European Investment Bank issues €500m climate awareness bond

The European Investment Bank (EIB) has issued a €500 million (£397m) climate awareness bond that will reach maturity in 2026 and carries an annual coupon on 1.25%. Since 2007 EIB climate awareness bonds have raised €6.2 billion (£4.9bn), demonstrating the growing demand for ethical bonds.

The 12 year bond is double that of the bonds the bank issued last year. The EIB said that the longer time frame “reflects the duration of renewable energy and energy efficiency projects” financed by the EIB.

The bank added that the bond generated strong demand from investors interested in the socially responsible features of the products, highlighting how environmental, social and governance (ESG) issues are now being considered by mainstream investors.

Elia Kreivi, directors and head of the capital markets department at the EIB, commented, “EIB is highly engaged in climate action, a key priority on the EU agenda, and is fully committed to the meaningful development of the green bond market, the importance of which is growing day by day.”

Asset managers made up the biggest portion of investors, accounting for 56%, followed by banks, which snapped up 27%. The Netherlands made up the biggest portion of investment allocation when looking at geographical region, followed by Germany and Scandinavia.

The sums invested in bonds related to climate change have grown rapidly in recent years and their popularity is continuing to grow. A report published in July noted that climate bonds have grown from a niche market and moved into the mainstream, with the market now standing at an estimated $501.6 billion (£293.6bn).

Hendrik Tuch, senior portfolio manager at Aegon Asset Management, which invested in the EIB bond, said, “The Climate Awareness Bond issued by the European Investment Bank fits within our existing mandate guideline and our impact investing approach in which we select investments that meet our existing risk and return requirements, but also have the intent to create a measurable social and environmental impact.

“We think the market for green bonds will grow considerably in coming years as the appetite from investors is more than sufficient to cover increasing issuance level.”

Photo: Images of Money via Flickr

Further reading:

Report: climate bonds enter mainstream, reaching $502bn

Campaigners call for clarity in Green Bond Principles

Green bond investment forecasted to double in 2014

Zurich back responsible investment and doubles green bond commitment

US firm launches $100m green bonds for low-carbon investment