A broader investor base, enhanced visibility, strengthened stakeholder relationships and catalysing new business are the main drivers for issuing green bonds, concludes a new report by Climate Bonds Initiative sponsored by Danske Bank.
Climate Bonds Initiative (CBI) today published the Green Bond Treasurer Survey, which based on interviews with 86 treasurers across the globe shows the main drivers for issuing green bonds. Danske Bank is sponsoring the survey together with the Luxembourg Stock Exchange.
Pricing is far from the principal benefit
The survey suggest that pricing is not the principal benefit of green bond issuance. Instead, a broader investor base, enhanced visibility, strengthened stakeholder relationships and catalysing new business are the main considerations behind the decision to issue a green bond over a regular bond.
“This survey provides valuable insight gathered from decision makers within green bond issuers, data and unique responses. Based on our own experiences, we all have ourthoughts on what terms decisions are made. A survey like this straightens those potential question marks and put facts rather than hunches on the table,” says Lars Mac Key, Head of DCM Sustainable Bonds.
Green bonds lead to increased investor base
In the survey, 98% say that their green bond attracted new investors. This fact is particularly helpful for issuers of bonds normally sold to a predominantly domestic investor base. The green label appears to act like a magnet to attract the interest of socially responsible or green investors regardless of domicile.
Our Partnership with Climate Bonds Initiative
As the only bank in the Nordics, Danske Bank entered an exclusive partnership with CBI in October 2019 to further strengthen the market intelligence in relation to green bonds. The Green Bond European Investor survey released in late 2019 and this Treasurer survey are both fruits of this partnership.
CBI is the leading international not-for-profit organisation that works to promote investment in projects and assets that can enable the transition to a low carbon and climate resilient economy. The partnership with CBI is an important step in Danske Bank’s commitment to help the societal transition towards a net zero carbon economy.
Read the full report here
- 98% of respondents said that their green bond attracted new investors. The most frequently stated benefits of this were 1) a more diverse pool of investors, offering greater flexibility to reopen or issue new bonds 2) a stickier investor base and 3) greater visibility.
- 91% of respondents said a green bond facilitated more engagement with investors compared to a vanilla one. Investors interrogated issuers on topics including the use of proceeds, the framework, and post issuance reporting. This dialogue resulted in investors having a more intimate knowledge of the organisation.
- 88% of respondents said they planned to issue more green bonds, while a further 15% said they would reopen their current bond. This underscores the positive experience of issuing green bonds. An established investor base and greater visibility in the market were the most frequently cited advantages of repeated green bond issuance.
- 84% of the green bonds in the sample, are listed on at least one stock exchange. Visibility was the most frequently selected reason for this, followed by perception and integrity
- Over two thirds (70%) of respondents said the demand for their green bond was higher than for vanilla equivalents.
- Another conclusion from the report is that as climate risks translate into financial risks, companies, particularly those with a low level of integration, must start preparing and managing these risks in a structured manner to protect both revenues and reputation. Green bonds are well-understood, transparent instruments that can help to fund this transition and catalyse this process.
- Visit our Sustainable Finance website
- Read more about our societal impact strategy and how we work with the societal transition towards a net zero carbon economy