Blue bonds, green promise - BNP Paribas CIB
 
Friday 16 October 2020

Blue bonds: a pioneering transaction opens up a new source of green capital.


Eight million tons of plastic. Oil spills. Overfishing. Against this background of industrial-scale pollution in the world's oceans, the Bank of China (BOC) has marked a major milestone with Asia's first-ever blue bond issue.

Its $942.5 million-equivalent debut is split between a three-year $500 million tranche and a two-year CNH (offshore Chinese yuan) 3 billion tranche, with proceeds earmarked for the financing or refinancing of marine-related eligible green projects defined in the issuer's Sustainability Series Bonds Management Statement. BNP Paribas was Global Coordinator and Joint Lead Manager. More broadly, BNP Paribas is the only global bank with a specific ocean protection policy.
Asia's first blue bond issuance

This deal marks significant "firsts" for the sustainable bond market, including:

  • First blue bond from the private sector
  • First blue bond in Asia
  • First blue bond from a commercial bank


Significant "firsts"

The Bank of China's landmark issue marks yet another watershed moment in sustainable finance. As well as being the first blue bond from Asia, it sets a benchmark as the first blue bond from the private sector and is the first blue bond from a commercial bank. It is only the fourth blue bond ever issued globally, following the Seychelles, the Nordic Investment Bank, and The World Bank in 2017, 2019 and 2019, respectively.

Issuers and investors worldwide are becoming more familiar with this financial instrument for which proceeds are used to fund environmental projects. Since the World Bank issued the world's first green bond in 2008, issuance volumes have grown to almost $1 trillion.

China, currently the world's largest source of greenhouse gas emissions, recently committed to net-zero emissions by 2060. Sustainable ocean development is a part this, while banks will be a vital part of its policy toolkit: in July the People's Bank of China announced it would evaluate the country's banks on their green financing performance on a quarterly basis.

For Chaoni Huang, BNP Paribas' Head of Sustainable Capital Markets in Asia Pacific, this policy framework provides the support for Chinese banks to make their operations greener, faster. "But Bank of China is not new to the green finance space – they have been an innovator and a market leader for quite some time," explains Chaoni. "It's a company with a strong track record in green and social bonds, and investors are already very comfortable with their profile."

With many Asian economies built around ocean resources (e.g. fisheries, shipping and tourism), it is a region well placed to reap the full value of blue bonds. "As sea levels rise and threaten the very existence of some Asian nations, the urgency to tackle climate change is growing, and blue bonds could be part of the solution" says Chaoni.

More education - What is a blue bond, exactly?

"This is a question many investors have been asking," says Chaoni. "The blue element is simply a label to highlight that the use of proceeds will go towards marine and ocean-based projects. The bonds are still 'green' and follow all the associated ICMA [International Capital Markets Association] principles."

While plastic pollution is firmly etched into the public consciousness, more education around "blue" finance is necessary: marine conservation is about more than managing plastic waste – it's about ensuring sustainable, clean and ecologically-friendly development.



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