ADB sells green bonds to spur climate change funding

The Asian Development Bank (ADB) sold $1.25 billion of green bonds in a dual-tranche issuance to support its low-carbon and climate resilient projects.

The Manila-based lender said on Wednesday that more investors saw the value in the use of the proceeds from the bond issuance for climate change mitigation.

“ADB is responding to the rapidly growing demand for green bonds with our second dual-tranche outing and our first 5-year green bond offering,” said ADB Treasurer Pierre Van Peteghem.

Earlier this year, the bank urged poor countries to invest in transport, telecommunications, power and water, and sanitation to fight climate change.

Venturing into low-carbon investments was also tagged by experts as an opportunity to attract vast capital flows, emphasizing on the potential to create jobs and spur economic growth.

With the $1.25 billion for climate change support, ADB expects a 30 percent growth in overall financing.

Dual-pronged approach

The issuance was split into five-year and 10-year tranches.

“We have found the dual-pronged approach taken today to be an efficient means of reaching ethical investors active at different segments of the yield curve," Peteghem said.

The $750 million of five-year bonds will mature on Aug. 10, 2022.

Priced at 99.531 percent, the bond issue is expected to hover at 16.3 basis points over the 1.875 percent US Treasury notes due in July 2022.

The second tranche of $500 million carries a coupon rate of 2.375 percent per year, payable semi-annually until its maturity on Aug. 10, 2027.

It was priced at 99.172 percent for a yield of 20.5 basis points over the 2.375 percent US Treasury notes due on May 2027.

ADB said both issues were widely distributed.

Almost a quarter (24 percent) of the five-year bonds was placed in Asia; 29 percent in Europe, the Middle East, and Africa; and 47 percent in the Americas.

More than half of the 10-year bonds were floated in Europe, the Middle East, and Africa (69 percent), while 18 percent were sold in the Americas and 13 in Asia.

Half the total bond issuance went to banks (52 percent); 25 percent to central banks and official institutions; and 23 percent to fund managers.

The transactions were lead-managed by Bank of America Merrill Lynch, Credit Agricole CIB, and J.P. Morgan. A syndicate group was also formed consisting of Citi, HSBC, Morgan Stanley, and TD Securities, according to ADB.

In 2015, the bank announced it would double its yearly climate financing to $6 billion by 2020.

ADB plans to raise around $27 billion to $30 billion from the capital markets in 2017.

The lender is celebrating 50 years of development partnership in the region to reduce poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. — Margaret Claire Layug/VDS, GMA News