Chile and France Make a Splash

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Stockholm (NordSIP) – The 2020 green bond market has started with a splash, with France and Chile issue a combined US$5.5 billion equivalent in four transactions.

The most prominent of the two sovereigns, and the leading issuer of green bonds so far this year has been the government of Chile, which issued a combined US$3.8 billion equivalent in three transactions.

The first two transactions – worth €1.961 billion – mature in 2031 and 2040 and were issued at historically low yields for Chile. €694 million was issued at the shorter end with a yield of 0.695%, while €1.267 billion was issued at the longer maturity at 1.299% yield. According to the Chilean Treasury, it was the first time a borrower issued euro-denominated green bonds directly to passive investors.

All proceeds from the issuance of this green bond will be directed toward clean transportation projects as defined by the Republic of Chile’s Green Bond Framework. Clean transportation projects focus on investments in public infrastructure such as new and updated metro lines, electric buses as well as subsidies to promote public transportation. This part of the green bond framework focuses on making contributions to SDGs 3 (good health and well-being), 11 (sustainable cities and communities) and 13 (Climate Action).

- Promotion -

The Finance Minister, Ignacio Briones, noted that “these operations show the confidence of international markets in the solid fundamentals of Chile’s economy, which reflect our commitment to climate action and the development of green finance.”

The day after, the Republic of Chile issued a US$1.65 billion bond maturing in 2050. This was a tap of the first green bond the country issued, a series which paid a 3.53% yield, 95bps above the US Treasury benchmark at its launch in June 2019.

According to the second opinion on the Green bond framework issued by Vigeo Eiris, “Chile’s sustainability performance is considered advanced (69/100). In particular, Chile shows a good performance in the Environmental Responsibility pillar and an advanced performance in the Social Responsibility and Solidarity, and Institutional Responsibility pillars. Chile ranks 39th out of 178 qualified countries.”

Last year, Chile received a sovereign issuer of the year award from LatinFinance, mainly because it was the first country in the American continent to issue green bonds.

Following Chile, the French sovereign also issued a €1.52 billion green bond during this week’s regularly scheduled auctions. The bond matures in 2039 and pays a 1.75% coupon. It was priced at a 125.57 premium, to yield 0.38% thanks to bids worth €2.606 billion. Following the auction, the total outstanding on this green bond series was worth €22.2 billion. The series was originally launched in January 2017 through a syndicated deal.

The green bond has received a second opinion by Vigeo Eiris, updated in April 2019, “France’s overall sustainability performance as a sovereign bond issuer is advanced and stable.” Regarding the sovereign’s reaction to controversies, Vigeo Eiris describes it as “remediative”, by which it means that the “issuer communicates in a transparent way on its cooperation with impacted parties and the corrective actions implemented consequently.” Regarding the use of proceeds from the green bond, the second opinion provider noted that “we have a reasonable level of assurance (best assurance level) on the green credentials of the Green Expenditures identified by the interministerial working group for 2019.”

 

 

Image by Laurette Chapuis from Pixabay

 

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