European Investment Bank („EIB‟) re-opened the EUR green bond market with the first transaction of the year, a EUR 350m tap of the Climate Awareness Bond (CAB) due 15 November 2019. Total size after the increase is a record EUR 1.5bn, which makes this issue the largest climate-themed bond outstanding in any currency.
The transaction is the fourth tranche of this line, which was the first CAB to adopt the „mini-benchmark‟ ECoop format in July 2013. This format foresees a size of at least EUR 500m and EUR 250m minimum re-openings to build and enhance the benchmark character of a transaction upon actual demand. The issue carries an annual coupon of 1.375% and has been priced in line with the existing EIB ECoop curve at a reoffer yield of MS-1bp.
The trade came on the same day as the release of the “Green Bond Principles” (GBPs) – voluntary guidelines published by a consortium of investment banks following broad market consultation. The GBPs aim to encourage transparency, disclosure and integrity in this market segment.
In 2007 the EIB issued the first transaction with proceeds earmarked for projects in key fields of climate action, now a recognised best practice endorsed by the GBPs.
Climate Awareness Bonds
CABs provide investors with the opportunity to associate their investment with projects contributing to climate action, while enjoying the excellent credit quality of EIB as an issuer.
The funds raised via these issues are earmarked for disbursements to EIB lending projects within the fields of renewable energy and energy efficiency. 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.
EIB‟s strict earmarking approach entails the ring-fencing of proceeds in a dedicated liquidity portfolio, with subsequent disbursement restricted to eligible projects. Pending disbursements, the sub-portfolio is invested in money market instruments.
The EIB provides transparency on the destination of CAB proceeds through regular reporting via the annual Corporate Responsibility report and the dedicated Climate Awareness Bond Newsletter.
Since inception, CABs have raised EUR 3.7bn equivalent in 7 currencies. 2013 was a record year for CAB issuance – the EIB issued its largest annual volume ever, EUR 1.4bn.
Climate Action – 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, with over EUR 13bn lent in 2012 alone. EIB‟s 2013 to 2015 Corporate Operational Plan sets an annual target of over 25% of finance directed to climate action.
Within its climate action framework, the Bank strongly supports energy efficiency and renewable energy investments. In 2012, EIB‟s lending in these areas reached EUR 3.3bn and 1.1bn, respectively, meaningfully contributing to the EU‟s climate change and energy sustainability objectives.