New Transition Bond Launches Successfully

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    Stockholm (NordSIP) – Crédit Agricole CIB announced it had issued a €100 million Transition Bond at AXA’s “Climate Impact Day” event in Paris. The bond was a Private Placement and has a ten-year maturity and a 0.55% coupon. AXA IM was one of the subscribers to the bond. The security is the first transition bond issued by a financial institution.

    Cutting Carbon Emissions

    Crédit Agricole estimates that the investments from this bond will decrease carbon emissions by a total amount of 26,500 tCO2 annually. The French bank has earmarked an amount equivalent to the proceeds of the Transition Bond to fund a selection of loans made to projects which contribute to helping carbon-intensive sectors transition to a low carbon economy. The potential project portfolio includes LNG-powered ships, investments in energy-efficient industries as well as gas power assets in countries where power generation currently relies on coal.

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    “Starting in 2009, Crédit Agricole has made significant progress to identify and promote green and Sustainable financings within its ‘distribute to originate’ business model,” Didier Gaffinel, Head of Global Coverage & Investment Banking at Crédit Agricole CIB said. “We are proud that AXA Group recognizes this expertise and partners with us to finance the environmental transition projects of some of our key clients.”

    AXA’s Guidance

    AXA was one of the main proponents of the idea of transition bonds, a concept which the investment manager advanced in June 2019 out of fear that the Green bond market’s potential could be undermined by issuance beyond its capacity.

    “We believe the establishment of a new asset class called Transition Bonds is vital for those issuers which do not have the capacity or capabilities to launch green bonds,” Yo Takatsuki, AXA IM Head of ESG Research and Engagement said. “Aimed at companies operating in greenhouse gas-intensive industries such as materials, extractives, or chemicals, alongside other companies which lack sufficiently green assets to issue a green bond, transition bonds would provide an alternative source of finance specifically aimed at helping the journey to become greener.”

    To support the issuance of these bonds, AXA IM’s Takatsuki and Foll published a guide for transition bonds, discussing the use of proceeds, the process for project evaluation and selection, the management of proceeds and reporting.

    “AXA is keen to source sustainable and innovative investment opportunities,” Pascal Christory, AXA Group Chief Investment Officer, added. “We are proud to join forces with Crédit Agricole CIB for the first issuance of a transition bond. Thanks to this new type of bonds, we aim to actively support companies that are transforming their business model and driving the transition to a lower carbon and resilient economy.”

    Sustainable Bond Innovation

    This bond from CACIB is the latest in a series of similarly out-of-brand Green bonds. At the end of July, Marfrig Global Foods SA announced it issued a ten-year US$ 500 million sustainable transition bond through its American subsidiary, NBM US Holdings, Inc. Proceeds from the issue will be invested in sourcing cattle from suppliers in the Amazon Biome, which comply with specific requirements of Marfrig. The security received neutral reviews from VigeoEiris’s second opinion, which expressed “a moderate assurance on the issuer’s commitments and on the bond’s contribution to sustainable development”.

    Most recently, Enel issued the first SDG-linked bonds in the euro and US Dollar market. At the time, NordSIP noted that most of the activities the SDG-linked bond was aimed at could have easily been funded through a green bond, although that would have probably required more detailed information.

    Image by Gerd Altmann from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.
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