Inaugural Sustainability Awareness Bond in Sterling highlights

LUXEMBOURG, 12 October 2021 /PRNewswire Policy/ -- On 7th October 2021, the European Investment Bank (EIB) published its 2020 Sustainability Awareness Bond (SAB) Framework with KPMG's Independent Reasonable Assurance (ISAE 3000). On 8th October 2021, the EIB issued a new GBP 500m SAB due 2026, inaugurating the sterling market in this format. The transaction was nearly three times oversubscribed. Announced as a “no-grow” transaction, the issue was priced with a spread of 23 bps above Gilt 30/01/2026, 2 bps tighter than per initial price guidance.

The 2020 SAB Framework draws attention to how EIB is living up to recommendation 2 of a recent Climate Awareness Bond (CAB) Evaluation Report, namely to lead the way in demonstrating the application of the EU Sustainability Taxonomy (EUST) and the EU Green Bond Standard (EUGBS). Taking the EUGBS-proposal of the EC's Technical Expert Group on Sustainable Finance (“TEG EUGBS Proposal”) as reference, the document provides:

description of SAB processes in line with the logic of the EU Taxonomy Regulation;

disclosure of SAB technical screening criteria for substantial contribution in alignment with the logic of the EUST;

rearrangement of the framework's content to suit the EUGBS template proposed by the TEG;

improvement of allocation and impact reports in line with the TEG EUGBS Proposal – inter alia providing for each bond a summary of allocations by sector, geography and sustainability objective.

The strategy described in the new SAB Framework is part of the EIB's “Climate Bank Roadmap 2021-2025”, which aims notably to:

raise the share of green lending to at least 50% of the overall new annual lending by 2025;

align the tracking methodology for green lending with the framework defined by the EUST;

reflect this alignment to capital markets through progressive extension of the eligibilities of CAB (which focus on climate change mitigation) and SAB (which cover other areas of environmental and social sustainability) ; and

gradually align CAB and SAB with the expected EU GBS.

The new SAB also announces the extension of eligibilities to “Access to Social and Affordable Housing”, which is key to achieving SDG 11 – Make cities and human settlements inclusive, safe, resilient and sustainable. Technical screening criteria have been defined by the EIB by applying the logic of the EU Sustainability Taxonomy.

Simon Bond, Executive Director – Responsible Investment Portfolio at Columbia Threadneedle Investments: “We are glad to see the further development of the sterling bond market with the first Sustainability Awareness Bond from European Investment Bank. We hope to see more sterling bonds issued that fund social and environmental projects, including the response to Covid-19.”

Eila Kreivi, Director and Head of Capital Markets at the EIB: “Sustainability funding – the issuance of CABs & SABs – has become an area of strategic business development within EIB's Climate Bank Roadmap. This inaugural Sterling SAB puts the spotlight on the 2020 SAB Framework, which provides a showcase for the EIB's early application of the logic of the EU Taxonomy and the proposed EU Green Bond Standard. The deal's strong oversubscription highlights the interest this exercise generates in the UK market at this point.”

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SOURCE European Investment Bank