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EIB issues first Sustainability Awareness Bond

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EIB issues first Sustainability Awareness Bond

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  •  Release date: 06 September 2018
  •  Reference: 2018-223-EN
  • EUR 500 m bonds demonstrates commitment to UN Sustainable Development Goals
  • New bonds expand benefits of impact reporting and transparency beyond climate
  • High-impact water projects to benefit from first sustainable bonds

The European Investment Bank today issued its first Sustainability Awareness Bond. The EUR 500 million transaction represents the first EIB funding intended to directly support sustainable finance and builds on the EIB’s pioneering role unlocking investment through green bonds.

“The launch of the EIB’s new Sustainability Awareness Bonds today demonstrates the EU Bank’s firm commitment to unlocking finance for high impact projects in sustainable sectors beyond climate. Sustainability Awareness Bonds build on the global success of green bonds, ensuring the confidence of socially responsible investors through rigorous transparency and market standards. We have selected the water sector as a starting point, as it is a mature sector, with well-defined impact indicators. We look forward to expanding the scope of the Sustainability Awareness Bonds in the coming months to cover health and education, which are key sectors where we can improve people’s daily life around the world,” said Werner Hoyer, President of the European Investment Bank.

With this new product, the Bank extends its established allocation and reporting practice to enhance capital market transparency and accountability in further areas of environmental and social sustainability. The new Sustainability Awareness Bonds complement Climate Awareness Bonds (CABs), the EIB’s established green bonds that support renewable energy and energy efficiency projects worldwide.

Harnessing financial support from global investors and capital markets is essential to achieving Sustainable Development Goals (SDGs) and improving people’s daily lives. The United Nations estimates that USD 6 trillion of new annual investment is needed to successfully tackle SDGs and the new Sustainability Awareness Bonds will strengthen investor support for transformational sustainable investment.

Initial focus on water projects and expected expansion to other sectors

The European Investment Bank is one of the largest financiers of water projects worldwide and proceeds from the first Sustainability Awareness Bonds will be allocated to water investment that supports sustainability objectives as defined by EU legislation.

These sectors include:

  • sustainable use and protection of water and marine resources;
  • transition to a circular economy, waste prevention and recycling;
  • pollution prevention and control;
  • protection of healthy ecosystems.

Initially, Sustainability Awareness Bonds will focus on investment in water supply, sanitation and flood protection. They are expected to expand to other sectors such as health and education once detailed reporting frameworks are in place.

Focus on high-impact and transformational investment

Sustainability Awareness Bonds will focus on high-impact investments selected on the basis of EIB’s sector and impact definitions, which will enable detailed reporting and transparency. This approach will also contribute to ongoing taxonomy discussions of the European Commission’s Technical Expert Group on Sustainable Finance.

Supporting sustainable investment across Europe and around the world

The EIB has in-depth technical and financial experience financing projects worldwide. Sustainability Awareness Bonds will support projects both across the European Union and in emerging and developing economies.

Reflecting the high-impact focus and specific sustainable investment challenges it is expected that the new bonds will include stronger support for projects outside the European Union than overall EIB financing activity.

Building on capital market best practice

In consultation with leading socially responsible investors and industry groups, Sustainability Awareness Bonds are expected to contribute to enhancing best practice concerning the use of proceeds, project evaluation and selection, reporting and verification.

Reflecting investor feedback the new Sustainability Awareness Bonds are based on the EIB’s commitment to a rigorous framework aligned with the Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines.

Building on EIB’s pioneer role in the green bond market

Sustainability Awareness Bonds build on the success of EIB’s Climate Awareness Bonds (CAB’s). The EIB pioneered the green bond market in 2007 has since issued more than EUR 23 billion equivalent of CABs, and continues to be one of the largest issuers of green bonds.

Summary Terms and Conditions for the new bond issue:

   

Issue Amount

EUR 500 million

Pricing Date

6 September 2018

Payment Date

13 September 2018

Maturity Date

15 May 2026

Issue/Re-offer Price

99.474%

Re-offer Yield

0.445%

Annual Coupon

0.375%

Re-offer Spread

MS-20bp

Re-offer Fees

15 cents

Format

Sustainability Awareness Bond

Listing

Luxembourg

Joint Lead Managers

BAML, Commerzbank, Credit Agricole, UniCredit, SEB

Co-Lead Managers

BNP Paribas, DEKA, DZ Bank, HSBC, Natixis

Investor quotes:

ACTIAM

ACTIAM is happy to invest in the new EIB Sustainability Awareness Bond and, together with the EIB and other SRI investors, contribute to meeting the 17 Sustainable Development Goals, as defined by the UN. This bond especially is a perfect fit for the key themes ACTIAM has chosen for its ESG strategy (climate, water and land) to deliver relevant investment solutions, maximizing longer-term financial, environmental and social returns. ACTIAM wants to actively contribute to invest within the planetary boundaries.” Dennis van der Putten, Director Sustainability & Strategy at ACTIAM

PGGM

“PGGM is very happy to participate, on behalf of its clients, in this initial Sustainable Awareness Bond. The Water theme aligns fully with one of the four investable focus areas, in which PGGM together with its institutional clients has the ambition to make a difference. We are proud to take our cooperation with EIB one step further through this transaction and are confident that EIB will once more set the industry standard for impact reporting in the area of water investments.” Wilfried Bolt, Senior Investment Manager Fixed Income at PGGM

Lead Managers` quotes:

A phenomenal transaction that cements the EIB as a pioneer in the ESG space and its ongoing desire to unlock further investment in social, green and sustainable projects around the world. Through the new Sustainability Awareness Bond (“SAB”) line, and building on its vast experience, EIB joins the elite group of SSAs furthering and broadening other aspects of the sustainability agenda, adding more impetus to the rapidly growing Sustainability Bond market. The launch of today’s inaugural SAB is a fitting way to complement this and demonstrates EIB’s vision for the future growth of environmental and social sustainability. We are delighted to have participated in this landmark transaction and wish the EIB every success with the development of this programme.” Adrien de Naurois, Head of SSA DCM & Syndicate, BofA Merrill Lynch

With an initial guidance flat to EIBs EUR curve and a final pricing 2bp inside, this transaction underlines EIB’s reputation as a pioneer in the segment and thus, the strong appreciation they get from investors.“ Klaus-Peter Eitel, Director – SSA Syndicate at Commerzbank

After extensive investor engagement, EIB has been able to reap the fruit of their labour with a fantastic inaugural transaction both in term of book quality and final pricing. This is a well deserved outcome for being innovative and ambitious in the growing SRI asset class. Credit Agricole CIB has been proud to be involved in this transaction, from the outset until the phenomenal ending.Benjamin Moulle, Head of SSA Syndicate at  Crédit Agricole CIB

SEB is very pleased to be a part of this ground breaking transaction which represents a landmark in the development of the sustainable bond market. The importance of supporting European and global infrastructure - and in particular water infrastructure which was the focus of EIB’s inaugural SAB transaction - is key to all of our clients, who showed their commitment to raising awareness around water solutions by means of a simple and well-structured investment opportunity.Christopher Flensborg, Head of Climate & Sustainable Finance at SEB

There is conceptional beauty behind EIB´s Sustainability Awareness Bond issuance program. While keeping the climate-related focus of the CAB issuance program untainted, the new SAB covers other environmental and social projects, building on the CAB’s eleven years of experience and innovation. The EIB always tilts towards greater objectives, this time as defined by both the European Commission’s Action Plan on Sustainable Finance and the United Nations’ Sustainable Development Goals. Today’s inaugural offering attracted a strong and granular book, dominated by market leading SRI funds. UniCredit was joint lead in the first CAB and we are very proud to be part of the first SAB as well.Antonio Keglevich, Head of Sustainability Bond Origination at UniCredit

Market reception

Taking advantage of a constructive market backdrop on Wednesday 5th of September, the EIB elected to announce the EUR 500 million no-grow long 7-year SAB transaction in the afternoon hours. Books officially opened the following morning at 9am CET, with price guidance announced at mid-swaps minus 18bps area.

The transaction attracted broad investor demand from the outset, with books exceeding EUR 700 million (excluding JLM interest) within one hour. As book momentum gathered strength to reach over EUR 950 million (including EUR 100 million JLM interest), the price guidance was revised to mid-swaps minus 19bps. Positive investor sentiment continued to support the transaction and enabled the EIB to set the final spread at mid-swaps minus 20bps area, at which point books had reached in excess of EUR 1.1 billion.

The transaction was priced at just after 2pm CET, with 45 accounts participating in the final book and demonstrating the depth of support among the international investor community for the EIB’s environment and social sustainability lending activities. Participating investors included: ABN Treasury, Achmea Investment Management, Actiam, Alecta, Banca Popolare Di Sondrio, Banca Profilo SpA, Bankhaus Lampe, Candriam Investors Group, Danske Bank Asset Management, De Volksbank, PGGM, APG Asset Management and Union Investment.

Investor distribution statistics – based on final allocations

Geography

   

Benelux

28%

Nordics

21%

Asia

18%

Germany / Austria

13%

UK

13%

Italy

3%

France

3%

Other

1%

Type

   

Pension / Insurance

33%

Banks

33%

CB/OI

18%

Fund Manager

16%

Eila Kreivi, EIB Head of Capital Markets answers key questions on the EU bank’s first Sustainability Awareness Bonds: 



Background information

EU policy framework for sustainable development

The Treaty on European Union aims to establish an internal market that works for the sustainable development of Europe. Ensuring an appropriate regulatory environment is a priority area of the EU’s Capital Markets Union. The European Commission’s Action Plan on 'Financing Sustainable Growth’ has been designed to help reorient capital flows towards sustainable investment.

For this purpose, a Regulation proposal of May 2018 (the ‘Proposal’) aims to stimulate companies to measure the impact of their activities on sustainable objectives via the development of a shared understanding of sustainability. The Proposal underlines that the European Union is committed to the implementation of the UN’s 2030 Agenda for Sustainable Development and takes on board in all its actions and policy initiatives the Agenda’s Sustainable Development Goals.

The task of the European Investment Bank is to contribute to the balanced and steady development of the internal market in the interest of the Union. In July 2007, in congruence with the EU Energy Action Plan, the EIB issued the first Climate Awareness Bond (CAB) with a focus on renewable energy and energy efficiency. The goal was to increase accountability of disbursements via precise eligibility criteria and to provide transparent impact assessment to capital markets.

Infographic for media use

EIB's new Sustainability Awareness Bond

SABs blog story

SABs Presentation

SABs Framework




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