International Finance Corporation (IFC), a member of the World Bank Group, is seeking to raise a minimum of $100 million through the issue of New Zealand’s first green bond in the Kauri bond market.
The 10-year bond is due to be priced on Friday. It’s being marketed at 58 basis points over the 10-year swap rate, which at the time of writing was at 3.28%. At that rate the IFC bond would have an interest rate of 3.86%.
The Asia Development Bank, like IFC a so-called “supranational” bond issuer, issued a plain seven-year Kauri bond last week that priced at 47 basis points over swap. IFC says the money raised will be used to support “climate-smart investments.”
A Kauri bond is a New Zealand dollar denominated security, registered in New Zealand and issued by a foreign issuer. Settlement takes place in New Zealand initially, but the security can then be held in other depositories around the world. As of June, there were NZ$28.9 billion worth of Kauri bonds on issue. (The RBNZ tracks Kauri bonds here).
IFC describes itself as the largest global development institution focused exclusively on the private sector in developing countries. A green bond page on IFC’s website says as of June last year it had issued US$5.1 billion in green bonds in eleven currencies.
“IFC was also one of the earliest issuers of green bonds, launching a green bond program in 2010 to help catalyze the market and unlock investment for private sector projects that support renewable energy and energy efficiency. As of June 2016, IFC had issued $5.1 billion in green bonds in eleven currencies. During 2016 alone, IFC issued 23 green bonds in public and retail format, across six currencies, amounting to a total of $1.4 billion – the highest annual issuance since IFC began the program in 2010,” IFC says.
“IFC issues ‘Use of Proceeds’ green bonds. This means that all proceeds from IFC green bonds are set aside in a designated account for investing exclusively in renewable energy, energy efficiency, and other climate-smart projects in developing countries. Investors in IFC green bonds are not exposed to project risks.”
IFC has triple-A credit ratings from both S&P Global Ratings and Moody’s. BNZ has arranged the issue, and is joint lead manager alongside ANZ.