SRI Bond House: Credit Agricole

IFR Awards 2018
5 min read
Robert Hogg

The SRI market in 2018 was characterised by subtle innovations for Green and Sustainable bonds. For its leading role in focusing on novel yet robust instruments amid a shifting landscape, Credit Agricole is IFR’s SRI Bond House of the Year.

In a marketplace where the definitions of what constitutes SRI are still evolving, Credit Agricole led some of the year’s most innovative transactions. Among those, a unique structure for Societe du Grand Paris gave the clearest sign of how a focus on SRI is changing the behaviour of borrowers.

State-owned SGP was set up to finance one of Europe’s largest infrastructure projects, one that will see the opening of four new underground lines around Paris. It sold a €1.75bn October 2028 bond issue in its debut trade.

SGP’s €5bn medium term note programme, which Credit Agricole worked on as a joint global coordinator, is the first of its type to be entirely Green.

“The difficulty was not so much in building the programme but making the commitment for the coming years and convincing them of the value of the route,” said Tanguy Claquin, head of sustainable banking at Credit Agricole. “This was a leap forward as SGP can make the claim to be the first purely Green issuer.”

As the SRI footprint has expanded, so have voices grown louder in offering opinions on what constitutes a Sustainability bond.

Efforts have been made to develop definitions, with some issuers printing bonds based on the UN’s Sustainable Development Goals. Claquin, however, sees the market developing in a different direction.

“The definitions of the SDGs are too wide and some are contradictory,” said Claquin. “It’s tough for investors who can end up including assets which can be contradictory. It’s a blurred message, when the success of this market has been based on clarity.”

Credit Agricole coordinated the working group that led to the publication of the Social Bond Principles in 2017. The principles were aimed at helping bring new issuers and asset classes to SRI investors, but corporates, especially non-utility ones, lagged behind other borrowers in adopting the format.

The French bank helped break that impasse when it acted as sole-structuring adviser for food product company Danone’s €300m seven-year social bond.

The broadening of the investor base for SRI securities has provided a platform for borrowers to expand their ambitions when they can tie a Green framework to their borrowing activities. Credit Agricole played an important role for two financial issuers – ING and BBVA – which achieved results that could not have been achieved without the backing of SRI accounts.

ING issued Green bonds for the first time via its holdco and broke records along the way. The dual-currency offering, backed by documentation that one banker away from the deal called “best-in-class”, included a €1.5bn 12-year tranche that was the longest holdco offering in the single currency, and a US$1.25bn note tranche was the biggest in that currency for a Green deal by a financial institution.

BBVA also created a milestone as it opened up the Spanish Green market for the country’s banks in May. Its €1bn senior non-preferred was the largest Green bond issue at the time from a eurozone bank. As well as achieving size, the lender also paid no new issue premium.

Naturally with a global product, SRI requires a bank to look beyond its borders. Issuers rushed out of the blocks in Asia-Pacific, as borrowers lined up to sate fast-growing investor appetite for Green bonds despite concerns that the region still lacks the sophistication and oversight seen in the US and Europe.

Credit Agricole played its part in that growth, particularly in the growing scene in South Korea.

Government-owned Industrial Bank of Korea printed the first Social bond from a South Korean issuer with a US$500m floater in July and Kookmin Bank became the first financial issuer to enter the social market, with a US$300m three-year.

Credit Agricole was a joint bookrunner for both.

The development of the sovereign SRI market has been more of a slow-burner as banks tackle greater bureaucracy and nebulous decision-making processes. Nonetheless, Credit Agricole supported the Kingdom of Belgium as it joined the ranks of sovereigns to sell Green bonds.

Credit Agricole also won important repeat business when Agence France Tresor reopened its Green bond issue due 2039. The resulting €4bn tap, three times the typical size of an OAT auction, made the €14.8bn issue the largest and most liquid Green bond offering in the market.

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SRI Bond House: Credit Agricole