Green bonds are a type of debt issued by public or private institutions. Unlike other credit instruments, the funds obtained are specifically destined for the funding or refunding of green projects.
What are green bonds and what are they for?
Green bonds are a type of debt issued by public or private institutions. Unlike other credit instruments, the funds obtained are specifically destined for the funding or refunding of green projects, i.e. projects that are sustainable and socially responsible in areas as diverse as renewable energy, energy efficiency, clean transportation or responsible waste management.
Main uses of the funds from a green bond.
On 5 July 2007, the European Investment Bank (EIB) launched a very special issue for the first time: green bonds. But what are green bonds and why they are so relevant? They can be distinguished by their goal: to fund projects that contribute to achieving the Sustainable Development Goals — number 7 (affordable and non-contaminating energy) and number 13 (Climate action) —.
Iberdrola has its own issue brand, inspired by the criteria established by the International Capital Market Association (ICMA): the Green Bond Principles [PDF]. The core ideas are:
- The funds will be used for green projects with clear sustainability benefits.
- The issuer of a green bond must transparently notify the investors of the environmental sustainability goals, allowing for them to be assessed and externally reviewed.
- The funds management will be appropriately and transparently controlled by the issuer, which will allow an auditor to perform a complementary review.
- The issuer of green bonds will periodically update the information about how the funds are used and the sustainability benefits obtained.
IBERDROLA, A BENCHMARK FOR GREEN BONDS
In 2014, Iberdrola became the first Spanish company to issue a green bond. With a total of 17 transactions issued as at April 2020, for a value of 11.4 billion euros, the group is an international benchmark in this type of financing and has been named most impressive green debt issuer by GlobalCapital magazine in 2016, 2017 and 2018 Sustainable and Responsible Capital Markets Awards.
Iberdrola continues to be one of the world's biggest issuers of green bonds, with 10.7 billion euros issued via capital markets since April 2014. In 2016, we subscribed with BBVA the world's first green loan for a utility. In 2019, Iberdrola group signed transactions — in both capital and banking markets — for a total value of 8.6 billion euros, of which 4 billion euros were for green or sustainable financing.
In 2020, Iberdrola was the first Spanish company to reopen the bonds market during the coronavirus pandemic, which it did with a transaction for a value of 750 million euros with a maturity of more than five years (June 2025). In line with the group's strategy, the funds obtained will go to financing and refinancing, whether totally or partially, renewable investments in Spain, Mexico and the United Kingdom, mostly onshore wind farms. By developing and commissioning these facilities, the company aims to contribute to economic recovery and protect jobs amid the difficult situation we are experiencing.
Since 2014, the corporation has successfully made a total of eleven public offerings, in addition to other green transactions made by subsidiaries such as Avangrid* (Iberdrola's subsidiary in the United States), which in November 2017 issued its first green bond for a value of 600 million US dollars, followed by a second in May 2019, this time for a value of 750 million US dollars. In June 2019, Neoenergia** (Iberdrola's Brazilian subsidiary) issued its first green infrastructure debentures for a nominal value of more than 1.2 billion reais. For its part, in April 2018, Iberdrola México, a fully owned subsidiary of Iberdrola, subscribed a green bank loan of 400 million US dollars with a set of international financial entities, which it used to refinance its renewable assets in Mexico.
The funds obtained through these operations have been devoted to financing or refinancing investments in projects which fulfilled environmental and sustainable development criteria, validated both by Iberdrola and, subsequently, by VigeoEris (an independent entity). These projects are basically framed within the field of renewable energies.
Installation of Andalusia II substation in East Anglia ONE.
Iberdrola has benefited from VigeoEiris as an independent expert when validating the green nature of its funding instruments. VigeoEiris issues its assessment on the issuer, not only with regard to management of the chosen projects, but also to the general environmental and sustainable development commitments which it exercises in the normal running of its activities.
*Avangrid, Inc. is 81,50% owned by Iberdrola, S. A.
**Neoenergia, S.A. is 50% + 1 share indirectly owned by Iberdrola, S.A.