Chapter News

Climate Awareness Bond hits 100th Green Bond listing on LuxSE

Key Topics:

  • Third EUR Climate Awareness Bond (CAB) increased to or above EUR 1.5bn
  • EUR 13bn of Green Bonds issued by EIB to date via 59 CABs in 11 currencies
  • Increasing role of Green Bonds in the context of COP21
  • Increasing role of stock exchanges in promoting transparency and comparability

Today, the European Investment Bank (EIB), the development institution owned by the EU Member States, increased the 0.500% Climate Awareness Bond (CAB) 11/2026 to EUR 1.5bn, now the largest Green Bond in this part of the curve. EIB’s two other Green benchmarks in EUR are the EUR 1.5bn CAB due 11/2023 and the EUR 3bn CAB due 11/2019, currently the largest Green Bond outstanding.

Total CAB issuance now approaches EUR 13bn, with 59 tranches launched in 11 currencies – underpinning EIB’s leadership and continued commitment to the sustainable growth of the Green Bond market. EIB’s CABs have been awarded a Sustainability Bond Rating of ‘b+’ from Oekom.

EIB listed the first ever Green Bond on the LuxSE in 2007, a milestone recognized with a “Green Bond Pioneer Award” by the London Stock Exchange and the Climate Bond Initiative last week. Today’s transaction will be the 100th issue of Green Bonds to be listed at the Luxembourg Stock Exchange (LuxSE). These achievements highlight EIB’s early and systematic commitment to promote direct capital market engagement in the area of climate finance.

The role of listing venues is growing as public authorities are increasingly considering Green Bonds in the context of COP 21, which establishes transparency and accountability as pillars of the global accord on climate change. These are core components of Green Bonds and stock exchanges can play a distinctive role for scaling-up the market as they promote comparability in this unique market segment, facilitating investor assessment and public confidence.

This is important in the context described by Carole Dieschbourg, Environment Minister for Luxembourg, then holding the presidency of the EU Council, on the day of the Paris agreement: “Today is a day to be proud. … But let’s not forget that Paris is only the beginning of a long journey. Together with all the stakeholders – NGOs, the business community and every citizen – we will now have the responsibility to translate this agreement into actions.

Comments on the issue:

Eila Kreivi, Director and Head of Capital Markets Department at the EIB, said:” Today’s transaction underpins EIB’s strong track record of Climate Awareness Bond issuance. EIB was the first borrower to issue a labelled green bond in 2007 and has since then closed more than 50 green bond transactions in 11 different currencies, many of which in close cooperation with Luxembourg Stock Exchange.”

Robert Scharfe, CEO of the Luxembourg Stock Exchange, said: “Today is a very strong moment in the current momentum the green bond market enjoys. We have had the pleasure to list EIB’s very first Climate Awareness Bond opening the green bond market in 2007 and have seen market participants’ trust increasingly confirmed ever since. With this 100th green bond listed on our exchange we recognize EIB’s outstanding contribution to the evolution of green standards and commit to further accompany green issuers in the next phase of the market.”

Comments by lead managers:

Martin Mills, Head of Green DCM, EMEA at Bank of America Merrill Lynch, said: “EIB kicked off the fixed income SRI market in 2007 with a landmark equity-linked EUR 600m trade. EIB has today reinforced their institution’s commitment to the development of this market with the 100th Green trade to be listed on the Luxembourg Stock Exchange. Bank of America Merrill Lynch has been delighted to be involved in both trades.”

Susan Barron, SSAR Origination at Barclays, said: “Reaching this important milestone further highlights the significant role that the EIB has had in the establishment and development of the Green bond market. As the largest and most regular issuer of Green bonds, investors continue to appreciate the EIB’s consistency in regards to issuance in this market. EIB should be applauded for the ongoing success of its Climate Awareness Bonds programme.”

Christian Guentzel, SSA Syndicate at Commerzbank, said: “We congratulate the EIB for yet another successful green bond transaction that highlights its leadership in the market segment. After EIB had launched the very first green bond in 2007 EIB as an issuer has been incremental in building up this market segment.”

Ulrik Ross, Global Head of Public Sector and Sustainable Financing, HSBC, said: “EIB has today successfully executed EUR 250 million Climate Awareness bond due November 2026.  As recognised by Climate Bond Initiative last week, EIB also received the award for being the first development bank to execute a green bond and their commitment to climate financing has been unparalleled. They have been an active member of the ICMA Green Bond Principles Executive Committee and significantly contributed to the development of the green bond market. So it is not a surprise that we see yet another landmark transaction by EIB through the issuance of the 100th green bond listed on the Luxembourg Stock exchange.”

Laurent Lagorsse, Global Head of Bond syndicate, Natixis, said: “EIB is a pioneer in the SRI markets, so investor community has become very focused on every new market offer from the issuer. Demand on Climate Awareness Bonds is now solid and recurrent, and confirms, more than ever, EIB’s vision that the market requires transparency and accountability. This 100th green bond transaction on the LuxSE highlights EIB’s commitment to provide continuous supply on this asset class, thus ensuring a dynamic market and building a liquid CAB curve. “

 

BACKGROUND INFORMATION

Renewable energy and energy efficiency – a top priority of the EU and EIB

A key instrument of EU public policy, the European Investment Bank is a market leader in the financing of projects tackling climate change worldwide. In 2015, the EIB dedicated over EUR 20bn, or 25% of its total lending activity, to climate action. Within this area, the EIB strongly supports Renewable Energy and Energy Efficiency, meaningfully contributing to the EU’s 2020 and 2030 climate policy targets.

Climate Awareness Bonds

CABs, EIB Green Bonds, provide investors with the opportunity to associate their investment with EIB’s lending in the areas of renewable energy and energy efficiency, while enjoying the excellent credit quality of EIB as an issuer.

The funds raised via these issues are earmarked to match actual disbursements to eligible projects. These projects include, but are not exclusive to, respectively:

  • renewable energy projects such as wind, hydropower, wave, tidal, solar and geothermal production,
  • energy efficiency projects such as district heating, cogeneration, building insulation, energy loss reduction in transmission and distribution, and equipment replacement with significant energy efficiency improvements.

The support of the Green Bond market in quantity and quality is an important objective of EIB’s activity as reflected in its Corporate Operational Plan 2015-2017 (http://www.eib.org/attachments/strategies/cop2015_en.pdf, p. 15) as well as in the Climate Strategy adopted by the Bank’s Board of Directors on 22/9/2015 (http://www.eib.org/attachments/consultations/eib_climate_action_climate_strategy_20150817_en.pdf).

EIB pioneered the Green Bond segment in 2007 and is the largest issuer of Green Bonds to date, with EUR 12.8bn raised.

On 27/03/2015, in concomitance with the publication of the new version of Green Bond Principles (GBP), the EIB published its 2014 Climate Awareness Bond Newsletter:http://www.eib.org/attachments/fi/2014-cab-newsletter.pdf. The Newsletter outlines in detail EIB’s Green Bond practice in relation to the four key areas of the GBP.

The Newsletter also includes EIB’s Green Bond project impact report, the first prepared according to the proposal for a Harmonised Framework for Green Bond Impact Reporting developed jointly by AfDB, EIB, IBRD and IFC in response to a recommendation of the 2015 Green Bond Principles and recently enriched and taken on board by 7 additional IFIs

http://www.eib.org/attachments/fi/informationonimpactreporting.pdf.

Harmonized Framework for Green Bond Impact Reporting jointly advanced by ADB, AFD, AfDB, EBRD, EIB, FMO, IBRD, IDB, IFC, KFW, and NIB on December 2 (http://www.eib.org/attachments/fi/informationonimpactreporting.pdf).

Mainstreaming Climate Action within Financial Institutions. Emerging practices.  http://www.eib.org/attachments/fi_mainstreaming_epp_en.pdf)

EIB funding strategy

The Bank’s funding strategy combines a consistent and transparent approach with flexibility and innovation, both in terms of product and maturity.

Background information on EIB

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. The Bank’s strong credit standing is underpinned by exceptional asset quality, a strong capital base, firm shareholder support, conservative risk management and a sound funding strategy.

Compliments of the European Investment Bank