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Forget pricing: the real green bond boost is diversity

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The question over whether socially responsible bonds should be priced more tightly than conventional bonds is as old as the market itself. But a deal from a Dutch agency last week highlighted that running a green bond programme has advantages far beyond saving a few basis points.

Why would an issuer bother with a green bond when regular funding costs the same? There are selfless environmental concerns and corporate virtue signalling, of course, but there are also hard, tangible capital markets advantages to being a green issuer , as a deal placed late last week suggests.

On March 17, Nederlandse Waterschapsbank sold a water bond, a format fast becoming an annual fixture of its funding programme.

But perhaps the most interesting feature was its tenor and currency — it was a $1bn 10 year dollar deal.

Before a Bank Nederlandse Gemeenten deal on March 10, the 10 year dollar area had been bare of core SSA issuance since a $3.5bn July 2025 bond placed by World Bank in July last year.

NWB had been looking for an opportunity to extend its dollar curve and finally found an opportunity with the green investor base. 

While NWB could likely have pulled in $1bn of 10 year conventional funding, it might have paid up to do so. The issuer made it clear though, that the broader investor base attracted by the green element of the deal kept the pricing tight, and the new issue premium low.

Just as importantly, while 74% of BNG's 10 year dollar trade went to Japanese investors, NWB was able to secure a much more diverse investor base with strong representation of US, European and Nordic accounts.

The strong and well-developed green investor base is adding a new incentive to green funding for issuers. With a green bond, issuers can establish a benchmark in previously difficult areas of the curve with relative ease, tight pricing and an impressively diverse book.

Certainly, when comparing the respective book sizes for BNG and NWB, it would appear that the latter deal’s socially responsible element delivered in this respect. NWB’s books closed with orders approaching $1.8bn — well in excess of BNG’s $1.2bn book.

Issuers that have chosen to add a green element to their funding programme are not only saving the environment — they are saving themselves stress during difficult market windows.

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