Green bonds can be issued at different levels; summarized below are some of the more common ones.
Corporate green bonds are bonds issued by financial and non-financial corporations. Typically, corporations choose to fund projects that are aligned with their respective environmental goals, which often includes reducing their carbon footprint by using renewable energy sources and implementing energy efficiency measures, as well as greening their materials, processes, products, and supply chains.
Some examples of corporate green bonds include:
As part of its commitment to sustainability and to meet its environmental objectives, Vodafone issued a EUR 750m green bond in May 2019; the company intends to allocate proceeds to a portfolio of Eligible Green Projects including energy efficiency, onsite renewable energy, and green buildings. Vodafone designed its own Green Bond Framework to establish criteria and standards for what projects are eligible under the use of proceeds, how they are selected, and the management of proceeds and reporting. The framework is aligned with the ICMA Green Bond Principles 2018.
AES Tietê (2019)
AES Tietê, a clean energy development company operating in Brazil, became the first Brazilian issuer to issue a Certified Climate Bond under the Solar Criteria when it issued a BRL 820m green bond in April 2019. The proceeds will be used to finance and refinance the acquisition of eight solar farms.
The American telecom company issued its first green bond in February 2019 – selling USD 1bn in debt. Investor demand was so high that within 24 minutes orders had already exceeded the USD 1bn mark and drew orders equivalent to eight times that number. The bond does comply with the ICMCA 2018 Green Bond Principles, confirmed via a second party opinion by Sustainalytics. Verizon plans to use the majority of the proceeds on projects that include renewable energy, energy efficiency, green buildings, sustainable water management, and biodiversity and conservation.
PepsiCo, Inc. (2019)
PepsiCo, Inc., a global food and beverage company, issued a USD 1 billion green bond in October 2019 to advance its corporate sustainability agenda. PepsiCo developed the PepsiCo Sustainability Report under which it intends to issue green bonds and use the proceeds to finance or refinance, in whole or in part, existing or new eligible projects. The Report defines company goals in the areas of sustainable plastics and packaging, decarbonization of operations and supply chain, and water sustainability.
Apple (2016 + 2017)
In 2017 – Apple issued a second green bond in 2017, selling USD 1bn in debt; the bond will be dedicated to financing clean energy and environmental projects including renewable energy, energy efficiency at Apple facilities and in its supply chain and procuring safer materials for its products, reducing its need to mine rare earth materials. In 2016 – Apple issued a USD 1.5bn green bond dedicated to financing clean energy projects across its global business operations including renewable energy, energy storage and energy efficiency projects, green buildings and resource conservation efforts. Sustainalytics provided a second-party opinion to ensure the bond met the ICMA Green Bonds Principles. Ernst and Young are responsible for annual audits on use-of-proceeds.
Unilever issued the first bond linked to internal company efficiency upgrades, totaling GBP 250m. The proceeds were linked to projects that improve the energy and water efficiency in the company’s internal operations. DNC GL provided a second-party opinion.
Sovereign green bonds are issued by national governments. They can be denominated in local currency or foreign currency (such as Euros, Dollars, Pounds).
The steps to issue a sovereign green bond are described in the Climate Bonds Initiative publication, Sovereign Green Bond Briefing. The Briefing discusses the nuances of national governments issuing green bonds and identifies and describes seven (7) steps to issuing a sovereign green bond, including:
1. Engaging governmental stakeholders
2. Establishing a green bond framework
3. Identifying eligible green budget items
4. Arranging an independent review
5. Issuing the green bond
6. Monitoring and reporting
Some examples of sovereign bonds include:
The Dutch Government (May 2019)
The Dutch government issued a sovereign green bond for up to EUR 6 billion, and it will seek to increase it to ~EUR 10bn in due time. The funds will be used for a variety of climate friendly projects including renewable energy, energy efficiency, clean transport and climate change adaptation. The deal has been certified by the Climate Bonds Initiative and received a second party opinion from Sustainalytics confirming it aligns with the Green Bond Principles.
Indonesia (March 2018)
The Government of Indonesia issued a USD 1.25 billion green Sukuk (bond), demonstrating its commitment to making strong progress on its sustainable development goals (SDGs). The proceeds from the green Sukuk issued by the Ministry of Finance (MoF) are dedicated to finance green projects that are in line with national strategies on mitigation, adaptation and biodiversity.
Belgium (February 2018)
The Belgian government issued a EUR 4.5bn green bond with the goal of raising capital for implementing its climate and environmental policies, and for supporting the development of the green bond market – especially in Beligum. Proceeds are allocated to low-carbon transport, energy effiiciency, renewable energy, circular economy, and living resources, and land use. An external review was conducted by Sustainalytics.
Nigeria (December 2017)
As the first African nation to issue a sovereign green bond, Nigeria issued a NGN 10.69 billion green bond that allocates proceeds to projects that promote the transition to a low-emission economy and climate resilient growth. Eligible categories include energy efficiency, resource efficiency, improved electricity grid, renewable energy and clean technology, and sustainable forest management. The bond underwent an independent review and is the first sovereign green bond to be Climate Bonds Certified, as verified by DNV GL.
Fiji (October 2017)
Fiji is the first developing country to issue a sovereign green bond and also the first amongst the island states; issuing a two-tranche FJD 100 million green bond at the end of 2017 that includes expenditures such as tax exemptions, tax credits, and subsidies. Eligible expenditures can relate to tangible assets such as land, power plants, and other infrastructure as well as research and innovation. Systainalytics provided a second party opinion that found Fiji’s Green Bond Framework to be credible, transparent and aligned with the 2017 Green Bond Principles.
Poland (December 2016)
Driven by demand from investors for more diversification, Poland’s Ministry of Finance issued a EUR 750 million that includes expenditures such as budget allocations (including excise tax exemptions), projects, and subsidies that support further investment by the private sector in Green Bond Principles-aligned sectors of renewable energy, clean transportation, sustainable agriculture operations, afforestation, national parks, and reclamation. Systainalytics provided a second party opinion on the framework, finding the framework to be robust, credible, and transparent.
SUB-NATIONAL GREEN BONDS: MUNICIPAL, CITY, ETC.
Sub-national bonds are loans investors make to local governments. They are issued by cities, states, provinces, counties, or other sub-national governments or government agencies.
Some recent examples of sub-national green bonds include:
City of Reykjavik (January 2019)
The City of Reykjavik issued a USD 33M green bond that will fund buildings, transport, waste management, land use and agriculture, and adaptation and resilience projects. According to the issuer, 70-100% of the first issuance will be used to refinance recent eligible projects from 2016-2017. The green bond received a second party opinion from CICERO.
City of Santa Fe (February 2019)
The City of Santa Fe, New Mexico recently issued a USD 13.5M green bond in order to fund the city’s new eco-friendly water system. There were USD 52M of bids for the issuance, with investors citing the Green Bond status as the reason for bidding. The bond is certified by the Climate Bond Initiative.
City of Cape Town (November 2017)
The City of Cape Town issued Africa’s first municipal green bond totaling ZAR 1 billion to fund sustainability projects throughout the city including procurement of electric buses, energy efficiency in buildings, water management projects, wastewater treatment projects, and coastal rehabilitation and protection. The bond was accredited by the Climate Bonds Initiative as compliant with its core use of proceeds criteria; Moody’s also awarded the bond the highest rating achievable for a green bond.
DC Water (July 2014)
In the process of financing the Clean Rivers project, the District of Columbia Water and Sewer Authority (DC Water) issued the first green municipal bond for water investments in the U.S. market, totaling USD 350M. The deal was met with such great enthusiasm by socially responsible investors interested in diversification, that the deal was oversubscribed multiple times. Vigeo provided an independent, second opinion of the green bond framework.
Sovereign Green Bonds
- International Finance Corporation’s “Guidance for Sovereign Green Bond Issuers: With Lesson’s from Fiji’s First Emerging Economy Sovereign Green Bond”
- Information and examples of sovereign green bonds in Climate Bond Initiative’s Sovereign Green Bond Briefing
Sub-National Green Bonds
Green Bond Frameworks / Reports
- Vodafone Green Bond Framework
- Aes Tietê Green Bond Pre-Issuance Verification
- Verizon Green Bond Framework
- Pepsico, Inc. Sustainabilty Report + Press Release
- Apple EUR 2.2bn green bond press release (2019) + Apple Green Bond Framework (2016) + Apple Green Bond Framework (2017)
- Unilever Limited Assurance Report
- The Dutch Green Bond Framework
- Indonesia’s Green Bond & Green Sukuk Initiative
- Belgium Green Bond Framework
- Nigeria Green Bond Framework
- Fiji Green Bond Framework
- Poland Green Bond Framework
- City of Reykjavik Green Bond Framework
- City of Santa Fe Independent Assurance Statement
- City of Cape Town Green Bond Framework
- DC Water Green Bond Report