Sustainable finance: Success of AFD's first SDG Bond issue for a total of 2 billion euros
published on 21 October 2020
After issuing climate bonds in 2014, AFD announced on 21 October that it had issued the first bond under its new United Nations Sustainable Development Goals (SDG) framework, ahead of the "Finance in Common" Summit to be held virtually from 9 to 12 November. The success of this unprecedented 2 billion euro investment reflects the confidence that sustainable finance stakeholders have in AFD and their mutual commitment to accelerate support for transitions to a more coherent and resilient world.
This innovative issuance framework broadens the scope of eligible loans to areas of social policy, primarily health and education, thereby consolidating AFD's role as a pioneer and key player in sustainable and responsible finance.
As a French public issuer with many years of experience on the capital markets, AFD will be able to obtain funding on the capital markets in a way that is entirely consistent with its activity, and can now issue bonds in three formats: climate bonds, social bonds and sustainable bonds.
Within this framework, AFD today announces the success of the inaugural issue of a 2 billion euro SDG bond with a maturity of seven years, with a final margin set at 27 basis points over the OAT (fungible treasury bonds) and a AA/AA rating (S&P/ Fitch).
This issue is a new record for AFD, with an order book totalling more than 5.4 billion euros of interest from more than 150 different international investors. Nearly 80% of the allocations were made to investors with ESG or sustainable strategies.
Completed with Natixis as sole arranger for preparing this SDG issuance framework, and with the support of Bank of America Securities, BNP Paribas, Crédit Agricole CIB, J.P. Morgan and Natixis as "lead managers", this transaction was independently reviewed by Vigeo Eiris, the international social and environmental rating agency. Vigeo Eiris found the framework to be consistent with ICMA's Green Bond Principles and Social Bond Principles. It considered that this SDG issuance framework met market "best practices".
AFD will publish an annual report presenting the allocation of funds raised, as well as environmental and social impact indicators.
“The Agence Française de Développement was the first french public issuer of a Climate Bond in 2014, followed by a climate bond framework set up in 2017. Today, as we enter the Decade of Action for Sustainable Development, we are going one decisive step further by issuing a SDG bond in line with the ECMA Green and Social bond principles. Based on the innovative methodology of our sustainable development internal opinion, this SDG bond illustrates our resolute commitment to achieving the United Nations United Nations 2030 promise, which is “our common road map for transforming the world,” as French President Emmanuel Macron said. By issuing sustainable bonds, public development banks – which represent every year at least 10% of total investments worldwide – can further inspire the global financial community to embrace a just transition. In this endeavor, the 450 public development banks around the world will gather for the first time on November 12th in Paris to address investors’ increasing request for positive impacts on the planet and the people”, AFD CEO Rémy Rioux said.
"After this first operation, which enabled us to set two new records for AFD's public borrowing, our objective is now to carry out at least one SDG issue per year, with the next one in 2021. Thanks to broader eligibility criteria for loans, the volume of SDG-related issues is therefore set to grow sharply in the coming years, especially since the size of an SDG issue will be at least one billion euros, whereas for our climate bonds the maximum amount has so far been limited to one billion euros." said Thibaut Makarovsky, Head of AFD's Funding and Market Operations Division.
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