2014 06 02 Green Bonds Market Outlook 2014

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GREEN BONDS MARKET OUTLOOK 2014
Blooming with new varietals 2 June 2014
 
 GREEN BONDS MARKET OUTLOOK 2014 2 JUNE 2014
© Bloomberg Finance L.P.2014 No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact sales.bnef@bloomberg.net. Copyright and Disclaimer notice on page 25 applies throughout.
CONTENTS
TABLE OF FIGURES
Figure 1: Historical green bond issuance, by type ($bn) ................................................... 6 Figure 2: Green bond issuance versus US corporate debt ($bn) ...................................... 7 Figure 3: Corporate self-labelled green bond issuance, last 12 months (coupon, tenor) ... 9 Figure 4: Top 10 corporate self-labelled green bond underwriters, 2013-present ($, deals) .............................................................................................................. 11 Figure 5: SolarCity 2013 ABS by host type .................................................................... 13 Figure 6: SolarCity 2013 ABS contract types .................................................................. 13 Figure 7: SolarCity 2013 ABS module manufacturers .................................................... 13 Figure 8: SolarCity 2013 ABS inverter manufacturers .................................................... 13 Figure 9: SolarCity ABS yields versus US auto-loan ABS tranches (coupon, tenor in years) .............................................................................................................. 14 Figure 10: Project bond issuance since 2011 ($bn) ......................................................... 16 Figure 11: Project bond issuance 2011-present (coupon, year, size $m) ........................... 17
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 GREEN BONDS MARKET OUTLOOK 2014 2 JUNE 2014
© Bloomberg Finance L.P.2014 No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact sales.bnef@bloomberg.net. Copyright and Disclaimer notice on page 25 applies throughout.
Figure 12: Top project bond underwriters, 2013 ($m, deals) .............................................. 18 Figure 13: Supranational/international green bond issuance by bank ($bn) ....................... 19 Figure 14: Disclosed use of proceeds by bank ($bn) ......................................................... 20 Figure 15: Top supranational/international green bond underwriters, 2013 ($m, deals) ..... 20 Figure 16: Top disclosed buyers of World Bank IBRD bonds, 2013-present ...................... 21 Figure 17: Government & municipal issuance over time ($m) ............................................ 22 Figure 18: CREB & QECB issuance by use of proceeds ($m) ........................................... 23
TABLE OF TABLES
Table 1: Our definition of the green bond universe .......................................................... 7 Table 2: Example verifiers used for corporate green bonds .......................................... 10 Table 3: Self-labelled corporate bond issuers ............................................................... 10 Table 4: Top reported holders of self-labelled corporate bonds, all time ........................ 11 Table 5: Green ABS deals to date ................................................................................. 12 Table 6: SolarCity 2013 ABS system locations ............................................................. 13 Table 7: SolarCity securitisation characteristics versus other ABS types, US market .... 14 Table 8: Underwriters of green ABSs ............................................................................ 15 Table 9: Toyota ABS holdings ....................................................................................... 15 Table 10: SolarCity 2013 ABS holdings .......................................................................... 15 Table 11: Clean energy project finance and bond finance versus other infrastructure ..... 16 Table 12: Key project bond issuances since January 2013 ............................................. 17 Table 13: Top reported holders of clean energy project bonds, all time ........................... 18 Table 14: QECB and CREB issuance versus allocation .................................................. 22 Table 15: International government green bond issuance since 2013 ............................. 23
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 GREEN BONDS MARKET OUTLOOK 2014 2 JUNE 2014
© Bloomberg Finance L.P.2014 No portion of this document may be reproduced, scanned into an electronic system, distributed, publicly displayed or used as the basis of derivative works without the prior written consent of Bloomberg Finance L.P. For more information on terms of use, please contact sales.bnef@bloomberg.net. Copyright and Disclaimer notice on page 25 applies throughout.
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SECTION 1.
 EXECUTIVE SUMMARY
 A record $16.6bn of green bonds have been issued to-date in 2014, driven by a surge in corporate self-labelled issuance and sustained volumes from large international and supranational banks. At its current pace, total 2014 volume could surpass $40bn, triple the $14bn issued in 2013. Innovative asset-backed securities and new entrants to the corporate space provide a solid foundation for an aggressive near-term growth trajectory.
 Thus far, through 2 June 2014, a record $16.6bn in green bonds have been issued in 2014, driven by a surge in corporate self-labelled bonds and high volumes from large international and supranational institutions likes the World Bank.
 The market is growing fast: at its current pace, total volume in 2014 will surpass $40bn by the end
of the year, triple 2013’s volume.
However, it still constitutes only a small fraction of the broader bond market. Global green bond issuance in 2013 was about 1% of the value of the US corporate bond issuance, which was over $1.4 trillion.
 The entrance of self-labelled green corporate bonds
 –
 bonds issued by corporations with proceeds ring-fenced for green investments
 –
 has opened up a new source of capital for the market as has the emergence of innovative asset-backed securities like the distributed solar-backed bonds pioneered by SolarCity in late 2013.
Corporate self-labelled
 Self-labelled green corporates function in much the same way as international and supranational bonds: their proceeds are used to fund green activities, but their repayments are from general corporate funds. Issuers have not been able to realise pricing advantages through green labelling as investors are unwilling to take lower than expected coupons simply for the
ability to ‘go green’.
 Bank of America Merrill Lynch has been both an issuer and an underwriter of these types of bonds. In terms of issuance, it kicked-off the corporate self-labelled space in early November 2013 with a $500m green bond, the proceeds of which are to be used to finance renewables and energy efficiency via loans and credit lines to industry participants. Since then, about $9.7bn in corporate self-labelled green bonds have been issued by nine companies in Europe and the United States.
 In terms of underwriting, Bank of America Merrill Lynch is the top self-labelled underwriter with  just over $1bn in underwriting since mid-2013, having participated in their own $500m offering as well as in deals with GDF Suez, Unibail-Rodamco and Iberdrola. Swedish bank SEB comes second.
Asset-backed securities
 The green ABS
market kicked off in 2013 with Hannon Armstrong Sustainable Infrastructure’s
issuance of a $100m ABS backed by the cashflows of over 100 wind, solar and energy efficiency projects at 20 properties across the US. Total issued since that date
 –
 across five different deals from four issuers
 –
 is $2.08bn.
 
SolarCity’s inaugural solar 
-backed ABS in November 2013 marked the start of what will likely be a significant market for solar securitiation in the US. Although small at $54.4m, it was a first step in testing the waters of both the demand for these securities and the process of issuing them. The company issued a second ABS ($70.2m) in March 2014. This report contains a special section on SolarCity's pioneering 2013 deal; key characteristics of that ABS include:
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