The European Investment Bank (EIB) announced that they have brought the largest Climate Awareness Bond (CAB). It was a €4bn June 2032 offering. This cap received huge endorsement from the investor community willing to buy the company’s liquidity format from the issuer. EIB pioneered green bond issuance. So, they brought their CAB debut back in 2012. In the past, investors cannot buy a transaction of this scale from the supranational.
This is because €4b is the largest outstanding trade in the format of €2.3bn of 0.01% November 2035 issue. A banker away from this transaction argues that the firm has received many rumors regarding this deal. However, based on the investors’ side, they are still interested in green assets. Therefore, EIB stays at the forefront of issuance in this scheme. In other words, the firm can do green better than social.
SSA issuers are more than willing to add more liquidity into their green formats. KfW, for instance, has increased deals as much as €4bn in the past in a single currency. Another banker argued that this situation reflects how investors want to see karger liquidity in green benchmarks. So far, the scenario works best for KfW, for the EU. Thus, EIB pursues this direction.
The emergence of EIB transactions was against a backdrop in SSA ESG issuance in the format of single currency. This was with €48bn printed in the year-to-date over €92.6bn at the same period last year. So, the fall was as much as 50%. One of the bankers aways from the deal testified that EIB has a special approach to pricing. Thus, they could attract investors’ appetite in the trade.
Therefore, it was not simply about the scarcity of the green paper playing an important role in EIB success. The first banker argued that they tend to begin with a 3bp-4bp NIP for their conventional EARNs. They applied the scenario here as well. Thus, the banker sees the fair value around 20bp-20.5bp. In this frame, the deal price was at 19bp.
