Climate Bonds

The following table provides a list of some climate-themed bonds issued in recent years. The list is not exhaustive but aims to provide a snapshot of the range and scope of past and present issuances. We also elaborate on some of the key climate-related bond programs below.

The Climate Bonds Initiative is currently building a thorough climate bond database subsequent to securing funding. For more information on climate bonds issuance or if you would like to add a bond to this list, please contact padraig.oliver@climatebonds.net

World Bank Green Bonds from 2007 – present

The World Bank has successfully issued a number of green bonds over the past few years.

The first green bonds it issued were for smaller amounts targeted at retail investors.

In December 2007 the Bank issued Euro-denominated, six-year “Eco 3+ bonds” through ABN AMRO, targeted at retail investors in The Netherlands, Belgium and Luxembourg. The bonds pay a floating rate annual coupon of at least 3% per year. The coupon is linked to an equity index, the ABN AMRO Eco Price Return Index, made up of companies that produce alternative forms of energy, engage in water and waste management, or are involved in the production of catalysts used to reduce pollution.

In June and again in September 2008 the Bank launched five-year bonds linked to certified emission reductions (“CER”). Daiwa Securities Group managed the first and Mitsubishi UFJ Securities second. The total offering was $31.5 million. The bonds will pay a fixed rate coupon for an initial period and then a coupon linked to future CER market prices and the actual volume of CERs issued by a hydropower plant located in the Guizhou Province in China and a bio-energy project in Malaysia.

Another NZD150 million worth of retail green bonds was issued in January 2010.

The first green bond designed for institutional investors was issued in November 2008. It involved SEK 2,700 million (roughly $350 million) issued through the Scandinavian bank SEB, with Credit Suisse and Landesbank Baden-Württemberg as co-managers, to be used to support projects in client countries that met criteria for low-carbon development; another SEK150 million was issued in February 2009. Interest payable on the bond was 0.25% above current Swedish government bond rates, giving investors a yield of 3.15% p.a. Investors included Swedish National Pension Funds AP2 and AP3, Skandia Life and the United Nations Joint Staff Pension Fund.

A second, dollar-denominated, bond issue of US$300 million in April 2009, with a maturity of six years, was purchased by the State of California as a sign that California wanted to contribute tangibly to climate solutions. It had a floating rate.

A third bond issuance of US$130 million in early December 2009, co-managed by SEB and Credit Suisse, matures in December 2013 and pays a coupon of 2% per annum. It was followed quickly by another $50 million later in the month. Among the investors who purchased the latest bonds were the California State Teachers’ Retirement System, the Swedish life insurance provider SEB Trygg Liv, and Swedish National Pension Funds AP2 and AP3.

The World Bank estimates that its green bond program has issued up to USD 2 billion up to February 2011.

Christina Kusoffsky Hillesöy, Head of Communication and Sustainable Investments at AP3 (Third Swedish National Pension Fund), commented: “For us as long-term investors, it is important to find responsible investments targeted at the global climate challenges. The green projects supported by the World Bank green bond are an important step in that direction”.

European Investment Bank: Climate Awareness Bond 2007 and 2009

The European Investment Bank’s (EIB) first ‘Climate Awareness Bond’ issue was in 2007, with a five-year zero-coupon bond for Euro 600 million, issued by through merchant bank Dresdner Kleinwort. The funds raised have been used in EIB renewable energy and energy efficiency projects.

In 2009 the EIB issued a second Climate Awareness Bond in Swedish Krona, targeted at EIB’s Scandinavian investor base. The proceeds are being used for projects in the fields of renewable energy and energy efficiency. The lead manager was Swedbank.

The bonds issued in fixed and floating rate format for a total amount of SEK 2.25 billion, will mature on 17 February 2015. The SEK 1.7 billion fixed rate tranche will pay an annual coupon of 2.95%. The SEK 550 million floating rate tranche will pay a quarterly coupon of 3-month Stibor +10bps.

US Government Clean Renewable Energy Bonds

The US Treasury in its stimulus package of 2009 issued Green Bonds to a value of US$2.2 billion to generate financing for renewable energy initiatives. These are known as ‘Clean Renewable Energy Bonds’ function as low-interest loans to renewable project owners, providing them with an alternative to traditional sources of finance, many of which had dried up as a result of the recession.

The Bonds are similar to production tax credits awarded to renewable projects, and apply largely to the same projects. However, they differ in that they serve as a financing tool rather than providing post-implementation tax relief; they are intended to help get planned projects, such as wind or solar farms, into construction.

Under a scheme, the borrower, in this case a government agency or a utility, sells the bond to a lender, which then becomes the bondholder. In normal bond conditions, the issuer then has to pay interest to the bondholder. But with Clean Renewable Energy Bonds the Federal government picks up most of the tab, paying interest in the form of a tax credit to the bondholder.

‘Build America Bonds’

In 2009 US Government introduced a program to encourage municipal bond raising as an economic stimulus. They “topped up” bond yields by 35%, leading to a boom in issuance, in many cases for local green energy projects, although accurate data is unavailable.

PACE bonds

The Property Assessed Clean Energy bonds program is a scheme designed to support energy efficiency and renewable energy applications in residential and commercial buildings in the US. Although it has achieved some scale, the program has stalled due to rulings by the Federal Home Loans Agency that houses with PACE loans would not be eligible for home loan insurance.

Triodos Bank climate change bonds

In December 2009 green banking specialist Triodos launched a range of retail climate change bonds. The two, three- and five-year bonds offered interest rates of between 2 and 3.25 per cent.

Nomura selling Nordic IB enviro bonds

Nordic Investment Bank funds renewable energy projects around the Baltic Sea and issues “environment-related” bonds to do so. In January 2010 Nomura Securities began selling three-year bonds Nordic bonds into the Japanese market, denominated in New Zealand dollars and South African rand. Funds are expected to be applied to loans for renewable energy and many other environmental projects. Japanese media are referring to the bonds as “green bonds”, a sign of local interest in such issues.

Notable calls for green or climate bonds

UK Government planning green bonds issuance

The UK Coalition Government announced a raft of climate finance initiatives in June 2010, including a Green Investment Bank to “design frameworks that provide the certainty and incentives to attract private sector investment in green technologies” and plans to issue green bonds.

Environment bonds proposal from UK’s Climate Change Capital

Climate Change Capital has been advocating the issuance by the OECD governments of ‘environment bonds’ or ‘green bonds’ similar to those issued to fund the war effort during World War II. The bonds would offer secure but modest returns, and be invested in renewable energy and low-carbon industrial initiatives (Cameron and Blood 2009; CCC 2009).

Canada: Green bonds proposals

In January 2009 an influential Canadian group, PowerUP Canada (backed by four former prime ministers) issued a call for a ‘green’ stimulus package of Can$41 billion, funded largely by the creation of ‘green bonds’ that would be floated by the government. The Green bonds would be modelled on existing Canada Savings Bonds and would pay a comparable rate of interest. A private funds management company in Canada, VCi Green Funds, has been developing the proposal, and has issued a Green Bonds public policy proposal document. See Green Bonds: A Public Policy Proposal at www.greenbonds.ca.

Green bonds for the Emerald Isle

Comhar, the Irish Sustainable Development Council, is proposing a “Green New Deal for Ireland that would be funded from the revenue of a carbon tax (400 million Euro a year), from the auctioning of carbon permits (which will not start before 2013), and with ‘green bonds’.

UNFCC: Developing country carbon emission bonds

In numerous speeches Yvo de Boer, head of UNFCC, has proposed green bonds issued by developing countries where the investors would be from developed countries, and the pay-off would be carbon emissions saved (UNFCC 2008). The bond would work on the principle of securitization of future revenue streams.