Caffil plans social bond this year in French covered first

Caffil looks set to become the first French issuer of a green or social covered bond, as it plans to this year issue a social bond backed by the public sector assets it refinances with an initial focus on healthcare, and to later enter the green bond market, officials at the issuer told Sustainabonds.

State-owned Caisse Française de Financement Local (Caffil) and parent SFIL are charged with the public policy mission of supporting the French local public sector.

Sami Gotrane, head of treasury and financial markets at SFIL (pictured), told Sustainabonds that Caffil wants to become a regular issuer in the green and social bond market.

“We were set up by the state with the clear mission to finance investments in social infrastructure all over France,” he said. “For us, it is not just about issuing a social bond this year – we want to contribute to the development of this market in the long run.”

The focus of Caffil’s first social covered bond will be healthcare. As of the end of September, public hospitals comprised 11.6% of Caffil’s cover pool.

“When we finance the local public sector in France we are financing schools, nurseries, hospitals and local public transport,” said Ralf Berninger, head of investor relations at SFIL. “That is why green and social bond investors are particularly important for us.”

Caffil is planning to comply with the ICMA-run Social Bond Principles.

French issuers, notably from the public sector, have been at the forefront of green and social bond issuance, with the country number one in Europe by volume in green bonds, also boosted by France’s green OAT government bond.

Only four previous sizeable public social covered bonds have been issued, the first by MünchenerHyp, with a EUR300m five year ESG deal in September 2014, then by Spain’s Kutxabank and Caja Rural de Navarra, and subsequently by Kommunalkredit Austria, the latter being the only public sector covered bond in green or social format. Four benchmark green bonds have meanwhile been issued, two by Berlin Hyp and one each from Deutsche Hypo and SpareBank 1 Boligkreditt.

Bank of China has sold what it dubbed a green covered bond, but this was not widely considered to be consistent with traditional covered bond standards.

ABN AMRO