Bank treasuries are an untapped investor base for green bonds
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Bank treasuries are an untapped investor base for green bonds

Green fields on the Ring of Kerry as seen from Valentia Island, Ireland

Buyers other than fund managers are ramping up their ESG policies

Issuers looking to tap into an area of growing demand for ESG products should look to the bank treasury desks.

Bank treasuries took 30.3% of Italy’s new 4.05% October 2037 green BTP this week. That compared with 26.9% of its green BTP due April 2031, which was sold last year.

About 350 investors participated in Italy’s latest deal and the book closed at a new all time record for the asset at €84bn, proving that strong demand for sovereign green debt persists.

Market insiders say that banks’ evolving ESG policies are behind the extra demand. Nordic bank treasuries, for example, which lack explicit guidelines from senior management on how much of their loan-to-deposit ratio portfolios should be in ESG green bonds, are expecting stricter rules to be imposed soon and are getting ahead of those changes by buying more labelled debt.

Of course, they are not the only type of investor developing ESG investment policies, and that all adds up to one thing — demand that will keep outstripping supply.

That is especially pertinent for the belly of the curve, where bank treasuries tend to operate. Issues from large, liquid borrowers such as Germany, Spain, Italy and France are restricted to the long end of the curve. Moreover, large sovereign syndications are over for the year, though there is still supply to come via auctions.

Any issuer that lists bank treasuries among its buyers and that has shorter-term green projects to fund would do well to consider tailoring a deal to this emerging investor base.

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