Jens Hellerup, Head of Funding and Investor Relations at NIB. Photo: Rami Salle

10 Oct 2014

Head of funding: Market welcomes our USD 500m environmental benchmark

On 23 September, NIB successfully issued its inaugural USD benchmark Environmental Bonds. The issue was very well received by investors. It supports NIB’s environmental mandate and promotes sustainable growth in the Bank’s member countries.

This benchmark bond of USD 500 million is the largest issue under the NIB Environmental Bond (NEB) framework. With a maturity of seven years, it was also the longest USD-denominated green bond benchmark from a supranational issuer at that time (see press release).

NIB Environmental Bonds are issued within a framework which defines the purposes for which the proceeds can be employed. The Bank decided to target areas in its lending where the environmental impact is particularly significant: projects which target energy efficiency, renewable energy, transmission systems, public transport solutions, waste management systems and green buildings.

“To prepare the issue, we carried out roadshows and conference calls. We met investors to tell them about the Environmental Bond framework and NIB”, says Jens Hellerup, Head of Funding and Investor Relations at NIB.

The investor relations team spoke to about 40 investors in Europe and the US—a lot of them dedicated SRI investors who hadn’t previously had contact with NIB.

“We decided to go ahead with the transaction shortly after the roadshow. The long maturity was a response to the preferences investors communicated to us during our meetings”, Mr Hellerup continues.

“The green bond market has developed rapidly over recent years. It has become an asset class of its own and is enjoying attention even beyond the fixed-income markets.”

The order book received strong support from investors focusing on socially responsible investing, who bought over 85% of the bonds. Within a short period of time, it reached over USD 800 million from 39 investors, including AP2, Blackrock, CalSTRS, Calvert, Local Government Super, Mirova, Praxis Intermediate Income Fund, State Street Global Advisors and UBS Treasury.

The distribution by investor type was as follows: 30% with central banks and official institutions, 41% with banks, 28% with fund managers, and 1% with pension and insurance companies. In terms of geographical distribution, 52% of the bonds were placed with accounts in EMEA, 24% with Asia & Pacific, and 24% with the Americas.

“NIB has been active in this market since 2011. We believe that the success of our new environmental benchmark bond proves the market is committed and there is substantial demand for environmental bonds”, says Mr Hellerup.

Investors in green bonds not only assess the credit risk–reward relationship of the investment, but also care about how the proceeds are used. The Bank’s Environmental Bond framework is set up to address the transparency issue. This framework describes the green bond issuance process, selection criteria and process for projects, and explains how the proceeds are dealt with and what reporting investors can expect.

“Our investors are supporting environmental projects in the Nordic–Baltic region and benefitting from the Bank’s triple-A credit rating. NIB is committed to using the NEB framework and plans to continue issuing environmental bonds in the coming years”, Mr Hellerup concludes.