World Bank became the first supranational ever to raise $5bn with a 10 year dollar bond this week, smashing the SSA book record at the tenor at the same time. Demand for the trade was likely bolstered by the issuer’s new climate change action plan, and the investor outreach it did to promote it.
“We’ve done a great deal of outreach,” said Heike Reichelt, World Bank’s head of investor relations and sustainable finance. “Through one on one calls with investors’ teams and workshops, roundtables and a net roadshow, we reached over 150 investors and bankers. It’s been a great opportunity to highlight our climate change action plan and explain how we’re integrating climate considerations into all of our activities.”
It seemed to work. 170 investors piled into World Bank’s $9.5bn order book. Head of funding Andrea Dore said that the organisation could have raised more than $5bn given the quality of the book, but said they felt “it was important to size the transaction to ensure secondary market performance.”
Under World Bank’s new climate change action plan, climate is now considered in all of its activities.
“All of our projects are screened for climate risk,” said Reichelt. “95% of our projects by number have climate financing components, and some 33% of the funds, by value, are financing climate action.”
As an example of the way in which climate action can be included in non-traditional climate projects, she highlighted that “building a school as part of an education project, for example, would be considered a social project. A climate component could be included by installing solar panels on the roof and making it an energy and resource efficient building overall.”
The 10 year bond is World Bank’s second of the year. The borrower raised $3.5bn in February at 10 years with an order book of around $5bn. The increase in demand since then may be partly due to the borrower’s new climate change action plan, but will no doubt also have been helped by the cheapening of the 10 year section of the curve.
The yield on Wednesday’s bond was 1.634%, up around 40bp from the February outing. However, World Bank was able to price the new bond only 1.5bp-2bp back of the older bond, and with a Treasury spread of 9.4bp, down from 18bp in February. And that was while contending with a choppy market. The 10 year US Treasury fell around 8bp during execution.
Bank of America, Citi, HSBC and TD Securities ran the trade.
