MANILA, PHILIPPINES — The Asian Development Bank (ADB) has raised $500 million from an inaugural green bond issue, aimed at channeling more investor funds to ADB projects that promote low-carbon and climate-resilient economic growth and development in developing Asia.
“Asia is one of the world’s most vulnerable regions to climate change but at the same time is an increasing user of energy, water and other resources,” said Pierre Van Peteghem, ADB’s Treasurer. “ADB is committed to channeling critical finance to help Asia adapt and mitigate climate change which will support a prosperous and sustainable future for the region.”
Asia’s fast-growing cities, such as Manila in the Philippines, and others located on coastlines or low-lying areas, are at huge risk from climate change. Lives and livelihoods in rural areas are also threatened by changing weather patterns which can disrupt farming, cause floods or droughts, or slow hydropower output in mountainous regions. The cost of adapting to climate change in Asia and the Pacific is estimated at $40 billion or more, annually, through 2050.
Meanwhile, developing Asia’s share of global energy-related carbon dioxide emissions more than doubled from 17% in 1990 to 37% in 2010, and is expected to increase to about 47% by 2035.
The proceeds from ADB’s 10-year green bonds, lead managed by BofA Merrill Lynch, Morgan Stanley, and SEB will be used to finance climate change adaptation projects such as those which climate-proof water, energy, transport, or other urban infrastructure. Climate change mitigation projects that could be financed by the bond include renewable energy, energy efficiency or sustainable transport initiatives like rail or bus services.
The bond was priced at 99.294%, with a spread of 12.45 basis points over the 2% US Treasury due 15 February 2025. The coupon is 2.125%.
The bonds were sold to about 44 investors including AP2, AP3, AP4, Baloise Insurance, Bank Morgan Stanley AG, Banque Syz & Co SA, Blackrock, Calvert Investments, Donner & Reuschel Asset Management, Mirova, Nikko Asset Management Europe Ltd, Nippon Life Insurance Company, Omega Global Investors on behalf of Local Government Super, Praxis Intermediate Income Fund, SEB Wealth, State Street Global Advisors, and TIAA-CREF.
By investor type, 16% of the bonds went to central banks and official institutions, 22% to banks, 61% to fund managers/pension funds/insurance, and 1% to other types of investors. By geography, 31% of the bonds placed in Asia, 45% in Europe, Middle East and Africa, and 24% in the Americas.
"Investing in ADB's Green Bond is a natural way for AP2 to expand our green investments into a region with large environmental challenges and opportunities. Through a first class organization with well-established green bond framework and excellent creditworthiness AP2 feel confident to support ADB in their green efforts," said Ole Petter Langeland, Head of Fixed Income at AP2.
"At Mirova, we were pleased to have the opportunity to invest in ADB's Green Bond. Not only were we impressed by the green projects; we also appreciated the environmental and social impacts outlined,” said Chris Wigley, Senior Portfolio Manager at Mirova.
“The relative value, targeted use of proceeds and strong commitment to ongoing project reporting made ADB’s inaugural Green Bond issue an attractive investment opportunity,” said Stephen M. Liberatore, Managing Director/Portfolio Manager, TIAA-CREF Asset Management.
ADB has been helping Asia to address climate change since the early 1990s and one of its key strategic goals is to support environmentally sustainable growth. In 2014, ADB approved climate financing of just over $3 billion, with about 75% expected to contribute to climate change mitigation and 25% to adaptation. Since 2010, ADB has also issued $2.2 billion equivalent in water and clean energy bonds.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region.