The fast-growing world of sustainable finance has seen significant development recently with the issuance of several corporate green bonds. These vehicles enable capital-raising for resource efficient growth practices and investment for new and existing projects with environmental benefits. To date, the bonds have been mostly issued by institutional organizations, such as the World Bank, the European Investment Bank, or several development banks in order to support the energy transition worldwide.
GDF SUEZ issued its first Green Bond on 12 May 2014. The amount of €2.5 billion is the highest to date for a corporate. It includes two tranches: a 6-year tranche of €1,200 million with 1.375 % annual coupon and a 12-year tranche of €1,300 million with 2.375 % annual coupon. The average coupon amounts to 1.895 % for a 9.1 years average duration. This Green Bond was three times oversubscribed, confirming the huge interest of the debt market for this type of bond. It was particularly successful amongst French, German and UK institutional investors. Social Responsible Investors acquired 64 %, which allows GDF SUEZ to diversify its portfolio of investors. For a Utility, one of the advantages of issuing a green bond is precisely to attract investors who discard utilities for specific reasons, such as nuclear activities. Conversely, for investors, the Green Bond is an opportunity to develop their investment portfolio with a better knowledge of the risks involved.
The main objective of issuing a green bond for GDF SUEZ is to support its growth by financing investment projects which are fully aligned with the corporate strategy related to the energy transition. GDF SUEZ can already claim a well-balanced energy mix with more than 80 % installed capacities labeled as low CO2 emissions, 60 % of the generation capacities based on natural gas, 15 % on renewables and 5 % on nuclear energy. GDF SUEZ is committed to the energy transition worldwide, intending to reach two of its non financial objectives related to climate change: reducing its CO2 specific emissions by 10 % by 2020 (vs. 2012), and increasing by 50 % its renewable installed capacities by 2015 (vs. 2009).
This first Green Bond will enable GDF SUEZ to develop further its renewable assets which represent 15 % of the energy mix in 2014, and its energy efficiency projects which contribute increasingly to handle climate change.
The definition of “Green”, which is entirely described in the Use of Proceeds, states that only renewable energy projects and energy efficiency projects are to be financed with the Green Bond. This definition has been set up in cooperation with a second party, the non-financial rating agency Vigeo. It was extremely relevant to address in detail the definition of the green project with a non-financial rating agency in order to describe clearly the meaning of “Green”, and to add non-financial ESG criteria to the project selection process. In this respect, GDF SUEZ overcomes current expectations related to green bonds. For GDF SUEZ, a green bond does not only mean financing projects which contribute to the energy transition worldwide, but also applying non-financial criteria to the implementation of investment projects. In cooperation with Vigeo, in addition to the global commitment of respect of human rights, five non-financial areas have been covered: environment protection, community involvement, ethics and business behavior, human resources and project governance. Vigeo published a second opinion on GDF SUEZ’s process of Green Bond issuance.
15 indicators have been set up to measure the performance in these five areas of the project development and operation. Annually, auditors will verify them and some will be disclosed in the Registration Document. Transparency within the green bond process is clearly a key asset for succeeding in increasing the confidence between investors and issuers.
The Green Bond is not only a fantastic tool for financing corporate development towards a lower CO2 emission economy, but also for increasing substantively the transparency vis-à-vis the investors community about issuers’ concrete actions to fight climate change.
Marie Gérard is Vice President, Environmental and Societal Responsibility Performance at GDF SUEZ.