The first ever World Bank green bond to be issued in euros has been successfully placed with investors around the globe.
The €550million three-year fixed rate bond was taken up by 21 investors, including Aegon, AP2, Barclays Treasury, Blackrock, Caisse Centrale de Reassurance, Pictet, SEB Asset Management, SNS Asset Management, Standish Mellon Asset Management, Zurich Insurance Group and Zwitserleven.
Around 90% of the bonds were placed with European investors, with the rest taken up in the Americas. Nearly half (42%) of the bonds were placed with bank treasuries and corporates, 22% with asset managers, 19% with insurance companies, 9% with official institutions, and 8% with pension funds.
The bond, which is triple A rated and will yield an annual return of 0.25%, has been issued by the International Bank for Reconstruction and Development, a World Bank subsidiary that raises funds on the global financial markets to reduce poverty in middle-income countries and creditworthy poorer nations.
Money raised by the euro-based bond will be used to finance development programmes designed to address climate change, including renewable energy installations, energy efficiency projects, new technologies in waste management and agriculture that reduce greenhouse gas emissions, forest and watershed management, and infrastructure to prevent climate-related flood damage.
The World Bank said the popularity of the latest issue shows there is an ‘expanding investor base’ for the green bond market. It issued its first green bond in 2008 and since then has raised US$5.3billion through more than 60 green bond transactions in 17 currencies. However, the latest bond is the first to be issued in euros.
Heike Reichelt, head of investor relations and new products at the World Bank, said it had been wanting to issue a euro-based green bond for some time, ‘but this was the first time that there was broad demand from many different types of investors … in euros at levels that worked’. She added that swap rates with US dollars have recently become more favourable, therefore ‘making it possible for us to offer benchmark-sized bonds in euros to investors at levels that work for us – after swapping to US$ Libor – and for the investors’.
The bond issue was jointly managed by Credit Agricole, Morgan Stanley and SEB, and was listed on the Luxembourg Stock Exchange. It was the second World Bank green bond issue of 2014.
The issuance of the First euro-based World Bank green bond times well with the work the PRI is currently doing to promote the consideration of environmental, social and governance (ESG) factors within the fixed income asset class. For more information on this work, or to find out more about PRI’s upcoming fixed income events, click here.