Investors have rallied to a wave of social-style bond issuance from supranationals aligned with the issuers’ role in the fight against the impact of the Covid-19 pandemic, providing at the same time a tonic for ailing fixed income markets. Neil Day explores the trend and the potential for such bonds.
The Nordic Investment Bank (NIB) last week inaugurated the first dedicated Covid-19 use-of-proceeds framework with a €1bn three year “Response Bond”, moving quickly to support the alleviation of societal and economic impacts of the crisis. Head of funding and IR Jens Hellerup discussed the rapid launch of the quasi-social bond with Sustainabonds.
Landesbank Baden-Württemberg (LBBW) issued the first green senior non-preferred sterling benchmark on 22 January, a £500m five year deal in which a maturing ESG UK investor base considered both LBBW’s green bond and issuer credentials, according to those involved in the deal.
NordLB Luxembourg Covered Bond Bank (NordLB CBB) attracted both ESG-focused and regular covered bond buyers to the first ever renewable energy covered bond last week, a €300m five year legislative deal that, the issuer told Sustainabonds, came surprisingly tight to its traditional issuance.
The broader sustainability strategies of green and social bond issuers and the impact of their issuance across a range of metrics are increasingly being focused on. Meanwhile, new varieties of sustainable bonds could yield benefits, but complicate the picture. Sustainabonds gathered leading public sector issuers and ESG-focused investors for a roundtable, hosted by SFIL, to discuss key developments.
The Royal Bank of Scotland Group issued the first bond from a UK financial institution aligned with the Social Bond Principles on 8 November, a €750m six year non-call five social bond with proceeds earmarked for SME lending in deprived parts of the UK.
NordLB Luxembourg Covered Bond Bank is set to launch the first renewable energy covered bond in the coming fortnight, a €300m five year, and the issuer told Sustainabonds it is confident the uniquely green legislative product will prove a timely addition to the market.
Caffil attracted over €3bn of demand to the first ever green public sector covered bond on Tuesday, a €750m 10 year issue that Philippe Mills, CEO of Caffil parent SFIL, said is “close to the heart” of its mission, with green bonds complementing its social issuance.
DKB sold a four times subscribed €500m five year “blue” social Pfandbrief focused on water and waste water services on Wednesday, with the Eurosystem and SRI investors among those helping the German issuer achieve an “outstanding” deal, according to its head of funding and IR.
Berlin Hyp issued its first green bond in senior preferred format and eighth overall on Monday, a €500m no-grow 10 year deal that attracted more than €1.2bn of demand, and head of funding and IR Bodo Winkler said the issuer had reached the point where its issuance was almost “self-explanatory”.