Climate Bonds

Save the date – Bonds and Climate Change: state of the market 2013, Frankfurt, 5 July,10:30am

Posted on 18. Jun, 2013 by Bridget Boulle in blog

Please join us on the 5th of July in Frankfurt for the European launch of the report Bonds and Climate Change: the state of the market in 2013, 10:30am 5 July 2013, Frankfurt

Speakers include: Nick Robins (HSBC) and Sean Kidney (Climate Bonds Initiative)
Kindly hosted by Allianz  Climate Solutions, Frankfurt
RSVP to: bridget.boulle@climatebonds.net  

Note that there will also be a London event – details to follow.

Join us for a presentation and discussion on the recent HSBC and Climate Bonds Initiative report Bonds and Climate Change: the state of the market in 2013. The event will include a presentation of the report findings as well as a panel discussion on opportunities in Europe and key issues faced by investors and issuers in investing in and growing this market.

Report findings

-        Total universe of climate themed bond market = USD356bn  (outstanding)
-        The issuance of new climate-themed bonds was USD74bn in 2012, up 25% on 2011
-        USD163bn outstanding aligns with benchmark-type rules on credit rating, size & currency.
-        Carbon-efficient transport = 75% of the total, followed by clean energy and climate finance.
-        89% of the USD346bn universe is investment grade.

 Download the report here http://www.climatebonds.net/files/Bonds_Climate_Change_2013_A4.pdf

Programme
10.30 Registration
11.00 Presentation report
11.30 Panel discussion: Climate bonds in Europe – hurdles and future potential
12.15 Opening up for exchange with audience and discussion on next steps
12.45 Buffet lunch

RSVP
Please send your name, position and company to bridget.boulle@climatebonds.net
Places are limited so please RSVP early to avoid disappointment

Address:
Allianz Global Investors,
Bockenheimer Landstrasse 42-44
Frankfurt

Bond snippets: Aussie CBD issues £7.5m corp bond to finance UK RE plans / BVP extends closing for EUR2m+ bond for Nthn Ireland wind

Posted on 18. Jun, 2013 by Sean Kidney in blog

While we report mainly about larger scale climate bonds, we’re also seeing more small-scale, retail-focused bond issuance. We aim to cover these on an occasional basis (so let us know your sightings!). Two from the UK this month:

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BusinessGreen reports that Australian renewable energy firm, CBD Energy, has launched a 4-year mini-bond offering to finance UK wind farm projects. The company is looking to raise up to £7.5m at a fixed-rate of 7.5%, aiming to capitalise on the recent boom in small-scale bond issuance in the UK. Minimum investment is £500. The bonds are unsecured corporate bonds for private investors; they have attracted some comment about their high risk nature.

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Dublin company BVP Investments last month raised EUR2m through a loan note for the construction and operation of 250kW wind turbines in Northern Ireland. The loan note has an 8 year tenor with a 10% coupon, with bi-annual capital payments so the full amount is repaid by the end of the term (declining balance method). Unlike the CBD bond, the loan note also has recourse to the project assets.

They got their EUR2m reasonably quickly, so decided to keep going, extending the closing date until 30 June.

BVP says they prefer medium-sized wind projects to wind farms as they are easier to connect to the grid; larger projects cause problems with the existing grid infrastructure. They also receive attractive incentives in the form of Renewable energy Obligation Certificates (ROCs) which can be sold to utilities. The revenue stream is generated via PPA contracts as well as through the sale of ROCS. 

Apologies about the gremlin code – please don’t miss our fabulous new report!

Posted on 14. Jun, 2013 by Sean Kidney in blog

HONG KONG, 14 June 2013 – The Climate Bonds Initiative, in collaboration with the HSBC Climate Change Centre of Excellence, today launches its 2013 review of Bonds and Climate Change at the First Global Investor Forum on Climate Change being held in Hong Kong.

Read the rest of the story …

… or simply download the full A3 report here. You can also get an A4 only version.

New Climate Bonds-HSBC report reveals 25% growth in issuance of climate-themed bonds over past year

Posted on 14. Jun, 2013 by Sean Kidney in blog

HONG KONG, 14 June 2013 – The Climate Bonds Initiative, in collaboration with the HSBC Climate Change Centre of Excellence, today launches its 2013 review of Bonds and Climate Change at the First Global Investor Forum on Climate Change being held in Hong Kong.

> Download A3 version of the report here <            > For A4 version click here <

The report finds that:

• The total universe of bonds linked to key climate themes stands at USD346bn, double last year’s estimate.
• The issuance of new climate-themed bonds was USD74bn in 2012, up 25% on 2011.
• China accounts for USD127bn of the total (37%), followed by the UK and France.
• Carbon-efficient transport, notably rail, accounts for 75% of the total, followed by clean energy and climate finance.
• 89% of the USD346bn universe is investment grade.

Nick Robins, Director at the HSBC Climate Change Centre of Excellence said that: “Over the past year, we have seen impressive growth in the issuance of climate-themed bonds, as well as much greater granularity in key sectors and countries. We believe that bonds will play an increasingly critical role in financing the substantial scale-up in low-carbon infrastructure that the world economy urgently requires”.

Welcoming the report, Karsten Löffler, CFO at Allianz Climate Solutions said: “To mobilize finance for low-carbon projects is key for effective climate protection. A large part of institutional investors’ portfolio is composed of bonds. Our needs are for investment-grade, liquid and benchmarked bonds. We’re cheered to see the report suggest the climate bond market is developing in the direction corresponding to our investment universe.”

According to Climate Bonds CEO Sean Kidney, “Applying an index-type filter —credit ratings, currencies eligible on benchmark indices, bonds over USD100m — shows there are USD163bn of investment-grade bonds available to international investors on the secondary market.”

“Looking ahead, we believe that there will be further expansion of interest from multilateral, municipal and corporate issuers. We also expect increasing demand from the USD21 trillion of institutional investors aligned with the new Global Investor Coalition on Climate Change.”

The biggest slice of the universe — 75% — is made up of transport bonds, mainly rail. Rail is seen as a low-carbon transport, essentially to reducing use of short haul aviation and fuel-based vehicles. The next two areas are clean energy and climate finance. China is the largest issuer at USD127bn, followed by the UK and France.

The report also explores opportunities for investing in climate-themed bonds and identifies where new innovative issuance may originate over the next year.

IEA offers a modest 4 for 2 deal to the world / Jorgen Randers: dealing with climate change will consume 12% of global GDP by 2050 / Sydney Climate Bonds meet next Mon

Posted on 11. Jun, 2013 by Sean Kidney in blog

The IEA released their new Redrawing the Energy-Climate Map report in London yesterday. It offers 4 measures they say can stop the emissions growth by 2020 at no net economic cost, reducing emissions by 3.1 G – that’s 80% of the savings required for a 2 °C path:

1. Partial removal of fossil-fuel subsidies. Partial means the larger part of those subsidies going to the rich, leaving in place subsidies that help the poorest 20%.
2. Implement selected energy efficiency policies. That’s worth 50% of the 4 measures.
3. Limit use of inefficient coal power plants – no inefficient coal
4. Reduce methane releases from upstream oil and gas. Hadn’t been thinking of that, but makes a lot of sense.

For that we get:

1. Global energy-related greenhouse-gas emissions at 8% (3.1 Gt CO₂‑equivalent) lower in 2020 than the level otherwise expected.
2. At no net cost.

Check out the Powerpoint.

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We’re holding a Climate Bonds meet-up in Sydney, Australia, next Mon 17 June 16.30. I will brief on our new Bonds & CC survey. Let me know if you want to come along. Teleconference access will be available.

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Limits to Growth guru Jorgen Randers spoke at the Green Growth Summit in Korea today; he’s great talent. My notebook shows these six points as most memorable:

1. Green growth is the only solution to climate change
2. Population growth will stop within 40 yrs, but not fast enough to stop climate change
3. We will in fact have enough resources – that’s not the big challenge
4. There will be more frequent and scary weather events leading up to 2050
5. By 2050 the world will be spending 12% of GDP on dealing with the impacts of climate change (including that scary weather)
6. Given the huge challenge, we have to do more on mission-driven investment, focused on the needs of society (e.g. Climate Bonds)

See http://www.chelseagreen.com/bookstore/item/2052/ and http://www.2052.info/

In case you missed it, the Paris 4 June Climate Bonds seminar video is now online

Posted on 07. Jun, 2013 by Sean Kidney in blog

Just like being there in person … (ok, that’s a bit of an exaggeration).

Thank you to our co-host, CDC Climat, for organizing this. See below or click here. (Cliquez ici pour la version française)

PDFs available at http://www.cdcclimat.com/Conference-Climate-bonds-and.html

Mass slashes GO bond offering … but $100m green bond bit oversubscribed. Could that be a “market signal”?

Posted on 06. Jun, 2013 by Sean Kidney in blog

The Massachusetts AA+ green bond I mentioned last week got a lot of coverage on release this week – even the WSJ ran the story. But there was a twist: it seems the State had to scale back the total $1.1bn GO offering to $670m on tepid demand, but the green bond bit was 30% oversubscribed.

For all you prospective issuers out there: the green bonds also lured as many as 9 new institutional investors for Massachusetts bonds. One buyer went so far as to say “We think more municipalities should do the same“. So perhaps this is Massachusetts starting a trend yet again?

Mind you, for those of us concerned about climate, Massachusetts is applying a broad interpretation of “green”, as State Treasurer Steve Grossman said to BloombergTV. The bond has more of a Parks & Recreation focus than the IFC / World Bank flavours that inspired them, with only a subset of allocations looking like they would qualify under the Climate Bond Standard.

Cut to Climate Bond Standard board member, California State Treasurer Bill Lockyer:

“Climate Bond Standards offer a valuable tool to help investor to assess the integrity of environmental claims for green bonds.”

One important point: Massachusetts say they will be putting effort into transparency for investors via website reporting – good on them.

The other option to shifting investment: capital steerage / Listen in to tomorrow’s sold-out Paris Climate Bonds seminar

Posted on 03. Jun, 2013 by Sean Kidney in blog

We have over 200 people signed up for our first Paris Climate Bonds seminar tomorrow with CDC Climat! If you can’t join us by the Seine (it’s going to be a beautiful 20C and sunny!) then you can listen in remotely via http://www.eyedo.com/en/WhiteBoard/Evenement/4002. 14:30-16:30 CEST.

This is a sneak preview of my remarks tomorrow:

Steering Capital towards a Low Carbon Economy

The International Energy Agency estimates that some $36 trillion of investment above ‘Business As Usual’ will be needed by 2050 to make the global shift a low carbon economy.

The key word is investment; these are not sunk costs, they are energy and infrastructure investments that can be structured to provide a decent return on capital.

But investment must happen quickly; emissions are increasing to a relentless drumbeat. Existing finance mechanisms, such as carbon markets, are not going to achieve the rapid change we need.

But there are other options.

Governments have throughout history used various forms of “capital steerage” to shift investment into areas of urgent policy priority. For instance, most of the urban infrastructure that developed countries take for granted – from sewers to railways to aviation and to highways – depended on active government steps to ensure necessary capital investment.

Capital steerage has involved tools ranging from policy and regulation to credit enhancement, guarantees, and tax credits. At times it has involved special deals, like agreeing real estate concessions in mid-19th century America so railroad companies had the extra incentive to connect the West Coast (a model copied for the Copenhagen Metro only a few years ago). In the 1990s the German government tweaked regulation of the Pfandbrief market to promote bank lending to housing and public sector projects in newly integrated East Germany.

Bonds: covered, asset-backed, sovereign, housing, war, highway, railroad — even sewer bonds — have been the recurring financial instrument of choice underpinning such capital steerage.

The use of bond finance has been enormously successful. Vast infrastructure projects have been completed; hundreds of thousands of unemployed people or de-mobbed soldiers have been re-integrated into economies; finance has been democratized in many sectors.

We now face the defining challenge of our times: a global switch away from carbon-dependency to a rapid transition to a low-carbon and climate resilient world.

Our opportunity is that this is about investment, not cost.

Government’s role is not to fully fund, but to sort out economic and energy planning and then to reduce key risks — notably government-related policy risk — enough to deliver secure long-term investment returns. That’s how to channel private capital towards low carbon investment: Capital Steerage.

Massachusetts to issue AA+ $100m Green Bond on 4 June

Posted on 24. May, 2013 by Sean Kidney in blog

Reuters reports that the US State of Massachusetts will issue $100 million of Green General Obligation Bonds, as part of a $1.115 billion parcel of bonds to be issued on 4 June 2013.

For credit purposes the bonds are standard Massachusetts State Government Bonds. The difference is that the State is guaranteeing to use the proceeds to finance “environmentally beneficial” projects.

It’s a similar approach to the World Bank Green Bonds, except there has been no third party review of the inclusion criteria – and the proceeds are not all for investments related to addressing climate change, so it wouldn’t win Climate Bond certification.

The projects are in designed in four categories:

• Clean Water and Drinking Water Projects.
• Energy Efficiency and Conservation Projects in State Buildings.
• Land Acquisition, Open Space Protection and Environmental Remediation Projects.
• River Revitalization and Preservation and Habitat Restoration Projects.

Rating is AA+ Fitch / Aa1 Moody’s. Lead manager is Bank of America Merrill Lynch. Full details are available on the Massachusetts Investor web site.

Tesla issues $600m, 5yr EV convertible bond / Reminder: join our Green Sukuk webinar this Thurs 2pm London time – http://goo.gl/3zYqD

Posted on 21. May, 2013 by Sean Kidney in blog

Tesla Motors’ inaugural bond issue has been, as you’d expect, electrifying (just had to say that). The US electric sports car manufacturer has just issued a 5 year, $600m convertible bond in a fundraising program which has seen it raise approximately $1bn through shares and convertible bonds. Coupon is 1.5-2%; conversion premium is 35%; bookrunners were JPMorgan, Goldman Sachs, Morgan Stanley.

Tesla had planned to raise $450m through convertible bonds, but this was raised to $600m after strong demand from investors. That demand allowed Tesla to drop what was going to be a 2-2.5% coupon down to 1.5%-2%. Investors were certainly bullish on the notes.

Over 200 investors participated in a group investor call and Tesla management also held a number of one-to-one investor meetings. We’re not sure yet who the main investors were (although we do know that one of them was the company’s co-founder and CEO Elon Musk) but unlike many convertible bond deals, buyers were primarily long-only funds (few hedge funds).

Approximately $450mn of the money raised will go towards repay a $452mn loan from the Federal government through the  DOE’s Advanced Technology Vehicles Manufacturing loan guarantee scheme.

Would the Tesla bonds qualify for Climate Bonds certification? Well, electric vehicle (EV) technology will be eligible, although we are still working on details of inclusion definitions. At this stage, we don’t see any problem with convertible bonds for pureplay companies like Tesla; but if it wasn’t pureplay then we’d have to take a deeper look. In our 2012 Bonds and Climate Change report, we didn’t find any bonds solely linked to EVs, so (as far as we can tell) this is a first!

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Last minute reminder: Join us Thursday this week a webinar on
Green Sukuk – why, what, how. Financing renewable energy in the Islamic World – Click for more info

23 May 2013; one hour. 5pm Dubai time / 3pm CET / 2pm BST / 9am EDT

To join the webinar click: https://www3.gotomeeting.com/register/117586174