EIB Adds Third Benchmark To Its EUR Green Bond Curve

• CAB 2023 complements CAB 2019 and CAB 2026
• EUR 10bn CAB issuance testament to EIB’s strategic commitment
• Highest Sustainability Bond Rating yet assigned by oekom

On 20 August 2015, the European Investment Bank (EIB), the EU Bank owned by the EU Member States, rated Aaa/AAA/AAA (Moody’s / Standard and Poor’s / Fitch), issued a new EUR 600m Climate Awareness Bond (CAB). The issue carries an annual coupon of 0.5%, has a final maturity date of 15 November 2023 and has been priced in line with the existing EIB ECoop curve at MS-24bp.

The transaction completes EIB’s EUR Green Bond curve with a third reference point in an intermediate maturity and takes the total CAB issuance to EUR 10bn. These two achievements reaffirm EIB’s developmental role and its commitment to spur further sustainable growth of the Green Bond market. These are important objectives of EIB’s activity in the run-up to the UNFCCC Paris Climate Conference (COP 21) in December 2015, and are reflected in the Bank’s Corporate Operational Plan 2015-2017: http://www.eib.org/attachments/strategies/cop2015_en.pdf, p. 15.

Like the other two EUR CABs outstanding, the new issue has been awarded a Sustainability Bond Rating of ‘b+’ from oekom, one of the leading ESG rating agencies worldwide. This is the highest rating so far assigned by this agency to any Green Bond.

The bond is EIB’s third CAB distributed in mini-benchmark / ECoop format, which foresees a size of at least EUR 500m and EUR 250m minimum re-openings upon actual demand. The EUR 3bn ECoop CAB due 11/2019 is currently the largest Green Bond outstanding, while the EUR 1.25bn CAB due 2026 is the longest outstanding Green benchmark in the market.

The bond generated strong demand from a range of investors genuinely interested in the socially responsible features of the transaction (e.g. BMO Global Asset Management, Actiam, etc.), particularly from the Netherlands which accounted for 27% of distribution. Asset managers, insurance companies provided over 37% of distribution by investor type while banks and central banks / official institutions accounted for 58% and 5% respectively.

Investor allocation:

Joint Bookrunners for the transaction were Bank of America Merrill Lynch, Barclays, BNP Paribas, Crédit Agricole CIB and HSBC.

BACKGROUND 

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 2014, the EIB dedicated over EUR 19bn, 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. EIB’s overall lending in these areas in 2014 reached EUR 8.2bn.

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.

EIB pioneered the Green Bond segment in 2007 and is the largest issuer of Green Bonds to date, with EUR 10bn raised.

On 27 March 2015, in concomitance with the publication of the new version of Green Bond Principles (GBP), the EIB published its latest, 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 the AfDB, EIB, IBRD and IFC in response to a recommendation of the 2015 Green Bond Principles:

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

Comments on the issue:

Eila Kreivi, Director and Head of Capital Markets Department at the EIB, said: “Green Bonds have gained recognition on the international climate agenda. EIB has made a strategic commitment to spur further sustainable growth of this market. We are building a Green curve, which now entails reference points in 4-, 8- and 11-years. We are pleased to see today’s issue appeal to a number of socially responsible investors who have equally pledged their commitment to this segment and are supporting it with tangible contributions.”

Erik Jan van Bergen, CIO at ACTIAM, said: “As the responsible asset manager in the Netherlands, ACTIAM firmly believes that financial return and social return on investment can go hand in hand. Our acquisition of Climate Awareness Bonds from the European Investment Bank is an excellent example of this win-win combination. ACTIAM is very pleased to participate in this particular EIB deal to continue to assist its clients like Zwitserleven in their search for responsible investments.”

Jozef Prokes, Blackrock, said : " This deal is a great example of the benefits of robust environmental impact reporting. Greater clarity of reporting is driving greater demand for this type of investment among our institutional clients, and we expect that it will help to grow the investor base for this asset class further."

Michiel de Bruin, Head of Global Rates at BMO Global Asset Management (EMEA), said: “After being one of the first entities to issue Green bonds, EIB keeps a leading role in the Green bond market through its commitment to increase transparency of the environmental impact of the projects. We support developments regarding an industry-wide benchmark as this adds to green bond transparency and impact reporting, to the benefit of our clients.”

Martin Mills, Head of Green DCM, EMEA at Bank of America Merrill Lynch, said: “This latest Climate Awareness Bond not only further enhances EIB’s Green Bond curve through the issuance of a third EUR benchmark transaction, but also underscores EIB’s commitment to remaining at the forefront of the sustainable development of the Green Bond market.  A very welcome and successful transaction all round.”

Lee Cumbes, Head of SSAR Origination at Barclays, said: “EIB has executed another impressive EUR Climate Awareness Bond, its first for the year. Many dedicated Green investors participating in the transaction, demonstrating their desire for a new intermediate tenor on the EUR CAB curve. EIB continues to distinguish itself with its leadership and ongoing commitment to issuance in Climate Awareness Bond format.”

Stephanie Sfakianos, Head of Sustainable Investment at BNP Paribas, said: “A cornerstone transaction for EIB who is the first Green bond issuer to create a full liquid curve. A flurry of demand from a diversified SRI investor base enabled the EIB to upsize the transaction from the initially targeted EUR 500m amount to EUR 600m while achieving a deep sub libor pricing of 24 bps through mid-swaps. BNP Paribas is proud to team up with the EIB and the investor community to further promote climate awareness initiatives in this important year, leading up to the UN summit in December.”

Benjamin Moulle, Managing Director Head of SSA Syndicate at CA-CIB, said: “EIB has once again demonstrated its leadership in the SRI universe by creating an additional point on its EIB Climate Awareness Bond curve on the back of strong investor demand. With this Nov-23 CAB, EIB is the only SSA issuer with a complete SRI curve.”

Ulrik Ross, Global Head of Public Sector and Sustainable Financing at HSBC, said: “EIB has today issued a successful EUR 600 million Climate Awareness Bond due November 2023. This bond yet again demonstrates EIB's commitment and important role in the climate finance space leading up to COP21 in December in Paris. EIB's effort through the recently announced Impact Report, is a way for EIB to meet investor's requests for more information, as well as to take a leading role in further advancing the Green Bond market”.

 Summary Terms and Conditions for the new bond issue:

BACKGROUND INFORMATION

EIB funding strategy and results

The Bank’s funding strategy combines a consistent and transparent approach with flexibility and innovation, both in terms of product and maturity. In 2015, the Bank plans to borrow ca. 60bn. It raised EUR 62bn in 2014.

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.