There is a new buyer in Europe’s ESG corporate bond market as the European Investment Bank starts taking a bumper share of new green bond sales.
Last week, the institution bought €150 million ($158 million) of a €600 million debut green bond from automobile component manufacturer Valeo, according to a statement from the company. That’s part of the EIB’s recently launched green bond purchase program.
“EIB is indeed selectively assessing a number of further investment opportunities in the primary green bond markets throughout the EU,” a spokesperson said.
It’s a boost for the European green bond market given sales this year are lagging behind the same point in 2022, according to Bloomberg league table data. The public sector bank’s involvement in primary debt sales could also help steady nerves at a time of greater market volatility, coming not long after the European Central Bank stopped buying bonds under its Asset Purchase Programme.
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The European Union’s lending arm is looking to bonds as an alternative to loans for financing green investments. Currently, it finances green projects through loans, equity investments and guarantees for projects. It’s part of plans to support €1 trillion of green investments and transform itself into the EU climate bank.
“We have a long established relationship with the EIB as they have lent to us directly in the past. Here, we had identified a common interest,” a spokesperson for Valeo said. “They knew that we might issue a green bond, which meant that everything was ready from their side in order to get involved.”
This is not the EIB’s first foray into the primary bond market however, having bought bonds from issuers such as Engie and Red Electrica in the past, the EIB spokesperson said. The bank’s new program allows for purchases of green bonds issued in EU capital markets by EU and non-EU corporates, as well as EU public-sector issuers.
The EIB has no fixed size for the program and it will represent a small portion of lending activity in the EU. It will exclusively buy bonds in the primary market on a buy-and-hold basis. Its participation in bond issuance will follow the bank’s lending principles. The program is handled by a recently set up bond financing desk within the lending teams of the EIB, according to the spokesperson.
