• SABs extended to “protection and restoration of biodiversity and ecosystems” (EU Taxonomy objective #6)
  • SABs committed to align with the evolving EU Taxonomy Regulation
  • Strong investor response (15x oversubscribed) confirms growing market interest for sustainability

On 11 January, the European Investment Bank (EIB) issued a new EUR 1.5bn Sustainability Awareness Bond (SAB) due 15 May 2041. On the back of demand in excess of EUR 22.5bn (excl. JLM), the transaction was upsized from initial target size (EUR 1bn) and priced at mid-swaps less 7bp, 2bp tighter than initial guidance. The issue had a re-offer yield of -0.003%, offering a spread of 30.6bp over DBR 4.75% 07/04/40 and 6.3bp below FRTR 4.5% 25/04/41.

The issue took place on the same day as the One Planet Summit for Biodiversity in Paris and extends the scope of EIB Sustainability Awareness Bond to the “protection and restoration of biodiversity and ecosystems”.

“Sustainable finance must be a pillar of the global response to the challenge of climate and environmental degradation. EIB is at the forefront, leading by example in lending and funding within the framework of ground-breaking EU legislation. Biodiversity is a core objective”. said Ambroise Fayolle, European Investment Bank Vice-President.

Funding raised from global capital markets by EIB Sustainability Awareness Bond will support long-term investment in projects in alignment with EU Taxonomy Regulation.

Ahead of the EU Taxonomy regulation, EIB Sustainability Awareness Bond has enabled investors to support Covid-related related financing, as well as projects that increase access to water, health and education using transparent screening criteria as enabled under the EU framework.

 “EIB’s Sustainability Awareness Bonds are allocated only to environmental and social projects with substantial contribution to EU sustainability objectives. In 2018, EIB was the first issuer to align documentation with EU legislation on sustainable finance. Eligibility is now extended to Biodiversity. This is a major commitment to transparency to investors in one of the most important areas of engagement for the EU and the EIB.” Ricardo Mourinho Félix, European Investment Bank Vice-President.

EIB has now decided to extend the same approach to the protection and restoration of biodiversity and ecosystems (see illustration below), starting with sustainable forest management and progressively extending to other relevant areas in due course (e.g. nature and biodiversity conservation, sustainable land use and management, sustainable agricultural practices, as well as related enabling activities, as per EU Taxonomy Regulation).

SAB allocations are to eligible disbursements following issue date, on a first-in-first-out basis, and cover multiple sustainability objectives. Allocations to biodiversity will materialise progressively and their amount and sequence will be reported to investors in yearly SAB Frameworks that are audited - with Reasonable Assurance (ISAE 3000) - by an independent external auditor under official supervision (presently: KPMG).

“Climate Change, environmental degradation and zoonosis are directly and closely interconnected. They need to be addressed holistically by capital markets. We therefore welcome EIB’s extension of SAB-eligibilities to biodiversity. The EIB has a coherent approach to sustainability, driven by EU legislation on sustainable finance, and enjoys our strategic support.” said Lars Dreier Kristensen, Senior Portfolio Manager at ATP.:

"We share EIB’s view that more clarity is needed in sustainable finance and appreciate its recent efforts tracking green finance in line with the EU Taxonomy Regulation. Highlighting that biodiversity is part of EIB’s endeavors in this field is very positive, and we have been happy to underline our support with a lead order”.said Patrick Gorm Nielsen, Portfolio Manager at PFA Asset Management.

This approach gained market favour in 2020, as investors realized the interdependency of different areas of sustainability, with WWF characterizing Covid-19 as the “boomerang effect of ecosystems’ destruction”.

SAB-issuance grew by more than 5 times in 2020 compared to 2019, assuming a bellwether role in the market.

Background information

Climate Awareness Bonds

 Sustainability Awareness Bonds 

Environmental

Environmental
(other than climate change mitigation)

Social

  • Climate Change Mitigation

So far:

  • Sustainable Use and Protection of Water and Marine Resources
  • Pollution Prevention and Control

NEW:

  • Protection and Restoration of Biodiversity and Ecosystems

So far:

  • Access to Water and Sanitation
  • Natural Disaster Risk Management
  • Access to Equitable and Inclusive Education
  • Universal Access to Affordable Health Services
  • Health Emergencies Response & Preparedness Capacity

 

Information on the issue

Composition of demand

By Region

 

By Investor Type

 

Other Europe

26%

Fund Manager/ Insurance/ Pension

55%

Germany/Austria/Switzerland

21%

Bank/ALM

36%

France

19%

Central Banks / Official Institutions

6%

Nordics

15%

Other

3%

UK/Ireland

15%

 

 

Benelux

3%

 

 

Americas

1%

 

 

 

Summary Terms and Conditions for the EUR 1.5bn new issue of 0.01% May 2041 Sustainability Awareness Bond

Issue Amount

EUR 1.5bn

Pricing Date

11 January 2021

Payment Date

19 January 2021 (T+6)

Maturity Date

15 May 2041

Coupon

0.01% Annual ; Act/Act ICMA; following unadjusted

Re-offer Spread

MS -7bp

Fees

20 cents

Listing

Luxembourg Stock Exchange

Lead Managers

BofA Securities, Crédit Agricole CIB, LBBW, Santander

Total SABs outstanding exceeds EUR 6.4bn (equiv.) with 8 lines in AUD, EUR, SEK and USD.

As of 11/01/2021, the EIB has raised over EUR 14.6bn (equiv.), i.e. ca. 24% of the announced EUR 60bn 2021 borrowing programme.

Link to SAB Framework 2018-2019