French province issues 119.5m green-SRI bond, China news: corporate bond market booms

Ethical Markets Green Prosperity

Snippets: French province issues 119.5m green-SRI bond / S&P says we need bonds to finance renewables / EDHEC study says Solvency II will reduce lending to business / Greenland’s big melt

> French region Provence-Alpes-Côte d’Azur has issued a 12 year, AA-rated, 119.5m “socially responsible” bond with 75% of proceeds going to environmental projects (renewable energy, energy efficiency, transport) and 25% to social housing. The bond was significantly over-subscribed. Coupon is 3.6%; joint bookrunners were Crédit Agricole CIB (bravo Tanguy Claquin!) and HSBC France. Insurance companies made up 58% of investors, followed by asset managers at 33%. A third French, almost a third German, and the rest divided between Belgian and Dutch.

> I was interested to see this report of a speech at Rio+20 by S&P’s Regina Nunes – she says that financing needs of renewables over the coming 15 years will “exhaust the capacity of banks and utilities? and lead to the involvement of the capital markets, among others. However, “to date the small secondary debt markets and the absence of large volumes of liquid, investment-grade securities have limited the involvement of institutional investors in this sector.” Spot on! Read more.

> We’ve been worried for awhile about the EU’s proposed Solvency II regulations for the insurance industry – we see a significant negative impact on the availability of capital for climate change investments at exactly the time we need to ramp up those investments. A new report from France’s EDHEC business school agrees – in “The Impact of Solvency II on Bond Management” it says Solvency II is likely to cause a further contraction in the amount of capital available to small and mid-sized European companies. Read the Financial News story or Read the full report.

> A cheery Greenland story from NASA (via the Guardian): “Greenland ice sheet melted at unprecedented rate during July: Scientists at NASA admitted they thought satellite readings were a mistake after images showed 97% surface melt over four days.” Follow the discussion on the implications of this and you’ll at least feel chilled again.
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China news: corporate bond market booms / Govt cautiously allows bond trading while tightening scrutiny / Beijing Jingneng Clean Energy issuing $567m of bonds

> The Financial Times recently reported that China’s economy is slowing, profits are falling and its stock market is drifting down, but its corporate bond market is moving in the exact opposite direction: it is booming. Bond issuance was up about 60 per cent by volume in the first half of 2012, compared to last year. The major reason for this has been regulatory reform, with officials clearing away some of the obstacles that have stood in the way of the development of the bond market. Read more.

> Bloomberg reports that China is allowing more companies to trade bonds and increasing scrutiny over issuers as the government seeks to ensure that the expansion of its nascent debt market isn’t derailed by defaults. China’s $659bn corporate bond market is only about 9% of its GDP; in the US bonds equal more than half the size of economic output. But the National Development & Reform Commission is not taking any chances – it has ordered local officials to set up risk monitoring and forecasting mechanisms for debt maturing this year and next. Companies that violate the monitoring rules and default will be barred from selling more bonds. Read more.

> Chinese company Beijing Jingneng Clean Energy is issuing 3.6 billion yuan ($567 million) of bonds to repay bank loans and raise working capital, according to Bloomberg. The company will sell 2bn yuan of 3-year notes and 1.6bn yuan of 5-year bonds.  The company, a unit of state-owned Beijing Energy Investment Holding Co, is rated AAA by China Lianhe Credit Rating Co.

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