The bank has acted as structuring advisor over the last year on many of the landmark sovereign deals which are providing the green bond market with significant liquidity across a range of issuers for the first time.
It was there when Germany issued for the first time in September 2020 with a €6.5bn five year and followed up in May 2021 with a €6bn 30 year. It was also there when Italy made its debut with an €8.5bn 25 year and when France returned for the first time since its 2017 debut with a €7bn 23 year deal, both in March 2021.
“These are the names which are able to provide liquidity and the more sovereigns that step into this market, the more investors will be able to manage very large ESG funds because they’ve got access to liquid instruments,” says Pierre Blandin, head of debt capital markets for sovereigns, supranationals and agencies. “We strongly believe that the public sector market will continue to grow and, starting with sovereigns, more very large issuers will strengthen their commitment to the market, or come to the market if they haven’t done so already.”
The UK announced in March that it would sell £15bn of green bonds in the 2021-22 financial year, while in April, Canada announced its plans for C$5bn of issuance.
“In the space of just a year, we will have gone from one G7 country in the market to five of the seven. The growth has been such that it’s now impossible for sovereigns to ignore,” says Blandin.
For Crédit Agricole, the trend represents the fruit of many years’ work championing the green product. “Probably one of the reasons that Germany, and for that matter France back in 2017, selected us as advisor was because we have been pushing for many years encouraging them to do it,” says Blandin. “We’ve been consistent in our advice and I think this is something that clients recognise.”
The entry of Germany was particularly important not just because of the size of the deals but also for the structure. It chose a unique twin bond format — issuing green bonds that are identical to existing conventionals to ensure that the green bond programme doesn’t impact overall liquidity for Bunds.
“The twin bond structure had a key advantage for the market because it identified very precisely the green premium — the greenium — of the issue,” says Blandin. “That has been seen very clearly with the 10 year inaugural which was issued with a 1bp greenium, and more recently with the with the 30-year which was issued with a 2bp greenium.”
Previously, issuers had to take it on trust that the green bond market really offered a pricing advantage. “But issuing a green or social bond is not only a financial instrument for sovereigns but also a communication instrument that demonstrates their commitment to a sustainable transition,” he says. “We’ve now got a number of reasons that are very compelling for sovereigns to look at one of these structures, whether that is green, social or sustainability-linked.”
Another big catalyst for growth in the SSA market over the last year have been the number of issuers structuring social bonds in relation to the Covid-19 pandemic and the emergence of the European Union as an issuer in its own right alongside over pure players such as French social security agency Cades. Crédit Agricole has also introduced MuniFin, Agence Françasise de Développement, IDB Invest and Cabei to the social/sustainability bond market in the last 12 months.
It further widened the pool of sovereigns accessing the SRI market in September 2020, helping Mexico bring the first Sustainable Development Goals (SDG) bond from a sovereign, a €750m deal that finances green and social expenditure, as well as Egypt, which issued a $750m inaugural green bond.
Crédit Agricole has also demonstrated its global commitment and reach of its SRI capital market franchise, returning this year as joint global coordinator on Hong Kong’s follow-up to its 2019 debut green bond, a $2.5bn triple-tranche deal in January 2021.
