ADB prices first euro-denominated green bonds

ADB is now in a position to achieve its US$6 billion annual climate financing target by 2020

THE Asian Development Bank (ADB) on July 5 announced that it raised EUR600 million (US$698 million) worth of green bonds to help finance climate change mitigation and adaptation projects.

The seven-year bond was priced at 99.924% with a coupon of 0.35% per annum payable annually to offer a yield of 43bp. The proceeds will be used to support low-carbon and climate resilient projects funded through ADB's ordinary capital resources and used in its non-concessional operations.

"Since the inaugural US dollar-denominated green issue in 2015, ADB has steadily expanded its green bond offerings, having pioneered the dual-tranche format for supranational green bonds in 2016 and issuing its maiden green Indian rupee-linked bond in 2017," ADB treasurer Pierre Van Peteghem says in a statement. "We are very pleased to accommodate the strong demand for our green bonds from euro investors with the offering, which allowed us to both tighten price guidance while increasing the issue size for our first euro-denominated benchmark green bond."

In July 2017, ADB adopted its Climate Change Operational Framework 2017–2030. The framework strengthens ADB's support to its member countries in meeting their climate commitments under the Paris Agreement, the Sustainable Development Goals and the Sendai Framework for Disaster Risk Financing – including nationally-determined contributions for reducing greenhouse gas emissions.

ADB's financing of climate mitigation and adaptation reached a record US$4.5 billion in 2017, a 21% increase from the previous year. ADB is now in position to achieve its US$6 billion annual climate financing target by 2020.

Out of the US$6 billion, a total of US$4 billion will be dedicated to mitigation through scaling up support for renewable energy, energy efficiency, sustainable transport and building smart cities, while the remaining US$2 billion will be for adaptation through more resilient infrastructure, climate-smart agriculture and better preparation for climate-related disasters.

The euro offering achieved a strong primary market distribution with nearly 90% of the bonds placed in Europe, the Middle East and Africa (EMEA) and 10% in Asia. By type of investors, fund managers, insurance companies, pension funds and others accounted for 48%, while central banks and official institutions took 39% and banks 12%.

Bank of America Merrill Lynch, Citi and Credit Agricole CIB acted as the lead managers for the transaction.

In August 2017, ADB printed a dual-tranche green bond issue for five years and 10 years totaling US$1.25 billion. Before that in May, it priced its first green bond in the offshore Indian rupee linker market amounting to 3 billion rupees (US$43.50 million) with an interest rate of 6% and a maturity of 3.75 years.

Proceeds from are mobilized into ADB's first co-financing with JICA LEAP (Leading Asia's Private Sector Infrastructure) Fund for the ReNew Clean Energy project, a wind and solar power project across six states in India. The issue was tapped for an additional 2 billion rupees in August 2017.

For 2018, ADB plans to raise around US$23 billion from the capital markets.

Date

6 Jul 2018

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