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- First report on individual Green Bond allocations to individual eligible projects
- Other highlights:
- CAB-issuance over EUR 10bn – EIB largest Green Bond issuer to date
- CABs awarded a “Sustainability Bond Rating“ of b+ by ESG rating agency oekom (best score so far assigned by this agency)
- Discussion on AfDB/EIB/IBRD/IFC’s joint proposal for Green Bond impact reporting harmonization extended to 6 further IFIs
- Frequency of Green Bond newsletter becomes semiannual
Transparency and accountability are a key theme of the Council Conclusions establishing the EU’s position for the UN climate conference in Paris later this year, as adopted by the EU Council on September 18.
In the Green Bond market, EIB has established significant new milestones in these two areas, further enhancing the transparency of EIB’s reporting on its Green Bonds (“Climate Awareness Bonds” or “CABs”).
In March 2015, EIB was the first issuer to apply a new template for reporting the expected impact of projects receiving allocations from green bonds, a template jointly proposed by AfDB/EIB/IBRD/IFC. In the CAB Newsletter published today, EIB extends this transparency effort by reporting on the allocations of proceeds from individual CABs to individual projects, beginning with allocations made in H1 2015.
With these contributions, the EIB continues to maintain its developmental role and to spur further sustainable growth of the Green Bond market, delivering on the commitment jointly adopted by the Multilateral Development Banks on the occasion of the UN Climate Summit in September 2014.
EIB DETAILS ALLOCATIONS OF CAB-PROCEEDS TO ELIGIBLE PROJECTS
The disclosure of the allocation of individual CAB-proceeds to individual projects establishes a direct link between the two, while the investor remains exposed only to the EIB credit. EIB can deliver this level of information thanks to an upgrade of its internal procedures and IT-infrastructure following extensive due diligence in 2014 and 2015.
The Bank records CAB-eligible disbursements and allocates CAB-proceeds to them on a daily, first-in first-out basis. This enables detailed monitoring and reporting of allocations, and helps to complete the set of information available to investors.
This new set of information will be made available via CAB Newsletters on a semi-annual basis. Detailed reporting on the expected impact of projects will continue to be published in the CAB Newsletter’s annual editions.
EIB REMAINS LARGEST GREEN BOND ISSUER
Issuance of EUR 2.7bn equivalent in 2015 ytd has brought total CAB issuance to over EUR 10bn. EIB thus remains the largest Green Bond issuer to date, another proof of its enduring commitment to supporting development of this market segment.
EIB has continued to build up its EUR Green Bond curve strategically. Earlier this year, it issued taps of EUR CABs due 11/2019 - the market’s largest Green Bond outstanding, and 11/2026 – the longest Green benchmark outstanding. In addition, the EIB added a new point on the green yield curve in August, with a new EUR 600m CAB in an intermediate maturity (11/2023).
EIB EARNS BEST GREEN BOND RATING
As the market for Green Bonds develops, certain investors are interested in obtaining research on ESG metrics specifically for bonds rather than issuers. On behalf of buy-side clients, oekom, an ESG rating agency, conducted a rating of EIB Green Bonds, and awarded them with a ‘Sustainability Bond Rating’ of ‘b+’ (“good“). This is the best Sustainability Bond Rating so far assigned by this agency. Among the components considered in the assessment, several are evaluated as “excellent“, including: Sustainability Quality of Bond, Clear and Transparent Disclosure of Management of Proceeds and Reporting.
DISCUSSION ON IMPACT REPORTING HARMONISATION EXTENDED
In response to a recommendation in the Green Bond Principles (“GBPs”) “to help establish a model for impact reporting that others can adopt and/or adapt to their needs”, AfDB, EIB, IBRD and IFC have jointly developed a first harmonization proposal in the fields of renewable energy and energy efficiency. In May, the GBP-Secretariat distributed it to GBP Members and Observers for broader market consideration. Formal discussions have meanwhile extended to six additional IFIs with the intention of improving the initial proposal and extending it to other areas of climate/social action in due course.
Comments:
Bertrand de Mazières, Director General of Finance, EIB, said: “Ahead of the Paris Climate Conference – “COP 21”, EIB is supporting EU’s leadership in climate policy also through innovation in the Green Bond market. Green Bond issuance has grown substantially, and has the potential to contribute significantly to addressing the 2°C target. Granular transparency on the allocation of the CAB-proceeds helps this process by bringing investors more precise insights and promoting best practice.”
Eila Kreivi, Director and Head of Capital Markets, EIB, said: “Investors are increasingly eager to receive clear information on the use of proceeds and the impact of eligible projects. EIB’s launch of detailed reporting in these areas this year has established an important reference. Transparent management and reporting are essential to further grow the Green Bond market. At the same time, one must be careful not to overload issuers with administrative hurdles. Striking the right balance will be a key challenge for the market.”
The full newsletter is available via the following link: EIB Climate Awareness Bonds Newsletter H1 2015
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 sustainability objectives. EIB’s overall lending in these areas in 2014 reached EUR 8.2bn.
Climate Awareness Bonds
CABs, EIB’s 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’s strict earmarking approach entails the ring-fencing of proceeds in a dedicated liquidity portfolio. Pending disbursements, the portfolio is invested in money market instruments. The EIB provides transparency on the allocation of CAB proceeds annually in its audited financial statements and sustainability report as well as in a dedicated Climate Awareness Bonds Newsletter.
EIB first CAB pioneered the Green Bond segment in 2007 and is the largest issuer of Green Bonds to date. In September 2014, together with other MDBs, the Bank committed to maintaining a developmental role in order to spur further sustainable growth of the green bond market. This comprises new reference issuance as well as active engagement in the market- based definition of minimum requirements, best practice and governance.
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.
