Manulife taps Singapore market for first green bond
Next Tuesday, Manulife Financial Corp. will receive the proceeds from its firstever green-bond offering: a 500 million Singapore dollar borrowing that has a 12-year term and a coupon of three per cent.
The green bond offering, which Manulife said is the first by any life insurance company, is also the second by a Canadian borrower in the past couple of weeks: earlier this month the City of Ottawa priced a $102-million 30-year borrowing that came with a coupon of 3.25 per cent and a yield to maturity, at issue, of 3.259 per cent.
The Singapore dollar borrowing (which converts to about $470 million at the current exchange rate) and which can be redeemed in seven years, is Manulife’s second borrowing in that market: In May 2016 it priced a 500 million Singapore dollar 10-year offering of subordinated notes at 3.85 per cent. The notes, which count as Tier 2B capital, featured a fixed rate for five years and then a floating rate.
That financing was part of Manulife’s goal to broaden its sources of finance by raising capital from a different investor base — knowing that about one-third of its earnings come from Asia. As part of that diversification push, the insurer also borrowed in the U.S. — a market that it has been absent from since 2010. In June 2016 it raised US$1 billion via an offering of 30-year senior notes in Taiwan.
So why now go green? In a statement Manulife said that issuing a green bond “aligns our financing with our existing green investment activities,” all part of a plan to help facilitate “the transition to a more-sustainable economy.”
And the offering comes after an extensive period of internal analysis and work done to ensure that it could issue a green bond. Indeed, Manulife’s green-bond offering comes a short period of time after it released its green-bond framework, an eight-page document detailing the issuer’s investment philosophy in support of sustainability, the use of proceeds, the eligibility criteria, the process for project evaluation, the management of the proceeds and the reporting.
“Manulife believes that investments in renewable energy, energy-efficient buildings, sustainablymanaged forestry and other long-duration assets provide a good economic fit for our long-dated insurance liabilities, some of which continue for over 20 years,” said the document.
The document also noted that when a green bond is to be issued it will be in accordance with the four core components of the International Capital Markets Association’s Green Bond Principles.
The insurer’s green-bond framework details how the proceeds are to be invested in the so-called eligible assets.
But the insurer is in no great hurry to find the investment opportunities as it expects that it will take 18 months to invest all the proceeds. But it is allowed to invest in green assets that have been funded by the insurer over the previous two years.
Manulife’s green-bond offering, which was not available to Canadian investors, also adopted another feature used by the City of Ottawa: it obtained a second opinion, also from Sustainalytics, on both the process undertaken and the greenness of the issue.
In its 22-page report, Sustainalytics, an ESG research firm, said that it was “confident that Manulife is wellpositioned to issue a Green Bond, and that the Manulife Green Bond Framework is robust, transparent, and in alignment with the four pillars of the Green Bond Principles 2017.”
In going green, Manulife joins a growing list of Canadian issuers including Export Development Canada, the provinces of Quebec and Ontario, TD Bank and Brookfield Renewable Partners.