EIB issues first Green Bond of 2016
On 5 January 2016, the European Investment Bank (EIB), the EU Bank owned by the EU Member States, increased the 0.500% Climate Awareness Bond (CAB) November 2023 by EUR 500m, bringing the total amount outstanding to EUR 1.5bn
On 5 January 2016, the European Investment Bank (EIB), the EU Bank owned by the EU Member States, increased the 0.500% Climate Awareness Bond (CAB) November 2023 by EUR 500m, bringing the total amount outstanding to EUR 1.5bn. Crédit Agricole SA is one of the main investors of the tap, in the context of its recent commitment to invest EUR 2 billion in high quality Green Bonds.
EIB’s CABs have 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 the agency.
The transaction, which takes the total CAB issuance to EUR 11.8bn, highlights EIB’s commitment to the sustainable growth of the Green Bond market by increasing the liquidity of EIB’s EUR Green Bond curve. The EUR 1.5bn CAB due 11/2023 provides a benchmark of intermediate maturity between the EUR 3bn ECoop CAB due 11/2019, currently the largest Green Bond outstanding, and the EUR 1.25bn CAB due 2026 - the longest outstanding Green benchmark. In EUR, CABs are distributed in mini-benchmark / ECoop format. This means they have a EUR 500m minimum size, and EUR 250m minimum for re-openings upon actual demand.
As in 2015, EIB is first to issue a Green Bond in 2016, thereby drawing attention to their relevance in the current policy and market context. Transparency and accountability are among the key features of the recent Paris agreements of COP21. The delivery of climate goals is not only a question of volume; it implies a wide-ranging transformation of business practice, and the credibility of climate finance is crucial for the effective involvement of capital markets.
Green Bonds enhance the transparency of climate finance and promote the debate on definitions, impact assessment methodologies and impact reporting principles, permitting stakeholders to increasingly engage for higher comparability and improvement in these fields. This engagement is essential for a shift from financing climate activities in incremental ways, to making climate change – both in terms of opportunities and risk – a core consideration and “lens” through which institutions deploy capital.
A synopsis or recent initiatives in these areas is provided by a report published by International Financial Institutions (IFIs, including the EIB) during COP 21, which details five voluntary principles for mainstreaming climate change considerations within Financial Institutions, illustrated by relevant test cases (thereunder Green Bonds on p. 51):
Mainstreaming Climate Action within Financial Institutions. Emerging practices. http://www.eib.org/attachments/fi_mainstreaming_epp_en.pdf)
A good practical example of the results already obtained is a proposal for a Harmonized Framework for Green Bond Impact Reporting jointly advanced by ADB, AFD, AfDB, EBRD, EIB, FMO, IBRD, IDB, IFC, KFW, and NIB on December 2 (http://www.eib.org/attachments/fi/informationonimpactreporting.pdf).
Joint Bookrunners for the transaction were Bank of America Merrill Lynch, Credit Agricole CIB, Commerzbank, DZ Bank, Rabobank, and UniCredit.
Eila Kreivi, Director and Head of Capital Markets Department at the EIB, said: “Today’s issue underlines EIB’s endeavour to further enhance the liquidity of the Green Bond market, increasing its investor appeal. Being the first Green Bond issuer to tap the market at scale in 2016 reflects the importance and urgency of acting upon decisions made at COP 21. Moreover, this brings the CAB 2023 to EUR 1.5bn, strengthening its benchmark status.”
Martin Mills, Head of Green DCM, EMEA at Bank of America Merrill Lynch said: “EIB has once more demonstrated leadership in the green bond market by kicking off the year with a €500m CAB increase on just day two. At the same time they have highlighted the attention given to the market by COP21 and provided renewed focus on important developments such as the recent release on impact reporting”.
Tanguy Claquin, Head of Sustainable Banking, Credit Agricole CIB, said: “This new Climate Awareness Bond highlights that the EIB will lead the way from COP21 words to climate action”.
Sylvia Moussalli, Head of DCM Public Sector and Frequent Borrowers, Commerzbank,said: “With the latest EUR 500 million increase to its 2023 Climate Awareness Bond, EIB re-opened the green bond market in 2016 and reinforced its position as one of the key issuers of the product. The early execution during the year emphasizes the importance of green bonds as a core product for EIB and Commerzbank is excited to support EIB in achieving its sustainability goals.”
Patricio Bustos-Heppe, Executive Director at DZ BANK: “The EIB has swiftly opened the SRI markets in 2016 by adding another EUR 500m to its existing November 2023 Climate Awareness Bond. The ongoing demand in this space has to be seen in conjunction with the ground-breaking agreements that have been reached during the COP 21 in December. Capital markets in general and the Climate Awareness Bonds of the EIB in particular will continue to play an important role to help financing ambitious goals in the environmental and climate policy”.
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Sachin Shah, Executive Director, Public Sector Origination, Rabobank, said: “EIB remains a leading issuer in the green bond market and today’s increase highlights EIB’s dedication to providing liquid references in this sector for SRI investors. By bringing EIB’s first EUR transaction in 2016 in Climate Awareness Bond format, the issuer has shown their commitment to the sustainable growth of the Green Bond market. EIB continues to foster transparency, accountability and compliance of environmental finance with their approach which is key for growth of the green bond market and to help combat climate change.”
Antonio Keglevich, Head of Green Bond, UniCredit, said “On the heels of the remarkable outcome of the COP21 in Paris it is again the European Investment Bank to take the lead by offering the first Green Bond in 2016. The EIB is constantly enabling investment opportunities for institutional investors who are seeking tradable and liquid debt products related to climate finance. UniCredit is proud to have repeatedly accompanied the CAB program from the very beginning in 2007."
BACKGROUND INFORMATION
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.
The support of the Green Bond market in quantity and quality is an important objective of EIB’s activity as reflected in its Corporate Operational Plan 2015-2017 (http://www.eib.org/attachments/strategies/cop2015_en.pdf, p. 15) as well as in the Climate Strategy adopted by the Bank’s Board of Directors on 22/9/2015 (http://www.eib.org/attachments/consultations/eib_climate_action_climate_strategy_20150817_en.pdf).
EIB pioneered the Green Bond segment in 2007 and is the largest issuer of Green Bonds to date, with EUR 11.8bn raised.
On 27/03/2015, in concomitance with the publication of the new version of Green Bond Principles (GBP), the EIB published its 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 AfDB, EIB, IBRD and IFC in response to a recommendation of the 2015 Green Bond Principles and recently enriched and taken on board by 7 additional IFIs
http://www.eib.org/attachments/fi/informationonimpactreporting.pdf.
EIB funding strategy
The Bank’s funding strategy combines a consistent and transparent approach with flexibility and innovation, both in terms of product and maturity.
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.
Investor Relations
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