News Roundup: BlackRock Launches Green Bond Index Fund as Demand and Supply Both Surge

We take a look at some of the many new green bond indexes and funds coming to market, as well as other green bond news from around the world. Plus, the Ford Foundation is putting $1 billon into impact funds, Washington D.C. may get its own Green Bank and other sustainability news.

Asset management giant BlackRock has launched a green bond index fund, responding to growing demand from investors. It’s not the only company looking to build products around green bonds, which continue to see growing popularity among issuers and investors alike.

BlackRock’s new index fund will be seek to track the Bloomberg Barclays MSCI Global Green Bond Index. It comes amid a flurry of other product and index launches.

In early March, S&P Dow Jones Indices launched the S&P Green Bond Select Index, aimed at “capturing the most liquid and tradable segment of green-labeled bonds issued globally.” The index was also licensed to VanEck to create an exchange-traded fund, which it says is the first-ever U.S.-listedgreen bond ETF.

Just a few days prior to that, Lyxor, though, said a few days prior said it was launching the first green bond ETF in the world. It is to track the Solactive Green Bond EUR USD IG Index, which Solactive launched in February.

All of these trackers will have a growing number of bonds to track, as experts say this year will set another record in terms of green bond issuance. Moody’s is particularly bullish as it forecasts $206 billion in new green bonds will hit the market in 2017, more than double the $95 billion issued in 2016. That’s a much more aggressive outlook than that of Bloomberg New Energy Finance, which is still forecasting the market to grow, with $123 billion in new issues this year. All this demand comes even as some skeptics note that terms and definitions around green bonds remain inconsistent.

Here’s a quick look at some recent green bond news, plus a look at other sustainability news of interest.

Green Bonds in the Americas:

Apple issued $1.5 billion in green bonds in February 2016, and has now disclosed the projects some of those dollars funded. Through the end of the fiscal year in September, Apple put $441 million of the green bond proceeds into 16 major projects, including $232.6 million in green buildings, $129.1 million in renewable energy and $74.6 million in energy efficiency. A lot of the money is being invested in Apple Park, the company’s soon-to-open office campus in Cupertino, Calif.

The state of Massachusetts issued a $100 million green bond as part of a $778 million general obligation bond issuance in late March. Details of the bond proceeds’ intended use were not available.

Voters in neighboring Rhode Island approved $35 million in green bonds in November, and the state recently disbursed about $10 million of that, mostly to upgrade bike paths. Additional money from the bond issuance will be targeted for cleaning up industrial sites for redevelopment.

Mexico City issued a $50 million green bond in December, making it the first Latin American city to float such a bond. The bond, which was oversubscribed by more than two times, will be used for transit improvements, energy efficient lighting and water plan improvements. The city plans to issue another $30 million to $75 million in green bonds this year, environment minister Tanya Müller García says.

CMPC, a Chilean paper and pulp producer, issued a 10-year, $500 million green bond, the first such bond issued in Chile. The company says the proceeds will go toward new projects, or refinancing existing projects, in areas such as sustainability forestry, sustainable water management, pollution control and energy efficiency.

Green Bonds in Europe and the Middle East:

Engie issued a €1.5 billion ($1.6 billion) green bond in mid-March. The French energy company says it will use the proceeds on a wide range of projects, from wind and solar farms to hydropower plants and energy efficiency. The bond was issued in two tranches: a seven-year, €700 million bond with an 0.875% coupon and an 11-year, €800 million tranche that carries a 1.5% coupon.

The National Bank of Abu Dhabi raised $587 million in green bond funding in late March. The five-year bonds are the first-ever green bonds to be issued in the Persian Gulf region. Specific projects that the NBAD green bond will fund were not disclosed, though Bloomberg notes that Abu Dhabi is building numerous sustainable projects, including a 1.2 gigawatt solar plant.

The European Investment Bank doubled the size of its Climate Awareness Bond, issuing €500 million in new debt to bring the bond’s outstanding amount to €1 billion. It’s a 20-year bond with a 0.5% annual coupon. With €16.7 billion in green bond debt raised, the EIB is the world’s largest green bond issuer so far.

Norwegian real estate company Entra issued a NOK 750 million ($88 million) green bond in March as well. The seven-year, floating-rate bond will fund “a pool of properties/projects with high environmental standards,” the company says in a statement. Entra issued its first green bond, for NOK 1 billion, in September.

Green Bonds in Asia-Pacific:

Green bonds have been relatively slow to catch on across Asia, notes Henrik Raber, global head of capital markets at Standard Chartered Bank. But, he says, regulators and central governments have been taking steps recently that should spark more green bond interest across the region.

China will update its own green bonds standards to make them more consistent with international standards, the chief economist of its central bank said on March 22. Harmonizing standards and disclosure requirements between China and Europe will make Chinese green bonds more appealing to international investors, China believes.

China is also looking into tax incentives for green bond investments, and the Shenzen and Luxumbourg stock markets recently teamed up to launch a series of green bond index products.

Japan is also said to be issuing its own green bond guidelines. Meanwhile, Canadian Solar, a PV manufacturer and solutions provider, sold a ¥5.4 billion ($47 million) green bond to finance the company’s 19 megawatt Gunma Aramaki Solar Power Plant in Japan. The bond has a dual-tenor maturity of 1.5 years and 20.3 years, which gives Canadian Solar flexibility in how it finances the project, the company says. The solar plant is slated to begin operations in December; Tokyo Electric Power Co. will buy electricity from the plant under a 20-year feed-in -tariff contract

The Monetary Authority of Singapore is launching a grant program which will reimburse companies up to S$100,000 (US$71,000) to cover the costs of issuers getting extra external reviews before issuing green bonds.

The Queensland, Australia government raised A$750 million ($570 million) through Australia’s largest-ever green bond issuance in mid-March. It’s a seven-year bond with a 3% coupon. Funds raised will be used for solar power projects and low-carbon transport programs.

Commonwealth Bank of Australia raised A$650 million (US$490 million) through a five-year green bond. Proceeds are targeted for a dozen projects across Australia, including solar, wind and hydro projects, low-carbon transport programs and energy efficient buildings.

Some other news of note:

The $12 billion Ford Foundation will put $1 billion of its assets into mission-related investment funds over the next decade. Affordable housing and making finance available to =people in developing countries will be a key early focus of the initiative. “We believe MRIs have the potential to become the next great innovation for advancing social good,” says Darren Walker, president of the Ford Foundation. The organization expects that the move will lead other institutional investors to put more money into mission-related and other socially responsible investing programs.

Washington, D.C. Mayor Muriel Bowser is pushing a plan to create the D.C. Green Bank to help finance sustainability projects across the nation’s capital city. The independent agency would oversee loans for projects to improve buildings’ energy efficiency, install solar panels and make other improvements. Washington, which would be the first U.S. city with its own green bank, modeled its proposed bank on Connecticut’s state green bank.

EDF Renewable Energy has created Distributed Electricity and Storage (DES), a new business unit that will focus on distributed solar and storage projects. The new unit is built on the platform of groSolar, a solar developer that EDF acquired last year. DES will focus on distributed solar and storage projects up to 30MW.


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