• 28 issuers representing 40 bonds shared the data
• Eight issuers representing eight bonds replied
without disclosing the data
• 16 issuers representing 19 bonds did not reply
Based on these responses, the average
allocation to investors describing
themselves as green was found to be 67%.
This appears to have stabilised over the past
few observation periods, as the number has
remained within 2% of that throughout 2021 andin H1 2022.
Allocations ranged from 30% (Wisconsin P&L2032) to 92% (ALD 2027).
Four issuers representing seven USD bonds
disclosed distribution numbers, while a further
two replied that they could not share the data.
This is an improvement on H1, when just threeissuers acknowledged the request. However,the consistently small USD sample does make it
difficult to monitor changes in investor demandin in this market. Among those who did respond,
the tone was positive suggesting that the greenlabel helped to attract the participation of abroader range of investors.

From the European issuers there was, as usual, ageneral acknowledgement that the green label
added value to the transaction and attracted
additional investors into the order book. Thiswas borne out by the numbers that we observed
for book coverage in the primary market, which
are consistently higher than those observedfor vanilla equivalents. Several repeat issuers
remarked that the interest from green investors
increases with each transaction, possibly
because genuine commitment is consolidated.
But during the volatile market conditions of 2022
the green label has offered another dimension toissuers: it has often helped to get deals over theline during periods of volatility, simply because of
its ability to capture a unique investor base.
One issuer remarked that SFDR implementation
for EU financial market participants has pushed
the green bond market towards stronger integrity
and accountability. Post issuance reporting andsecond party opinions are the starting points.
Methodology notes: Green investor
participation is provided by issuers. Where theallocation is split between dark, medium, andlight green investors, percentages for dark andmedium green are included in this analysis. Thereis 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.

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative7

67% of green bonds were allocated to green investors
Declared green investor

Not declared green investor

Average 67% was allocated to green investors

Rating Group
EUR

0%

20%

40%

60%

80%

100%

40%

60%

80%

100%

KFW 2029
Land. Renten 2032
HESLAN 2027 (SNP)
Madrid 2029

SSA

Eurofima 2031
Adif Alta Velocidad 2029
COV

Nordea 2025 (CO)Sparebanken Soer Bolig. 2025 (CO)A

TenneT 2034
TenneT 2028
CaixaBank 2029 (SP)TenneT 2032
TenneT 2042
Raiffeisen Bank 2025 (SP)Aareal 2025 (SP)ALD 2027
Renault 2027

BBB

SSE Plc 2029
Iberdrola 2032
Iberdrola 2028
Ferrovie dello Stato 2027
Achmea 2025
Jyske Bank 2027 (SNP)
EnBW 2029
ABN Amro 2030 (SNP)EDP 2030
Intesa 2027 (SNP)
EnBW 2026
VW 2030
VW 2028
Stora
Enso 2030
VW 2025
Amprion 2032
Amprion 2027

USD
A

NTT 2027*
NTT 2025*
NTT 2024*
Wisconsin P&L 2032
EDP 2027
Lenovo 2032

BBB

0%

20%

*Over 40% of the NTT deal was allocated to high-profile investment managers with an ESG focus, according to one of the banks involved in the transaction.

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative8

4. Performance in the immediate secondary market• Seven days after pricing, 59% of green bonds
had tightened more than comparable vanillabaskets; 70% had tightened more than theircorresponding index.
In H2 2022, 67% of individual green bonds
in our sample had tightened seven days after
pricing; this increased to 73% after 28 days. In
H1 2022, 64% had tightened after seven days,
and 49% after 28 days so both observations
increased in H2.

After seven days
• 59% of green bonds had tightened by morethan their vanilla baskets: 60% of EUR and 60%
of USD green bonds.
• 70% of green bonds had tightened by morethan their corresponding index: 70% of EUR
and 75% of USD green bonds.
A higher percentage of bonds tightenedmore than their vanilla baskets in H2 (59%)
compared to H1 (51%). A larger percentage
of bonds tightened on the break in H2 (67%)
compared to H1 (64%). Notwithstanding thevolatility seen in 2022, fewer green bonds wereadded to the Climate Bonds GBDB in H2, andthe relative scarcity of benchmark sized green
deals with adequate credentials could havealso contributed to the greater magnitude oftightening. In H1, 88 non-sovereign green bonds
qualified for inclusion in this research, while 66
qualified in H2.
More than half (62%) of EUR green bonds had
tightened against both their vanilla basket
and corresponding index after a week. Amongthese, four deals in the SSA category tightenedby more than 20% each. NRW Bank 2032
(22%), SNCF 2027 (25%), EUROFIMA 2031
(26%), and Ned Water 2027 (24%). A generalpreference for higher quality paper as a safe
haven could have contributed to the demand
for these bonds, all of which have composite
credit ratings of at least AA.
German Local Authority NRW Bank 2032
priced its EUR1bn (USD1.2bn) deal in lateJuly, As the only EUR deal of the day, thebond achieved book cover of 3.8 times, andspread compression of 2bps beating its vanillabasket on both metrics. The bond was oneof four in our sample to have priced with agreenium in H2.
Eurofima, the Swiss based supranational
supporting the development of rail transport inEurope, came to the market with its EUR500m(USD495m) EUROFIMA 2031 in early November.
On the same day, the Dutch Local Government
Funding Agency priced its EUR500m (USD500m)
Ned Water 2027. Both achieved larger bookcover than vanilla equivalents, and EUROFIMA• 28 days after pricing, 55% of green bonds
had tightened more than comparable vanillabaskets; 64% had tightened more than theircorresponding index.

Bonds generally often deliver price tightening
in the immediate secondary market sinceinvestors may want to increase their position
or open a position in a bond they did not
get allocated. Timing is an important factor,
because bond indices rebalance at each monthend. Therefore, if bonds are issued early inthe month, there could be an opportunity
for managers to add some off-benchmark
performance before bonds are added tobenchmark indices. Once bonds enter indices,
except for credit events, liquidity can quickly
evaporate, and accurate spreads are quoted
on a bilateral basis. Our consideration of thesecondary market consequently only extends toone month after the pricing date of each bond.
To contextualise spread movements, we
compare each green bond to two alternatives.

2031 tightened more than its basket too. Ned
Water 2027 priced with a greenium.
On the corporate side, German energy
company ENBW priced a pair of green bonds
in mid-November. The transaction, which was
fixed at EUR1bn (USD1bn) from the outset (nogrow), was split evenly between ENBW 2026
and ENBW 2029 attracting book cover of 5.2
and 5.7 times and tightening in primary by 35
and 40bps respectively. Both tranches priced
with a normal new issue premium but went on
to tighten dramatically in the secondary market.
Proceeds from ENBW green bonds
are earmarked for renewable energy,
energy efficiency, and low carbon transport(charging infrastructure). Diversification into
renewables is crucial for German utilities whichhave been hurt by their reliance on Russiangas. In early December, ENBW announced
that its subsidiary VNG had resolved residual
risks of gas procurement and had withdrawn
its application for stabilisation measures fromthe German government which may havecontributed to the price tightening after 28-days
noted below.
In USD, 56% of green bonds had tightenedagainst both their vanilla basket andcorresponding index after a week. Among these,
GACI 2027 and GACI 2032, addressed above,
had tightened by 22% and 18%. KEPCO 2026
(again, addressed above) was another stand out,tightening by 19%.

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

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

After 28 days
• 55% of green bonds had tightened by morethan their vanilla baskets: 56% of EUR and 53%
of USD green bonds.
• 64% of green bonds had tightened by morethan corresponding indices: 58% of EUR and
81% of USD green bonds
A higher percentage of green bonds had
tightened against their vanilla baskets after
28-days in H2 (55%) compared to H1 (48%).
However, a lower percentage had tightenedagainst indices: 64% in H2 against 77% in H1.
25 out of 66 bonds had tightened more thancorresponding bonds and indices after 28 days.
In EUR, some of the bonds mentioned above
continued to demonstrate strong tightening after
28-days: Eurofima 2031 (50%), NRW Bank 2032
(55%), ENBW 2026 (59%), and ENBW 2029 (27%).
Seasoned green bond issuer Iberdrola announced
updated sustainability commitments prior to
COP27, including a pledge to reach net zeroby 2040, and a commitment to have a positive
impact on species and ecosystems by 2030.
Following this, the company priced a EUR1.5bn(USD 1.5bn) green deal in mid-November, split
evenly between Iberdrola 2028 and Iberdrola
2032. Both tranches achieved higher book coverand spread compression than comparable bonds
and priced with a normal new issue premium. The
bonds went their separate ways in the secondary
market, with the longer deal remaining static,
while the shorter deal tightened dramatically,reaching -33% after 28 days.
9

Swedish SEB priced a EUR1bn (USD1bn) green
deal in early November. The SEB 2026 (SNP)
achieved greater book cover and spreadcompression than its vanilla match, but Climate
Bonds could not construct a yield curve socannot say whether this translated into a pricing

benefit. The bond had tightened by 6% after
seven days, extending to 27% after 28 days.
In USD, six out of 16 green bonds achieved
greater spread tightening compared toequivalents in the first month. Among them, thepair of NTT bonds addressed above achieved themost dramatic tightening. All three of the bonds
tightened after 7 days, but after 28-days NTT 2024
had extended that to 23%, while NTT 2027 hadtightened by 34%. The NTT 2025 did not beat its
match but had still tightened by 22% a monthafter pricing.

1 week change
Rating
Group
EUR

Bond

SSA

KFW 2029

SSA

NRW Bank 2032

Green Bond

VanillaBasket28 day change
CorrespondingiBoxx index

Green Bond

VanillaBasketCorrespondingiBoxx index

3%

-18%

9%

25%

23%

53%

-22%

-55%

-7%

6%

-11%

-21%

SSA

HESLAN 2027 (SNP)

2%

-1%

-1%

3%

-6%

-40%

SSA

EIB 2030

-9%

5%

121%

-9%

1%

-6%

SSA

Madrid 2029

95%

103%

33%

47%

-16%

27%

SSA

Adif Alta Velocidad 2029

29%

62%

33%

47%

45%

39%

SSA

SNCF 2027

-25%

22%

-1%

-7%

-11%

-20%

SSA

Eurofima 2031

-26%

-50%

121%

82%

2%

0%

SSA

Ned. Water. 2027

-24%

14%

30%

-2%

-2%

-20%

CoveredLBBW 2028 (CO)

-163%

-185%

-7%

29%

4%

3%

CoveredING-DiBa 2030 (CO)

424%

153%

499%

820%

-4%

-9%

CoveredUniCredit 2028 (CO)

433%

158%

-7%

29%

-1%

-2%

CoveredSlovenska Sporit. 2028 (CO)

19%

15%

-7%

29%

-3%

6%

CoveredSparebanken Soer Bolig. 2025 (CO)

31%

12%

35%

-14%

0%

5%

Covered

Nordea 2025 (CO)

-8%

-173%

35%

-14%

15%

11%

AAA

Land. Renten 2032

28%

17%

-56%

-46%

13%

7%

A

Aareal 2025 (SP)

-19%

-28%

17%

20%

-10%

-29%

A

CaixaBank 2029 (SP)

-4%

-9%

-5%

-1%

-3%

-3%

A

Raiffeisen Bank 2025 (SP)

-12%

-15%

17%

20%

-5%

32%

A

Statkraft 2029

-8%

-20%

0%

-11%

-6%

2%

A

SR Bank 2025 (SP)

6%

2%

17%

20%

7%

33%

A

TenneT 2028

3%

10%

12%

20%

3%

-5%

A

TenneT 2032

-7%

-12%

-2%

-16%

2%

30%

A

TenneT 2034

-7%

-21%

-23%

-14%

1%

-7%

A

TenneT 2042

-5%

-17%

-7%

-13%

1%

-7%

A

SEB 2026 (SNP)

-6%

-27%

-6%

-13%

3%

-13%

BBB

ALD 2027

-1%

-17%

-3%

-20%

10%

-2%

BBB

Renault 2027

3%

-12%

-3%

-20%

13%

-3%

BBB

SSE Plc 2029

-19%

-22%

0%

-11%

-1%

-4%

BBB

Eurogrid 2031

-15%

-18%

-7%

-20%

4%

5%

BBB

Intesa 2027 (SNP)

-2%

-7%

-1%

3%

6%

4%

BBB

Orsted 2031

-5%

-5%

-7%

-20%

-3%

0%

BBB

Ferrovie dello Stato 2027

-5%

-2%

-46%

-7%

5%

36%

BBB

Amprion 2027

3%

-12%

-4%

-15%

3%

16%

BBB

Amprion 2032

-10%

-26%

-7%

-20%

2%

1%

BBB

EDP 2030

-15%

-6%

-2%

-16%

-4%

4%

BBB

Ceske Drahy 2027

-5%

-3%

2%

-7%

2%

7%

BBB

EDF 2034

-3%

-1%

3%

2%

2%

4%

BBB

VW 2025

-9%

-21%

-12%

-23%

-3%

-21%

BBB

VW 2028

10%

4%

2%

12%

-3%

-15%

BBB

VW 2030

1%

1%

-12%

-14%

-5%

-16%

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative10

1 week change

Continued
Rating
Group
EUR

USD

Bond

Green Bond

VanillaBasket28 day change
CorrespondingiBoxx index

Green Bond

VanillaBasketCorrespondingiBoxx index

BBB

Covestro 2028

4%

-14%

2%

12%

-7%

-15%

BBB

Jyske Bank 2027 (SNP)

-5%

-18%

-6%

-13%

-7%

-19%

BBB

ABN Amro 2030 (SNP)

1%

-8%

0%

-6%

-2%

-10%

BBB

Vonovia 2030

-6%

-13%

4%

7%

0%

-8%

BBB

EnBW 2026

-27%

-59%

8%

16%

-3%

-13%

BBB

EnBW 2029

-13%

-27%

-7%

-3%

-1%

-8%

BBB

Iberdrola 2028

-12%

-33%

12%

20%

-1%

-8%

BBB

Iberdrola 2032

1%

0%

-2%

-16%

0%

-8%

BBB

Achmea 2025

-14%

-23%

-4%

-41%

-5%

-13%

A

PepsiCo 2032

-14%

-5%

1%

-1%

-5%

-9%

A

NTT 2024

-11%

-23%

-4%

1%

-3%

-8%

A

NTT 2025

-8%

-22%

-24%

-24%

1%

-8%

A

NTT 2027

-12%

-34%

-1%

1%

0%

-20%

A

Wisconsin P&L 2032

-7%

4%

-6%

-6%

-6%

5%
21%

A

Wisconsin EP 2032

-3%

3%

-3%

4%

1%

A

Gaci 2027

-22%

-1%

8%

4%

9%

6%

A

Gaci 2032

-18%

-4%

5%

0%

8%

0%

A

Gaci 2122

-11%

-19%

N/A

N/A

7%

-4%

A

Pacificorp 2053

-2%

-8%

-8%

-13%

-1%

-2%

BBB

Lenovo 2032

13%

10%

-5%

-8%

2%

-19%

BBB

GM 2029

2%

-9%

-9%

1%

-1%

-9%

BBB

GM 2032

-1%

-4%

-4%

14%

-2%

-8%

BBB

Niagara Mohawk 2052

0%

5%

-6%

3%

3%

9%

BBB

EDP 2027

-3%

-6%

-2%

-16%

-2%

7%

SSA

KEPCO 2026

-19%

12%

2%

5%

0%

23%

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative11

5. Green bond ETFs
At the end of H2 2022, Climate Bonds wasaware of 14 EUR or USD green bond ETFs
with combined fund assets of USD1.9bn, a
net increase of 11.2% on the prior period. The
preceding two periods had accumulated small
contractions, the first net outflows experienced

the largest contraction. The Lyxor EuroGov Green
Bond DR almost double in size in H2. While
the fund had the longest duration, it was able
to satisfy investor demand for quality, and thediversity of available sovereign green bonds has
significantly improved.

by green bond ETFs. During H2, six funds
increased in size, while seven contracted, andone did not have data available. The Franklin
Liberty Euro Green Bond ETF grew its net assets
by the largest amount (132%), while the Lyxor
Green Bond DR UCITS ETF (-46.5%) experienced

ChangeonperiodUSD
30 Dec2022

Local
30 Dec2022

ETF name

Currency

Index

Launch dateSize atlaunchLocal
30 June2022

USD
30June2021

Lyxor Green Bond DR
UCITS ETF*

EUR

Solactive Green
Bond Index

01/02/2017

EUR5m

533.9

559.7

587.2

628.9

12.4%

Van Eck Vectors
Green Bond ETF

USD

S&P Green Bond
Select Index

01/03/2017

USD5m

82.6

82.6

73.5

73.5

-11.0%

iShares Global Green
Bond ETF

USD

Bloomberg Barclays
MSCI Global Green
Bond Select Index

01/11/2018

USD25m

269.1

269.1

291.1

291.1

8.2%

UC MSCI European
Green Bond ETF

EUR

Bloomberg Barclays
MSCI European GB
Issuer Capped EUR
Index

01/11/2018

EUR20m17.3

18.1

Unavailable

Unavailable

N/A

Franklin Liberty Euro
Green Bond ETF

EUR

Bloomberg Barclays
MSCI Euro Green
Bond Index

01/04/2019

EUR10m

81.2

85.2

184.9

198.1

132.6%

Lyxor Green BondESG Screened*

EUR

Solactive Green ESG
Bond EUR USD IG
TR Index

01/10/2019

EUR4m

158.6

166.3

154.8

165.8

-0.3%

L&G ESG Green Bond
UCITS ETF

EUR

JP Morgan ESG Green
Bond Focus Index

01/02/2021

EUR22.9

8.1

8.5

6.2

6.7

-22.1%

iShares EUR Green
Bond UCITS ETF

EUR

Bloomberg MSCIEuro Green Bond SRI
including Nuclear
Power Index

25/03/2021

EUR30m

48.4

50.7

59.4

63.6

25.4%

Horizons S&P Green
Bond Index ETF

CAD

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

01/06/2021

CAD6.2m

5.5

4.3

5.4

4.0

-7.0%

Xtrackers EUR
Corporate Green
Bond UCITS ETF

EUR

Bloomberg MSCI EUR
Corporate and Agency
Green Bond Index

24/06/2021

EUR20m

148.1

155.3

211.6

226.7

46.0%

Xtrackers USD
Corporate Green
Bond UCITS ETF

USD

Bloomberg MSCI USD
Corporate and Agency
Green Bond Index

24/06/2021

USD16.8

233.4

233.4

126.6

126.6

-45.8%

Lyxor EuroGov Green
Bond DR*

EUR

Solactive Euro
Government Green
Bond Index

01/07/2021

EUR48m

63.9

66.9

124.2

133.0

98.7%

Lyxor Corporate
Green Bond DR UCITs
ETF*

EUR

Solactive EUR USD IG
Corporate Green Bond
TR Index

24/08/2021

EUR50m

46.2

48.4

24.2

25.9

-46.5%

Franklin Municipal
Green Bond ETF

USD

Bloomberg Municipal
Bond Index

02/05/2022

111.5

111.5

107.9

107.9

-3.2%

1943.7

11.2%

Total Green bond
ETF

1748.6* Amundi ETF

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative12

6. Spotlight: Sovereign Green Bond Club
• Austria priced the first sovereign green money
market instrument in October 2022
• Hungary has priced green bonds in four currencies,
the most diverse among the sovereign issuers• France remains the largest single issuer ofsovereign green bonds with EUR52.1bn (USD58.8bn)
outstanding at the end of 2022.

By the end of 2022, the Climate Bonds GBDB included
sovereign green bonds from 29 issuers with a
combined volume of USD268.7bn. Of this USD19.8bn
had been priced in US dollars, while almost ten times
that amount had been issued in EUR (USD197.1bn).
This figure includes EUR23bn (USD23.7bn) added in
H2 2022.
• Five sovereign green bond reopenings amounted to
EUR5.5bn (USD5.6bn)• Five repeat sovereign issuers priced new bonds withcumulative volumes of EUR19.5bn (USD18.4bn)

Reopenings
Five sovereign green bonds were reopened in H2 2022.

Five green bonds were reopened in H1 2022
IssuerMaturity

Date of tap

Republic of France

25/06/2044

07/07/2022

EUR2.3bn

USD2.3

EUR16.5bn

USD15.3bn

25/07/2028(IL)

15/09/2022

EUR549m

USD548m

EUR4.5bn

USD4.8bn

15/08/2030

20/07/2022

EUR1.5bn

USD1.6bn

EUR9.5bn

USD10.8bn

22/04/2023

04/08/2022

EUR201m

USD204m

EUR10.6bn

USD12.6bn

30/07/2022

03/11/2022

EUR971m

USD947m

EUR8.2bn

USD9.3bn

EUR5.5bn

USD5.6bn

Federal Republic of Germany

Kingdom of Spain

Size of tap(local)Total

Size of tap(USD)

Size as of
31/12/2022 (EUR)

Size as of
30/06/2022 (USD)

New bonds
Five sovereign issuers priced new green bonds in
H2 2022. All were repeat issuers, and all the deals
were EUR denominated. No USD denominated green
sovereign bonds were priced during the period.
Sovereign Scorecard H2 2022
Germany

Coupon & Maturity
Pricing Date
Tenor
Amount issued

Belgium

Italy

Austria

Hungary

1.3% 15/10/2027

2.75% 22/04/2039

4% 30/04/2035

Zero 23/03//2023

5% 22/02/2027

31/08/2022

14/09/2022

06/09/2022

18/10/2022

14/11/2022

5

17

13

0.5

5

EUR5bn/USD5bn

EUR4.5bn/
USD4.5bn

EUR6bn/USD6bn +EUR2bn/USD2bn

EUR1bn/USD1bn

EUR1bn/USD1bn

5

2

2

3

9

EUR37.5bn/
USD42.7bn

EUR15.1bn/
USD17bn

EUR21.5bn/
USD24bn

EUR6bn/USD6.3bn

USD4.8bn

2.2%

3.3%

0.9%

1.6%

3.6%

Total green bonds at 31/12/2022
Number of bonds
Total size of green bonds% of sovereign debt (market
data from Bloomberg as of
31/12/2022)

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

13

1.7000

1.60001.5000Germany’s fifth green bond, a second 5-year deal
(Bobl), was priced in August 2022 via syndicate.
The target size of the deal was EUR6bn (USD6bn)
and the book closed at EUR14bn. The spread
was revised down by 2bps, and the deal size wasset at EUR5bn (USD5bn). The twin curve wasslightly outside the green curve as of 31 August2022 and the new Bobl priced inside its twin witha greenium of 1.25bps. The German DMO does
not share data on green investor participation
but noted that there was high allocation to realmoney accounts including central banks andofficial institutions (24%).
The vanilla twin had been issued through an
auction at the end of June, with an original
size of EUR4bn (USD4bn). The book covered
the transaction size once. The bond was
subsequently reopened six times, and by the endof 2022 had reached EUR27bn (USD27bn).

Belgium
Belgium was the second DM
sovereign (after France) tobring a green bond when it
priced its 2033 deal in 2018.
The sequel green bondcame in September 2022,
a EUR4.5bn (USD4.5bn) 17-year tenor, priced
via syndicate. This attracted an order book of
EUR32bn and achieved 2bps price tightening
pricing with a small new issue premium (6bpsover the June 2032 deal). More than 60% of
the deal was allocated to investors describing
themselves as green and the book included highparticipation from real-money accounts.

1.40001.30001.7

Germany's green curve sits inside vanilla

1.6
1.5
1.4
1.3
Source: Bloomberg

Germany uses a twin structure
to price its green bonds,
issuing a vanilla bond, andlater a green version, sharing
similar characteristics.

Germany’s green curve sits inside vanilla

Yield as of 31/08/2022Yield as of 31/08/2022

Germany

1.2

1.20001.1

1.10001.000005Duration

5.0

0.0

Vanilla bonds

10
10.0

Seasoned green bonds

55% of the deal was allocated. The bond priced
with a small new issue premium and was tapped
for a further EUR2bn (USD2bn) in November.

Austria
Austria priced its first green
sovereign in May 2022, a
EUR4.5bn 2049 deal. Laterin the year, it became thefirst country to issue a green
Treasury Bill when it priceda 126-day maturity deal via auction in October
2022. The EUR1bn transaction attracted a bid/
cover ratio of 2.69 times, which is more thanthe 2.12 times average for other Austrian T-bills
priced in 2022. Green investors comprised 85%of the book and were mainly central banks
and money market funds. The deal obtained
a greenium of 2bps according to the Austrian
Treasury. The instrument is expected to be rolled
over when it matures in February 2023.
According to Bloomberg, at the beginning of2023, the short-term debt market, comprising

15

20

25

30

15.0

20.0

25.0

30.0

Duration

New issue green bond
instruments with a residual maturity of one year orless at issuance, stood at USD13tn. Climate Bonds
published A Discussion Paper: Certification of ShortTerm Debt in June 2022 describing how whole
entity Certification could increase the variety andscope of green instruments available to investors
while maintaining the integrity of the green label.6

Hungary
Hungary has issued sevengreen bonds in a mixture of
JPY, CNY, HUF, and EUR. In
November 2022, it added aneighth deal, its second in EUR,
a EUR1bn 2027 maturity priced
through a syndicate. The bond obtained interestof four times its size, and the spread was revised
down by 35bps during book building. The bondpriced with a small new issue premium, and after
28 days had tightened by ten percent, rising to
20 percent by year end. The combined volume of
Hungary’s green liabilities had reached USD4.8bn
by the end of 2022.

The size was the largest possible based on
identified green expenditures in the state budget.
Belgium published its updated green financeframework in June 2022. Five eligible project
categories were identified, corresponding withthe six environmental objectives of the EU
Taxonomy: Energy Efficiency (including Green
Buildings); Clean Transportation; Renewable
Energy; Circular Economy; and Living Resourcesand Land Use.

Italy
Italy priced its second green
sovereign in September, an
EUR6bn (USD6bn) 13-yearbond. Orders of EUR40bn wereaccumulated, covering theoriginal transaction size by 6.6times and enabling 2bps of spread tightening.
The order book included high participation frominvestors describing themselves as green to whom

European Union
In November 2022, theEuropean Union (EU)priced its fourth greenbond, by syndicate. Despite
the ongoing market
volatility, the EUR5bn
transaction attracted a book of EUR41.9bn,covering the deal seven times which enabled
spread revision of 2bps. Investors describing
themselves as green received 46% of theallocations. On the same day, the EU priced asmaller (EUR2.5bn) 30-year vanilla deal which
covered its book by 11.8 times. Each tranche
priced with a small new issue premium.
Since June 2021, Climate Bonds hasmonitored the book size of 16 EU transactions.

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

The average book cover was 9.1 times, witha high of 16.1 times (achieved on a EUR3bn
30-year social deal priced in March 2022) anda low of 3.8 times (for a EUR3bn 15-year social
bond priced in December 2022).
The EU is expected to become the largest issuer
of green bonds globally, and by the end of 2022
had issued EUR36.5bn (USD39.9bn) under thegreen label. The EU seeks to provide a regularsupply of green bonds to the market, while
also taking into consideration the prevailingmarket conditions and the green expenditures
as reported by Member States. To ensurepredictability and as part of its open andtransparent communication to markets, theEuropean Commission regularly publishes thetiming of the expected syndicated transactions.

14

7. Spotlight: Relative values: where the greenium persists
Prepared by Caroline Harrison (Climate
Bonds), and Maria Gonzalez-Ramirez(University of Texas at San Antonio)
Climate Bonds partnered with the University ofTexas at San Antonio (UTSA) to determine whether
green bonds priced tighter than vanilla equivalentsin H2 2022. The results of this work suggest thatgreen and bonds bearing other thematic labels—
including sustainability, social, and sustainabilitylinked bonds (SLBs)— did price tighter than vanillaequivalents during the observation period.
Climate Bonds developed and uses the term greenium
which describes a green bond that has priced inside
its own yield curve in the primary market (new issue
discount), and has been monitoring its presence since2017. The existence of a greenium implies that theissuer has obtained cheaper funding for its new bondcompared to prevailing rates.
The Russian invasion of Ukraine in 2021 andsubsequent energy price shocks led to interest rateincreases pushing up yields on all categories ofbonds. In H1 2022, Climate Bonds built yield curves
for 50 bonds, of which ten (20%) priced inside theiryield curves. This was the lowest incidence sincethe 19% observed in H1 2019 and way off the highof 61% which occurred in H2 2020. However, green
bond pricing dynamics in the primary market
remained strong with green bonds continuing toachieve higher book cover, and greater spreadcompression, and green bonds tightening by alarger magnitude than vanilla equivalents 7- and28-days after pricing, on average. Climate Bonds
suspected that this translated into relatively tighter
pricing so that where a new issue premium waspresent, its magnitude was smaller for green
bonds than vanilla equivalents.
To make this determination, Climate Bonds and
UTSA analysed bonds priced in H2 2022. From a
universe of 407 EUR and 503 USD denominatedbonds priced between 01 July and 31 December,
Climate Bonds constructed yield curves for 259
EUR bonds (63%), and 289 USD bonds (57%).
Climate Bonds then calculated a theoretical yieldfor each subject bond using linear interpolation.
The difference between the theoretical yield andthe observed yield was the new issue premium if
positive, or greenium if negative.
The incidence of greenium in the sample is describedabove for bonds plotted against vanilla curves.
The UTSA team then applied a matched pair analysis
to compare the new issue premium/greenium ofgreen and other types of labelled bonds with theirnearest-neighbour vanilla equivalents. The matchingprocess was performed using Mahalanobis distanceto find an environmentally labelled bond’s closest
vanilla counterpart in terms of currency, maturity
bucket, credit rating bucket, and ultimate parent
country of risk.7 This procedure yielded a total ofseven SLB pairs, 49 green bond pairs, two social

EUR
Against vanilla
curves

USD
Number ofbonds pricing
throughvanilla curve

14%

5

0

2

25%

1

0

N/A

1

1%

7

2

29%

Number ofbonds pricing
throughvanilla curve

Green

28

4

Social8

Sustainability

7

%

%

Samplesize

Sample
size

N/A

SLB

4

0

N/A

3

0

N/A

Vanilla

174

20

11%

258

5

2%

Green not aligned

15

1

8%

7

0

N/A

233

28

12%

281

9

3%

bond pairs, and 12 sustainability bond pairs.
Typical pair matching exercises compare bonds
from the same issuer, but this usually means thatrecency is compromised. Climate Bonds and
UTSA compared bonds priced in the same
six-month period ensuring similar market
conditions, which is particularly relevant
given the recent volatility.
The pairs were then used to compute averagetreatment effects—or the differential mean spread
between environmental and vanilla bonds.
Spread in this context means the difference
between a bond’s actual yield and interpolated
yield. This revealed all types of environmentallylabelled bonds presented lower average spreads
relative to their vanilla comparables. Spreads,
on average, were lower by 10 basis points for
SLBs, 47 basis points for social bonds, 22 forsustainability bonds, and 48 basis points forgreen bonds compared to those of nearest
neighbour vanilla equivalents.

Yield curve methodology
Subject bonds had an original issue size of atleast USD475m, vanilla structure, denominatedin either EUR or USD, and priced between 01
July 2022 and 31 December 2022.
Climate Bonds plotted each subject bondon its own yield curve, constructed using
existing bonds from the same issuer sharing
the same characteristics as the new issue(subject) bond:• Ticker• Currency• Seniority• Minimum amount outstanding of USD475m• Parent country of risk
• No other thematic label• Priced after 01 July 2014
• Bullet Bonds, with vanilla structures
For the subject bond, yield-on-issue-date wasused, reflecting the price that the green bondGreen Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

While the sample size was small, the results
suggest that even though the incidence ofthe outright greenium had diminished underprevailing market conditions, green bonds werestill achieving relatively tighter pricing comparedto vanilla equivalents. For green bonds, thisis consistent with the results of other analysis
described in this report, i.e., green bonds achieve
larger book cover, and large spread compression
in the primary market compared to vanillaequivalents. The higher demand translates into
relatively tighter pricing.
The relative scarcity of labelled bonds
contributes to this tighter pricing, driven byhigher demand in the primary market. As
regulation continues to support green bondissuance and underpins the market with therequired integrity to maintain credibility, Climate
Bonds expects this to persist.

offered on the pricing date. For comparable
bonds, yield-to-convention-mid was used.
For all bonds, modified duration to mid wasused, and all the data was as of the pricing
date of the green bond. The modified duration is
the percentage price change of a security for agiven change in yield. The modified duration
increases with risk.
Seasoned vanilla bonds were plotted and a
2nd order polynomial yield curve was fitted.
Next, labelled bonds were overlaid and finally,
the subject bonds. Other bonds priced on thesame day as the subject bonds were also plotted
separately. Only yield curves of bonds in our
sample with a minimum of two comparable
bonds were included (one with a shorter duration,and one with a longer duration than the subject).
Reference
Gary King and Richard Nielsen. 2019. “Why
Propensity Scores Should Not Be Used forMatching.” Political Analysis, 27, 4, Pp. 435-454

15

8. Outlook
The market volatility, which started in H1 2022with the Russian invasion of Ukraine, continued
into the second half of the year as high energy
prices, and rising inflation extended into warnings
of a global recession. During the final six monthsof 2022, USD204bn of green bonds were added
to the Climate Bonds GBDB denominated in 25
currencies. Two thirds of the volumes (66%) werepriced in EUR (USD96.2bn) and USD (USD38.6bn).
While prevailing market conditions did not favour
bond markets, our analysis demonstrated thatgreen bonds continued to experience relatively
strong pricing dynamics. Green bonds in both
EUR and USD attracted higher book cover on
average compared to vanilla equivalents, theyalso experienced larger spread compressions in
the primary market. Further, on average, green
bonds tended to tighten more aggressively thanvanilla equivalents and indices in the immediate
secondary market. Bonds pricing inside theiryield curves became much less common than inprior periods. This is as one would expect given
the broader context, and in some cases, issuers
reported that the green label helped to get theirdeal over the line, in itself an achievement in a

EUR or USD took two thirdsof green bonds priced in H2
CHF 1%SEK 1%
SGD 2%CAD 2%

period when scheduled deals were being taken
off the table at the last minute, and during which
there were several stretches in both the USD and
EUR markets which saw no deals at all. Within
our sample of 66 non-sovereign bonds, just four
priced inside yield curves in H2. However, Climate
Bonds analysis in partnership with UTSA suggeststhat labelled bonds of all types did price closer
to their yield curves than matched vanilla pairs.
Climate Bonds analysis finds that participationof investors describing themselves as green
reached 67% and has roughly remained similar
for the past three observation periods, suggestingthat issuers can rely on this strong appetite fromdedicated investors.
In 2023 Climate Bonds expects that the green
bond market will continue to support theaccelerated transition to clean energy kickstarted
by the Russian invasion of Ukraine, particularly
in Europe. In its recent market blog, Climate
Bonds predicted 5 Big Directions for Sustainable
Finance in 2023 noting that the US Bipartisan
Infrastructure Laws (BILs), which will provide tax
cuts and grants for clean energy will facilitate a
new raft of investment to green projects.8

32% of USD volume waseligible for analysis

NZD 1%
Others 4%

Climate Bonds started monitoring green bondpricing in 2016, and after six years 680 securities
had been included in the analysis. As the profile
of green bonds has evolved in the intervening
period, pricing dynamics have also changed.
Observations made five years ago will almost
certainly not pertain to the current market
which is rapidly developing. Climate Bonds willcontinue to monitor the behaviour of green
bonds in the primary and immediate secondary
market.

69% of EUR volume wassuitable for analysis

Structure 6%

GBP
5.5%

Included32%

Too small 5%

Structure
12%

Reopening
12%

EUR
47%

CNY
16%

This analysis is based on a limited numberof green bonds, chosen according to theparameters outlined on page 17. Green bonds
issued in other currencies, structures, formats,and sizes may perform differently from those
discussed in this paper.

Too small
54%

USD
19%

Included
69%

Green loan 3%
Non investment grade 5%
Source: Climate Bonds Initiative

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

Source: Climate Bonds Initiative

Green loan 2%
Source: Climate Bonds Initiative16

Methodology
This paper includes labelled green bonds issued
during H2 2022. Labelled green bonds meetingthe following specifications are included:
Announcement date between 01 July 2022 and
31 December 2022
Currency: EUR or USD
Benchmark size i.e., >= USD500m
Investment grade rated
Minimum term to maturity of three years at issue
Consistent with the Climate Bonds Taxonomy
and included in the Climate Bonds GBDB
Amortising, perpetual, floating rate, and othernon-vanilla structures were excluded. These
parameters are designed to capture the mostliquid portion of the market while not limiting thediversity of data.
All historical data is based on asset swap spreads
for EUR denominated bonds. USD bonds arecompared to a US treasury curve. All historical
data is from Refinitiv EIKON.

Climate Bonds Initiative © March 2023
Author: Caroline Harrison

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

Endnotes

Suggested citation: Harrison, C., Green Bond
Pricing in the Primary Market H2 2022, Climate
Bonds Initiative, March 2023

www.climatebonds.net

Contributor: Maria Gonzalez, Finance PhD
candidate, University of Texas at San Antonio
Graphic Design: Godfrey Design, Joel Milstead

1. MSCI https://www.msci.com/market-classification
2. https://www.climatebonds.net/resources/reports/green-bondpricing-primary-market-h2-2020
3. Ald Automotive Green and Positive Impact Bond Framework, June
2022, LinkClick.aspx (aldautomotive.com)
4. Volkwagen Group, Green Finance Framework 2022, October 2022,
Volkswagen Group - Green Finance Framework 2022 (volkswagenag.com)
5. Statkraft Green Financing Framework, April 2022.
6. Discussion Paper: Certificarion of Short-Term Debt, Climate Bonds
Initiative, June 2022, Discussion Paper: Certification of Short-Term
Debt | Climate Bonds Initiative
7. Mahalanobis distance is a multivariate distance computation that
accounts for correlation between matching variables in quantifying
the closeness between two bonds. For more details on thiscomputation and why we use it, refer to King & Nielsen (2019).
8. Climate Bonds, 2022 Market Snapshot and 5 big directions forsustainable finance in 2023, January 2023 2022 Market Snapshot: And 5
big directions for sustainable finance in 2023 | Climate Bonds Initiative

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

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

Green Bond Pricing in the Primary Market H2 2022 Climate Bonds Initiative

17