Green bonds - the
logical next step
Jeroen Dicker
November 13, 2015
Cefas van den Tol
Today’s agenda
• Introduction from ING
•
Green bonds: Bridging the gap between sustainable performance
and corporate finance
• TenneT green bond
•
•
•
Profile
The making of a green bond
Execution
• ING: where do we go from here?
Green bonds: Bridging the gap
between sustainable performance
and corporate finance
A green hat for treasury?
Considerations
• The way forward:
We believe all
sustainable
progress is driven
by people with the
imagination and
determination to
improve their future
and the futures of
those around them
• Corporate
treasurers can
empower people
both inside but also
outside their
organizations to
realize their own
vision for a
sustainable future
We cannot hope to create a sustainable
culture with any but sustainable souls.
- Derrick Jensen
Business
Environment
Treasury
Society
Treasury links the three key areas of sustainable
development
November 13, 2015 Green bonds - the logical next step
4
Latest market developments
• What are green
bonds: Green
bonds constitute
fixed income
instruments that
enable capital
raising exclusively
for projects with
specific
sustainability aims
such as renewable
energy or energy
efficiency
• Market is
developing fast:
With projected
green bond
issuance expected
to top €35bn** in
2015, the market
has arrived at an
evolutionary stage
where issuers and
investors aim to
develop a liquid
market
The green bond market is quickly picking up steam
40
€bn equivalent
Considerations
Forecast
Corporate
30
GBP
7%
Government
Others
10%
EUR
48%
SEK
7%
Financial
USD
28%
20
10
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
Corporates take the lead in the primary
**ING house view
November 13, 2015 Green bonds - the logical next step
5
Increasing investor demand
Key factors
Demand for Social Responsible Investments increasing
• Strong investor
focus on SRI
assets:
Sustainable
investment asset
growth has
outpaced growth in
total professionally
managed assets
over 2012-’14
which means that
SRI assets now
account for c. 35%
of the asset total
70
60
1,600
Assets under management (US$ trillion) - LHS
Number of Signatories - RHS
1,200
50
800
30
20
400
10
0
• Green bond
market
guidelines: The
growth of the green
bond market has
been facilitated by
the establishment
of broadly
accepted
guidelines such as
the Green Bond
Principles or the
Climate Bond
Initiative Standards
Incorporate ESG
issues into
investment analysis
and decisionmaking processes
40
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
SRI assets expanded by 61% to 21.4tr* since ‘12
Impact/community investing
27% growth
2012
Sustainability-themed investing
2014
137% growth
-1% growth
Positive/best-in-class screening
82% growth
Norms-based screening
54% growth
Corporate engagement…
117% growth
ESG integration
74% growth
Negative/exclusionary…
0
US$ billions
5,000
10,000
15,000
November 13, 2015 Green bonds - the logical next step
6
Sustainability is core at ING
Do Good
• Operational impact
• Community investment
Mitigate Harm
• Risk management
• Equator principles
Drive Progress
• Financing the transition to a
sustainable economy
• Financial education
• ING is carbon neutral since 2007
and has an integrated approach to
sustainable procurement
• Robust framework publicly
disclosed and applied to business
globally
• Support our clients to become
leaders in tomorrow’s economy
• By 2015 more than 1 million
children reached via UNICEF
• Screening integrated in our
systems and procedures
• Accelerate sustainable business
innovation through
entrepreneurship
• Group wide programs promoting
financial empowerment
• Chair of the Equator Principles
Steering Committee 2012–2014
• Stimulate sustainable finance
opportunities and allocate capital
We use sustainability criteria in our capital
allocation choices to help stimulate the transition
to a sustainable economy
– Ralph Hamers
Chief Executive Officer of ING Group
Green
bond
November 13, 2015 Green bonds - the logical next step
7
Financing sustainable transitions
•ING sees important opportunities to help society meet challenges successfully and to do so in a way that promotes social
progress and environmental protection
Sustainability
Direction
•ING launched its Sustainability Direction in 2014 which puts central our support of business clients in making the transition
to a healthy and sustainable world
•ING created a Sustainable Finance team in 2012 to promote sustainable business opportunities in addition to our ongoing
assessment and management of environmental and social risks (ESR)
Sustainable
Finance
•In our Sustainable Finance Programme we identify and help our corporate customers in making the transition towards
more sustainability and sustainable business
•Sustainable Transitions Financed (STF) is our way of reporting our financing of clients that are environmental trend setters
in their sectors and projects that provide sustainable solutions
Sustainable
Transitions
Financed
•At the end of 2Q15, total sustainable transactions financed were €20.9bn (up 7.2% from 4Q14) of which €3.4bn financing
of sustainable projects and assets
7%
Sustainable projects financed 2013-1H 2015
€m
Sustainable transitions financed (in %, 1H15)
4%
9%
€20.9bn
3,500
Loans to environmental outperformers
2,800
Project Finance - renewable energy
2,100
Project Finance - other
1,400
Other projects
Renewable energy projects
1,416
768
224
ING Groenbank*
80%
700
1,275
1,730
2,003
FY 2014
1H 2015
0
FY 2013
November 13, 2015 Green bonds - the logical next step
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Profile
November 13, 2015 Green bonds - the logical next step
9
A grid operator’s task
Our three main tasks
1
Transmission services
Ensuring the construction and
maintenance of a robust and efficient
high-voltage grid
2
System services
Maintaining the balance between
demand for and supply of electricity,
24 hours a day and 7 days a week
3
Market facilitation
Facilitating a liquid and stable
electricity market that functions
efficiently
November 13, 2015 Green bonds - the logical next step
10
Vision
Society has opted for the
large-scale introduction of
renewable energy. The
generation of this energy
results in major changes
in the dynamics of the
electricity supply.
At the same time, our
dependence on electricity
is increasing. This
requires the security of
supply to be
continuously kept at the
right level. In order to
keep up with these
developments, the
European electricity
market requires further
integration.
A proper market design,
technological and
operational innovations,
solutions for electricity
storage, and sufficient
grid capacity all play a
role to balance
cross-border supply and
demand.
November 13, 2015 Green bonds - the logical next step
11
Construct & Operate
November 13, 2015 Green bonds - the logical next step
12
TenneT at a glance
Europe's first cross-border grid operator
EBIT
2,813
employees
Total grid
length
21,000 km
Assets
Investments
(2014-23)
Credit rating
A- / A3
725
13.645
20
(EUR million)
(EUR billion)
(EUR billion)
Number of
end-users
Number of
transformer
substations
Number of
cross-border
interconnectors
445
14
41
million
Grid
availability
99.99%
Figures as per 31 December 2014
Investments account for 13.3% of EUR 150 billion in the EU.
Number of end-users account for 7.7% of a total of 532 million in the EU.
November 13, 2015 Green bonds - the logical next step
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The making of
a green bond
November 13, 2015 Green bonds - the logical next step
14
Rationale for a green bond
Linking TenneT’s brand values
Responsible
Supporting the sustainable energy
policies in the North-West European
electricity market
Engaged
Motivated by the societal challenges
Connected
Enabling TenneT to meet the
growing pace of demand for energy
November 13, 2015 Green bonds - the logical next step
15
Green Bond principles (GBP)
Green Bond principles have been created to help issuers and investors
deploy capital for green projects
Green Bonds are any type of bond instruments where the proceeds will
be exclusively applied to finance or re-finance in part or in full new
and/or existing eligible Green Projects.
Four components
1. Use of Proceeds
2. Process for project evaluation and selection
3. Management of Proceeds
4. Reporting
November 13, 2015 Green bonds - the logical next step
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Project selection
100% transmission of green energy
Gode Wind 1
Gode Wind 2
Innogy Nordsee 1
DolWin beta
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Project evaluation
Green Bond framework
Structure for verifying the sustainability quality of the projects to be
financed through the Green Bond issuance




Definition of use of proceeds categories
Specific sustainability criteria
Specific indicators to enable quantitative measurement
Detailing comprehensive reporting.
November 13, 2015 Green bonds - the logical next step
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Project evaluation
Sustainability criteria & Quantitative factors
Transmission of renewable electricity from offshore wind power plants
into the onshore electricity grid using direct current technology or
alternating current technology
•
•
•
•
•
•
•
•
Consideration of environmental aspects in planning and installation of offshore
converter platforms
Consideration of environmental aspects in operation of offshore and onshore
converter stations
Consideration of environmental aspects in cable-laying (onshore and offshore)
Standards for decommissioning and rehabilitation of cable-laying construction sites
Standards for decommissioning and recycling of offshore converter platforms at endof-life
Community dialogue
Working conditions during construction and maintenance work
Social standards in the supply chain
November 13, 2015 Green bonds - the logical next step
19
Project evaluation
Impact indicators
• Number of households provided with access to wind power
 Total number of households per transmission line that would be able
to switch to 100% renewable energy
• Potential avoidance of CO2 emissions
 CO2 emissions avoided through the transmission of 100% wind
power from offshore plants to the electricity grid
November 13, 2015 Green bonds - the logical next step
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Reporting
Annually
Information
• Allocation of proceeds to 3 projects
• Advancement of projects in building
phase
• Environmental and social impact
indicators
Key performance indicators
• Safety performance (accident rate, fatal
accidents)
• SF6 emissions
• Average interruption time
• Transmission losses
• Significant controversies
Impact indicators
as defined in the Green Bond Verification
Framework
Frequency
once a year and reviewed with limited assurance
by the independent auditor
November 13, 2015 Green bonds - the logical next step
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Execution
November 13, 2015 Green bonds - the logical next step
22
Green Bond execution
Summary
•
•
•
•
•
Internal awareness, internal focus
Project selection
Sharing information and discussion with CSR rating agencies.
Establishing green bond framework and Second Party opinion
Road Show with clear focus on the green aspect. We brought on the road
also our board member responsible for the projects that were linked to the
green bond
• “Normal" bond execution
November 13, 2015 Green bonds - the logical next step
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Green Bond execution
Advantages
 Support sustainability ambitions
 Further internal awareness on CSR
 Gained insight in different stakeholders involved in CSR-related matters/ financing
 Price advantage ?!
November 13, 2015 Green bonds - the logical next step
24
ING: where do we
go from here?
25
TenneT ‘plug & play’ into green
The Netherlands
TenneT
EUR 500m
0.875% Green Bond due 2021
EUR 500m
1.750% Green Bond due 2027
Joint Bookrunner
Corporate Issuer
05/15
Transaction details
• TenneT’s decision to purse financing via green bonds underpins TenneT’s efforts in the sphere of climate
change mitigation and represents a natural step in the company’s debt capital market presence
• The proceeds raised are exclusively used to finance projects relating to the transmission of renewable
electricity from offshore wind power plants into the onshore electricity grid
• TenneT has set up an independently verified green bond framework which serves as a structure for verifying
sustainability quality of the projects to be financed
• During a 3-day roadshow TenneT meet over 60 key investors in the UK, France, Germany & Netherlands
• Approx. 17% of investors in TenneT’s green bond issue are “dark green” accounts while approx. 53% are “light
green” accounts
Key terms
Investor analysis
Issuer
TenneT Holding B.V.
Status
Senior Unsecured
Format
Green bond
Rating
A3 (Moody’s) / A- (S&P) both stable
Listing
Euronext Amsterdam
Law
Docs
€100k+1k
May 28, 2015
Maturity
6 year
12 year
Amount
€500m
€500m
June 4, 2021
June 4, 2027
Coupon
0.875%
1.750%
Re-offer Yield
0.933%
1.824%
Issue spread
MS + 45bp
MS + 80bp
DBR 2.5% Jan-21
DBR 0.5% Feb-25
Maturity Date
Benchmark
ING’s role
6%
37%
26%
60%
13%
EMTN / CoC / 3m Par Call / MWC
Trade date
8%
12%
Dutch Law
Denoms
6%
10%
Joint-Bookrunner, EMTN Arranger and Billing &
Delivery
Germany & AT
Benelux
UK & Ireland
22%
France
Nordics
Other
Ins/Pens
Bank
5%
11%
5%
Supra
Other
10%
33%
33%
10%
13%
13%
28%
Germany & AT
Benelux
Switzerland
France
UK & Ireland
Other
28%
FM
Ins/Pens
Supra
Other
Bank
November 13, 2015 Green bonds - the logical next step
26
Green bond investors
Considerations
Top Green bond investors*
• Who plays in
Green bonds?:
Being a top trader
in € corporate
bonds, ING also
knows who is
buying green
corporate paper.
ING’s panEuropean
decentralized
presence enables
ING to cover the
full range in
European investors
Holder name
KFW
APG
Ilmarinen Mutual Pension Ins Co
QBE International Insurance
Aviva Asset Management France
HSBC Asset management
Blackrock
Norges Bank Investment Management
NatIxis Asset Management
Allianz Global Investors Frankfurt
Union Investment Institutional GmbH
WGZ Bank
Allianz Global Investors France
BNP Paribas Asset Management
Credit Agricole
Petercam SA
Erste Sparinvest
Parvest Investment Management
KLP Fondsforvalting AS
State Street Corp
Sella Gestioni
MN Services Nv
Allianz - RAS Asset Management Spa
LBBW AM
Deutsche AWM
MEAG Asset Management GmbH
Nord LB AM
Prado Marseille
Versam
M&G Investment
SEB AG
Amundi
Bayern Invest
• Dedicated Green
funds: While
certainly not all
mentioned
investors maintain
dedicated green
bond funds, we do
note the increasing
focus on social
responsible
investments
Green bond investor comments
Geography
Germany
The Netherlands
Finland
Great Britain
France
Germany
USA
Norway
France
Germany
Germany
Germany
France
France
France
Belgium
Germany
France
Norway
United Kingdom
Italy
The Netherlands
Italy
Germany
Germany
Germany
Germany
France
Germany
Great Britain
Germany
France
Germany
More than half of investors now say that
environmental, social and ethical criteria
are important or very important to them
when they are making investment
decisions
We are able to provide clients with the full
range of SRI Funds and Strategies across
asset classes inlcuding equities, fixed
income and money market products
One of the largest managers of SRI in the
world with approximately €60 billion in
socially-screened assets.
BlackRock Impact platform manages over
$225 billion in low carbon passive strategies
and screened funds, designed to align clients’
portfolios with their objectives
Norges Bank Investment Management seeks to
safeguard investments in more than 9,000
companies worldwide by promoting good corporate
governance standards and encouraging businesses
to improve social and environmental standards
*Source: Bloomberg, orderbooks
This list shows only a selection of Green bond investors and is not exhaustive
November 13, 2015 Green bonds - the logical next step
27
ING Green bond research
Considerations
ING actively published Green bond research
• ING dedicated to
Green bond
research: ING is
acknowledging the
growing trend for
Green investments
and as such
publishes
dedicated research
to educate the
investor base
thoroughly on a
continuous basis
November 13, 2015 Green bonds - the logical next step
28
Signs of outperformance?
28-05-2015: TenneT Green bond issuance
Enexis (A+/Aa3)
70
60
Alliander (AA-/Aa2)
Gasunie (A+/A2)
50
TenneT2022 4.500%
Alliander2022 2.250%
Gasunie2022 2.625%
Enexis 2022 3.375%
40
18-Jun-15
12-Jul-15
6-Aug-15
TenneT2022 4.500%
Alliander2022 2.250%
Gasunie2022 2.625%
Enexis 2022 3.375%
50
TenneT (A-/A3)
Enexis (A+/Aa3)
30-Aug-15
80
23-Sep-15
17-Oct-15
TenneT2022 4.500%
Gasunie2022 2.625%
11-Nov-15
Alliander2022 2.250%
Enexis 2022 3.375%
70
Enexis (A+/Aa3)
60
TenneT (A-/A3)
40
Alliander (AA-/Aa2)
50
5bp
60
25-May-15
Z spread mid (bp)
30
1-May-15
20bp
• Pricing
advantage vis-àvis plain vanilla
paper: In general,
green bonds
within the utilities
sector trade in
line or at a spread
discount when
benchmarked
against the
issuers’ implicit
plain vanilla
secondary curves
80
Z spread mid (bp)
• Green bonds
supportive for
secondary
curve?: In the
recent market
environment
where credit
spreads tend to
widen, we
observe that
TenneTs credit
curve on relative
basis widened
less than peers
TenneT vs comparable senior spread performance
Z spread mid (bp)
Considerations
Gasunie (A+/A2)
Alliander (AA-/Aa3)
30
1-May-15
8-May-15
16-May-15
24-May-15
1-Jun-15
40
1-Oct-15
Gasunie (A+/A2)
11-Oct-15
21-Oct-15
31-Oct-15
11-Nov-15
November 13, 2015 Green bonds - the logical next step
29
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presentation, nor for the consequences of activities undertaken on the basis of data and information
included in it.
30
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positive opinions from legal counsel.
31
www.tennet.eu
TenneT is Europe's first cross-border grid operator for the transmission of electricity. With
approximately 21,000 kilometres of high-voltage lines and 41 million end-users in
the Netherlands and Germany, we rank among the top five grid operators in Europe. Our
focus is to develop a North-West European energy market and to integrate renewable
energy.
Taking power further
November 13, 2015 Green bonds - the logical next step