May 2019

This edition covers:

As always, we welcome your feedback.


The Secretariat for the Principles


Issuance news in brief

Q1 2019 issuance in green, social, and sustainability bonds has outpaced all previous issuance in terms of volume. Green, social and sustainability bond issuances for Q1 2019 reached new heights of USD63.8bn from 233 deals, up 47% in terms of deal value over Q1 2018. Nearly half of these issuances were denominated in EUR (49%), followed by USD (19%) and SEK (8%). Europe continued to stay at the forefront in the sustainable bonds space, while issuances in America ran slightly ahead of that in Asia for the first time since 2015. The GSS bond volume includes USD6.3bn of social bonds and USD7.5bn of sustainability bonds, signifying remarkable growth of 206% and 49% respectively, when compared with the same period last year.

Issuance from the public sector (42%) and corporates (37%) drove the first quarter of the year, with financial institutions rounding out the rest. Some of the key deals driving the growth this quarter include the first ever green issuances from the telecom and chemical sector from Telefonica and LG Chem respectively, as well as the largest sustainability bond to date from Land NRW (at EUR 2.25bn). The quarter also witnessed three repeat issuances from sovereigns - France, Poland and Indonesia.
More than 60 inaugural issuers entered the market during the quarter - CAFFIL, Verizon, LeasePlan, OP Corporate Bank, Snam, UBI Banka, Danske Bank, FMO (Green Bond), Korea Midland Power, Morhomes, and RCBC among others. Ayala’s AC Energy’s $225m 5-year green bond issuance marked the first public issuance of green bonds by a Philippine corporate.

(USDbn) 2018 Q1 2018 Q1 2019
Green bonds 182 36 50
CORP 29% 36% 46%
FIG 43% 23% 18%
SSA 28% 41% 36%
Social bonds 12 2 6
CORP 3% 20% 4%
FIG 41% 34% 37%
SSA 56% 45% 58%
Sustainability bonds 14 5 7
CORP 5% - 10%
FIG 25% 18% 21%
SSA 70% 82% 69%
Total - green, social and sustainability bonds 208 43 64

Q1 2019 was a record-breaking quarter, and the acceleration of issuance is in line with the market expectations, which predicts the total issuance volume for 2019 to be in the range of USD220bn – USD285bn1.
1. Market expectation for GSS bond market in 2019 includes forecasts by: BBVA – USD220bn, HSBC –USD250bn and SEB – USD248-285bn
Source: HSBC Green, Social & Sustainability Bond database – based on Dealogic, CBI, Bloomberg, as of 12 April 2019.
The data presented above is to the best of HSBC’s knowledge and may not be fully representative of the SRI market.


European Action Plan on Sustainable Finance

There have been significant developments the past quarter relating to the ongoing implementation of the European Commission’s Action Plan on sustainable finance and the work of the EU Technical Expert Group on Sustainable Finance (TEG) of which ICMA is a member. This has led to key consultations on topics such as the EU Taxonomy and very recently on the EU Green Bond Standard. There have also been important consultations from ESMA and the FCA, both related to the EU’s sustainable finance agenda. ICMA has responded to these consultations with the help of all its constituencies.

EU GBS: Identified Barriers and Proposals

At a high level, the report confirms the fundamental orientations and underlying principles of the EU GBS that had already been communicated to the market. These are that the EU GBS should be (i) a voluntary standard, (ii) aligned with EU Taxonomy (iii) built on market best practices, (iv) be both a European and international standard, and (v) be accessible to existing green bond transactions and to all types of issuers. It is nonetheless important to note that the report states that after 3 years “possible recourse to legislation in support of the implementation of the EU GBS” could be considered. Our understanding is that this does not reflect any policy orientation of the Commission but could be considered pragmatically and for example in the context of introducing longer term incentives.
In the short term, the report does include recommendations for incentives to be introduced as soon as possible such as a grant scheme to cover verification costs and credit enhancement guarantees for sub-investment grade green bonds. More speculatively, the report also points to the possibility of tax and accounting proposals in support of green bond issuers that could be considered after further review.
Through the actual draft standard included in its annex, the report also illustrates in some detail how the EU GBS builds on existing market practices while also proposing evolutions. At the same time, it introduces flexibility and gradualism on how the Taxonomy will be implemented. More specifically, the draft standard covers the following:

  • Green Projects are required to be aligned with the EU Taxonomy but it is acknowledged that it will be rolled out progressively over time and has been designed to identify a broader spectrum of sustainable activities rather than assets or projects. Specific language provides flexibility in its use. Firstly, in areas not yet covered by the Taxonomy, market participants will be able to align with its “fundamentals” i.e. the EU environmental objectives, minimum social safeguards and “do no harm” criteria as long as the projects are validated on that basis by an EU accredited verifier. Secondly, they may also be validated with reference to the fundamentals of the Taxonomy in exceptional cases as a result of the location, the innovative nature or the complexity of proposed projects.

  • Many issuers in the green bond market develop “frameworks” with the help of their underwriters to provide information especially on their future issues and on the type of projects that will be financed, but the EU GBS proposes a unified practice.

  • The scope of eligible expenditures is broadened taking into account capital and operational expenditures (capex and opex), working capital, public expenditures, as well as tangible and intangible assets.

  • Reporting is expanded and standardised. As with the other components, the requirements of the proposed EU GBS are more specific than current market practice.

  • Verification becomes mandatory and requires the accreditation of External Reviewers. The EU GBS is a standard requiring verification which aligns it with leading best market practice. This is further exemplified by both pre-issuance verification focused on the green bond framework and post issuance verification covering the alignment of actual use of proceeds, as well as their actual or estimated impact.

Accreditation of external reviewers whether in relation to the interpretation of the Taxonomy, or generally through the verification of alignment with the EU GBS will play a critical role. Acknowledging this, the Interim Report recommends that these organisations come under the scope of regulatory supervision and specifically ESMA. As this would however require a period of 2-3 years for the necessary legislation to grant such powers to ESMA, a transitional, voluntary and market led accreditation process is being proposed. It is important to note that ICMA may be asked to play a role in this initiative based on the work already done with the GBP to promote best practices for external reviewers.  

The Corporate Forum on Sustainable Finance

On 15 January 2019, a group of 16 among Europe’s largest companies joined to launch the Corporate Forum on Sustainable Finance (“the Forum”) with a view to pushing forward the development of sustainable finance. The Forum now boasts 19 corporates among the most dynamic “green issuers” (A2A, EDF, EDP, ENEL, ENGIE, Ferrovie Dello Stato Italiane, Iberdrola, Icade, Iren, Ørsted, RATP, SNAM, SNCF Réseau, Société du Grand Paris, SSE, Tennet, Terna, Tideway, Vasakronan), representing over two-thirds of green and sustainable bond volumes issued by European corporations, and involved in a number of industries including electricity utilities, clean transport infrastructures and operations, environmental infrastructures and services, and real estate.
A key goal of the Forum is to bring together corporate issuers that regard sustainable finance instruments as efficient market-based tools that allocate the economic resources where they are most needed, particularly to low-carbon and sustainable investments, which are central to the members’ corporate strategies.
The Forum is also expected to help establish and carry a stronger corporate “voice” in the discussion shaping the development of sustainable finance markets, for instance: through direct engagement with investors as well as in international and national forums; or through participation in the processes setting the future standards and regulatory frameworks for sustainable finance instruments (the Forum has already submitted contributions to two consultations from the European Commission’s Technical Expert Group). The Forum should also serve to leverage its members’ collective expertise for the benefit of existing and potentially new corporate issuers on specific issues such as best practices on impact reporting.
Beyond sustainable finance instruments, the Forum will aim to engage with stakeholders, especially rating agencies, about more-deeply integrating SRI criteria in the assessment of companies’ long-term financial sustainability.
Each Forum’s member is at your disposal should you wish for further information.
Source: EDF – April 2019


CEB Social Inclusion Bond Report #2: Stepping Up the Efforts

On 26 March, the Council of Europe Development Bank (CEB) published the impact report on its second Social Inclusion Bond, a €500 million seven-year transaction that was issued in March 2018.
As a development bank with an exclusively social mandate, the CEB is fully committed to supporting the social policies of its member countries. The proceeds of the second Social Inclusion Bond were allocated to projects with a particularly high social impact in areas that are vital for social development in Europe:

  • social housing for vulnerable population groups;

  • education and vocational training ;

  • support to micro, small and medium-sized enterprises (MSMEs) in order to strengthen job creation and preservation.

In social housing, 2,600 dwellings have been made available to low-income persons through construction or renovation projects. In education and vocational training, about 24,000 students in 31 institutions have benefited from the funds. And thanks to the provision of financing to MSMEs, more than 65,000 jobs have been preserved and almost 6,000 new jobs have been created.
The report provides full and transparent information on the use of the proceeds and, for the first time, makes use of the Harmonized Framework for Impact Reporting for Social Bonds, published by the Social Bond Working Group in June 2018. The new Sample Summary Template for Reporting on Social Projects presents the data in a clear and precise format, including the Sustainable Development Goals (SDGs) addressed per project.
Following on from the report, on 3 April the CEB launched its third €500 million Social Inclusion Bond. The issuance attracted a wide range of socially responsible investors and demonstrates the CEB’s strong track record of promoting social investments across Europe.
Source: CEB – April 2019


Market highlights

NIB issued its first Nordic-Baltic blue bond in January 2019 (SEK 2bn, 5 year), targeted at sustainable investors. Eligible projects include wastewater treatment, prevention of water pollution and water-related climate change adaptation.
The Rizal Commercial Banking Corporation, one of the Philippines’ largest universal banks, issued its inaugural Green Bond of PhP 15bn (~USD 287m). The RCBC ASEAN Green Bond aligns with the GBP 2018.  
The Spanish telecommunication company Telefónica issued its first green bond (EUR 1bn, 5 year) in January 2019 – marking the initial step of its industry in green bond issuance. The funds raised will be used in financing projects devoted to increase the company's energy efficiency thanks to the network transformation from copper to fibre optic in Spain.
Société du Grand Paris, the fully state-owned company, issued a EUR 2bn 15-year green bond in March 2019. The proceeds will be used for clean transport infrastructures in the context of the Grand Paris Express Project of EUR 35bn launched by France in 2010.
Land North Rhine-Westphalia issued a dual tranche EUR 2.25bn sustainability bond in March 2019, indicating the continuing contribution of local authorities to the growing sustainability bond momentum that was remarkable in 2018.
Also, in March 2019, Housing New Zealand, the largest residential owner in the country, issued a 7.5-year Sustainability Bond – the first one from a public sector entity from New Zealand.
In April 2019, the German retail and services giant Otto issued a EUR 250m sustainability bond. The bond proceeds will be used in the development of a sustainable value-added chain in the important textile and furniture product ranges. The transaction also represents the inaugural precedent for the textile sector.  


GBP SBP Annual General Meeting and Conference

The 2019 Green & Social Bond Principles AGM and Conference will be held in Frankfurt, Germany, on 13 June 2019, co-hosted by the Green and Sustainable Finance Cluster of Germany.

The AGM itself is reserved for Members & Observers of the GBP/SBP (please see information on becoming a Member or Observer) and will feature an open discussion session with moderation by the GBP/SBP Executive Committee and the ICMA Secretariat, alongside formal points of business.

The conference will be open to all professionals and officials interested in the future of this market, free of charge. It will address topical themes such as regulation, including green bond standards and green & social taxonomies/classifications, corporate issuer initiatives, impact reporting, growth markets, recently launched Sustainability-Linked Loan Principles, and important developments in the local German market.

We encourage early registration to secure a place at the Conference. Please see the event webpage to find out more or to register. Those interested in sponsorship opportunities for the Conference may contact Allan Malvar at ICMA.

Updates from the Executive Committee and the Secretariat

Responses to Sustainability Consultations

There have been significant developments the past quarter relating to the ongoing implementation of the European Commission’s Action Plan on sustainable finance and the work of the EU Technical Expert Group on Sustainable Finance (TEG) of which ICMA is a member. This has led to EU consultations on climate-related disclosure, the usability of Taxonomy and the EU Green Bond Standard. There have also been important consultations from ESMA, FCA and IOSCO related to the sustainable finance agenda.
In February, ICMA responded to the EU consultation on Climate Related Disclosures. We welcomed the mapping of the recommendations of the TCFD against the EU Non-Financial Reporting Directive, and the identification of potential gaps. The proposals provide valuable guidance as to how companies, on a voluntary basis, can enhance their non-financial reporting.

Later that month, ICMA together with the GBP EXCOM responded to the consultation on Usability of the Taxonomy. We broadly welcomed the efforts to develop this sustainability classification system, but also underlined a number of issues including that:

  • some of the proposed sustainability thresholds may be too ambitious (e.g. energy efficiency, green buildings);

  • there was no clear mechanism for geographic differentiation/adjustment;

  • an activity-based classification system will be challenging to apply to the complexity of many corporates businesses and to projects;

  • it does not easily accommodate the impact-based approach that prevails for green bonds and green finance;

  • the thresholds for individual sectors should be reviewed from the perspective of achieved impact towards the climate goals of the Paris Agreement; and

  • a significant portion of the existing green bond market could fail currently proposed key thresholds (mainly for energy efficiency improvements).

In March, the EU TEG released an Interim Report on the EU GBS. The principles of the EU GBS are that (i) it should be a voluntary standard, (ii) aligned with EU Taxonomy (iii) built on market best practices, (iv) both a European and international standard, and (v) accessible to existing green bond transactions and to all types of issuers.

ICMA together with the GBP EXCOM responded to the consultation on the EU Green Bond Standard and was broadly supportive, but also constructively critical, cautioning that the EU GBS may unintentionally create additional barriers for new and existing issuers by increasing complexity, risks (including litigation risk) and costs.

We also emphasized in our response that a different policy focus is required to create the pipelines of projects at a scale commensurate with the level of investment necessary to achieve the goals of the Paris Agreement. Therefore, we recommend focusing on enabling supply with an appropriate incentive structure accompanied by appropriate policy interventions and alignment in the “real economy” (i.e. carbon pricing, fossil fuel subsidy reform, predictable and cost-effective support policies, stringent building envelope codes and fuel efficiency standards, etc.) to create the economic underpinnings for creating green project investment volume.
ICMA and GBP EXCOM remain deeply engaged with the EU GBS initiative and continues the dialogue.
In addition to the flow from the EU TEG, ICMA also has responded to important consultations on sustainability issues from ESMA, FCA and IOSCO during the first quarter.

A summary of ICMA’s replies to the ESMA and FCA consultations can be found in ICMA’s Quarterly Report for second quarter 2019.
Finally, the New Markets Working Group responded to the IOSCO Consultation on sustainable finance in emerging markets, recommending that IOSCO in its recommendation makes reference to the Green and Social Bond Principles and the Sustainability Bond guidelines.

Executive Committee elections

Pursuant to the governance framework 12 seats equivalent to one-half of the total number of the Executive Committee’s members are being renewed (i.e. 4 seats per category: issuer / investor / underwriter). Newly elected members will join the Executive Committee for a term expiring at the end of the ordinary General Meeting to be held in 2021.
GBP SBP members interested in putting themselves up as candidates are requested to complete a candidacy form and to send it back to the GBP SBP Secretariat before Friday 17 May COB. After this date, no new candidates will be accepted.
From 21 May to 10 June, GBP SBP members will be invited to select and vote through an electronic ballot for 4 organisations from each category, equivalent to a total of 12 organisations.
The election results will be announced at the GBP SBP Annual General Meeting in Frankfurt on 13 June 2019.


The Secretariat welcomes the following organisations which have joined the GBP SBP membership since the newsletter published in January 2019:

Bolsa de Valores de Quito S.A. Observer
Central Bank of Malta Observer
Export Development Canada Issuer
Japan Railway Construction, Transport and Technology Agency Issuer
La Banque Postale Asset Management Investor
LYXOR international Asset Management Investor
OP Corporate Bank plc Underwriter
Simmons & Simmons Observer

Please refer to the on-line Members' list to see the full list of 300 GBP SBP Members and Observers.


Introduction to Green Bonds course Frankfurt, 11 June 2019.
This one-day course from ICMA provides a thorough and practically oriented introduction to the essentials of green bonds. Developed and delivered by a combination of leading market practitioners and ICMA’s green bond experts, the material also benefits from input from members of the GBP Executive Committee, comprising the elected representatives of the most significant issuers, investors and underwriters in the green bond market.

Website updates

Suggested Impact Reporting Metrics for Green Building Projects have been published in March 2019 by the Impact Reporting Working Group. This new document complements the release of harmonised frameworks (i) for impact reporting on sustainable water and wastewater management projects (in June 2017), (ii) for sustainable waste management and resource-efficiency projects (in February 2018) and (iii) for clean transportation projects (in June 2018).

External Review Service Mapping: In order to provide market participants with clear information on the range of services offered by external review providers and on the context and content of the final external review report, ICMA collects templates completed by external reviewers. As of today, 7 reviewers have provided information about their services:

Green, Social and Sustainability bonds database: ICMA has been continuously tracking the green, social and sustainability bonds newly issued. This database lists the issuers who have publicly disclosed their external review reports, or who have completed the relevant templates or forms, in accordance with the recommendations of the Principles.



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