Green Bonds More Sought After Than Vanilla Counterparts

    Stockholm (NordSIP) – In a new study published by the Climate Bonds Initiative, 70% of Treasurers reported that the demand for their green bond was higher than for vanilla equivalents.

    The report cites Tom Meuwisson, Treasury Manager at Nederlandse Waterschapsbank (NWB) to illustrate this argument. “Conversations about vanilla bonds tend to revolve around spreads and liquidity, but with green bonds, the discussions are about the transformation of the business,” the treasurer explains.

    The global Green Bond Treasurer Survey was sponsored by Danske Bank and Luxembourg Stock Exchange with supporting analysis from Henley Business School. The report surveys 86 treasurers from 34 countries, accounting for a total of USD7.4tn in bonds outstanding. The treasurers work for organisations representing approximately 44% of the identified green bond universe, including US$222 billion in 686 green bonds.

    “The survey advice from multiple treasurers to simply ‘do it’ on green issuance is a message to be taken up by sovereigns in their recovery capital raising programmes, the banking sector and corporates considering their transition pathways,” Sean Kidney, CEO, Climate Bonds Initiative commented. “The investor appetite is there. It will only increase as asset owners and institutional investor calls grow for climate, resilience measures and sustainability considerations be at the core of stimulus and economic response programs.”

    Other findings covered the appeal of green bonds, the engagement they facilitated, green bond issuance plans and listing on stock exchanges. 48% responded that the cost of funding green bonds was similar to that of vanilla equivalents, while 42% considered the costs to be lower. For larger issuers and those with more years of experience in the green bond market, the costs of funding for green bonds were lower than for vanilla bonds. 98% of respondents reported that their green bond attracted new investors. Responding treasurers argued that this borrowing format provided a more diverse pool of investors, offering greater flexibility to reopen or issue new bonds. Green bond investors were also said to be stickier and more visible.

    91% of respondents said a green bond facilitated more engagement with investors compared to a vanilla one. This dialogue resulted in investors having a more intimate knowledge of the organisation. 88% of surveyed treasurers planned to issue more green bonds, while a further 15% said they would reopen their current bond. The most frequently cited advantages of repeated green bond issuance were an established investor base and greater visibility in the market were. 84% of the green bonds in the sample, are listed on at least one stock exchange. Visibility was the most frequently selected reason for this, followed by perception and integrity.

    “This survey shows the reason why we partner with Climate Bonds Initiative and have for many years. It provides valuable insight gathered from decision-makers within green bond issuers, data and unique responses never previously available in the green finance market,” explained Lars Mac Key, Head of DCM Sustainable Bonds, Danske Bank. “Based on our own experiences we all have our thoughts and hunches of how the market works. A survey like this – for which I see limitations in whom could carry it out if not the Climate Bonds Initiative – straightens those question marks and put facts rather than hunches on the table.”

    Image by Rebekka D 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.

    Latest Posts

    NordSIP Insights Handbook

    What else is new?