Issue a Green Bond to Buy a Green Bond

by | May 20, 2022 | ESG

Is issuing a green bond to the capital market and buying a green bond incorporated by corporations in developing nations, development banks new strategy?

If this trend is accurate, the strategy is encouraging for all corporations across the globe and emerging market bonds.

Asia Development Bank (ADB) are in full support of green bonds, this year alone ADB raised €600 million through the issuance a 7-year green bond[1]. The interesting trend is seeing development banks now taking their raised capital and purchasing corporate green bonds in support of climate and social change across the globe.

Thailand’s maiden certified climate bonds, by B. Grimm Power Public Company, is received the backing of a 5 billion Thai baht (US$155 million) investment by the Asian Development Bank (ADB) as details were announced on December 11.

“The issuance will foster the development of the green bond market in Thailand by showcasing international best practice for genuine green and climate bonds,” said B.Grimm Power President Preeyanart Soontornwata. “ADB’s support was invaluable to ensure the bonds comply with International Capital Markets Association Green Bond Principles and Climate Bond Initiative standards, building on a long-standing relationship we have forged through multiple transactions.”[2]

In 2016 ADB provided credit-enhancement to the Philippine firm AP Renewables, Inc. (APRI), a subsidiary of AboitizPower Corporation (AboitizPower), for the Tiwi-MakBan geothermal energy facilities. The PHP10.7 billion ($225 million equivalent) local currency bond comes in addition to a direct ADB loan of PHP1.8 billion ($37.7 million equivalent). ADB’s credit enhancement is in the form of a guarantee of 75% of principal and interest on the bond.

“The successful use of credit enhancement for Tiwi-MakBan reflects our evolving strategy to make creative use of ADB’s expanding balance sheet to support infrastructure investment in Asia and the Pacific,” said Todd Freeland, Director General of ADB’s Private Sector Operations Department. “Credit-enhanced project bonds offer an attractive alternative to bank financing, and by mobilizing cost-effective, long-term capital can help close the region’s infrastructure gap.”[3]

Michael Barrow, director general of ADB’s Private Sector Operations Department, believes the green bond will help the country (Thailand) achieve its goal of reducing greenhouse gas (GHG) emissions by 20% by 2030[4].

The investments are in line with ADB’s new Strategy 2030, which mandates that at least 75% of the number of ADB’s committed operations will support climate change mitigation and adaptation by 2030, with climate finance from its own resources reaching US$80 billion over 2019-2030[5].

Written by ESG Responsible Investments (www.esgi.com) and noted sources.

[1] https://www.adb.org/news/adb-sells-600-million-7-year-green-bond-spur-climate-financing

[2] https://www.adb.org/news/adb-invests-5-billion-thai-baht-bgrimm-power-s-green-bond-develop-clean-energy-thailand

[3] https://www.adb.org/news/adb-backs-first-climate-bond-asia-landmark-225-million-philippines-deal

[4] https://www.pv-magazine.com/2018/12/12/adb-invests-155-million-in-thai-green-bonds/

[5] https://www.adb.org/sites/default/files/institutional-document/435391/strategy-2030-main-document.pdf

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