Man­ulife taps Sin­ga­pore mar­ket for first green bond

National Post (National Edition) - - FINANCIAL POST - BARRY CRITCH­LEY

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.

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