Standard Chartered sold a debut Sustainability bond last Tuesday, a €500m holdco senior, with the proceeds targeting the emerging regions.
The deal is the first from the bank’s Sustainability bond framework established in May. Through its issuance, the UK bank aims to direct capital beyond developed nations, where sustainable financing is already well established.
“How those regions transition over the next 20 to 30 years will determine whether we hit global warming at two degrees or less or much higher,” said Daniel Hanna, Global Head of Sustainable Finance at Standard Chartered Bank.
Hanna said that of the record high proceeds raised by Green bonds in 2018, excluding China, less than 10% went to emerging markets.
Part of the problem, Hanna said, is that sympathetic investors in the West are often unable to invest directly in sustainable projects in emerging markets, as they are restricted by credit rating, liquidity or listing requirements. Standard Chartered’s issuance aims to connect the two.
“This is a challenge we all need think about how we solve,” said Hanna. “What Indonesia, India or Nigeria does in terms of their power mix will determine what global warming and sea level rises happen in the UK and elsewhere.”
The €500m no-grow eight non-call seven-year was priced at 100bp over mid-swaps, with the leads tightening 30bp from IPTs on the back of more than €3.4bn of demand. ABN AMRO, Credit Agricole, Deutsche Bank, ING and Standard Chartered were the lead managers.
Standard Chartered is a relatively rare name in the euro market. Its last benchmark deal in the currency in the wholesale funding market was a €1.25bn dual-tranche holdco senior offering in September 2017.
“It’s a good deal given that historically Standard Chartered has found it slightly harder to do euro deals, which is why they’ve tended to stick to US dollars where they’ve a much better reception,” said a syndicate banker away from the leads. “Here, the fact that it’s €500m no-grow, the fact that it’s sustainable is all positive, and they chucked on a nice NIP.”
The deal offered a final new issue premium of around 4bp versus the issuer’s curve.
The proceeds of the new issue can be allocated to green projects, in categories such as renewable energy or clean transportation, and to social projects, such as those improving access to health services and education.
Standard Chartered has also made a number of sustainability commitments, including a decision to no longer finance new coal-fired power plant projects.
Standard Chartered’s deal comes shortly after the Green bond market recorded a major milestone. According to the Climate Bonds Initiative, year-to-date Green bond issuance surpassed US$100bn-equivalent the week before last.
It is the third successive year this milestone has been reached, but the first time it has been reached in the first half of the year. Projections for full-year supply range from US$180bn to US$250bn, up from US$168bn in 2018, according to the CBI.
This nevertheless leaves a long way to go to the CBI’s stated goal of reaching US$1trn of annual Green bond issuance in the early 2020s.
Source Nasdaq