New green rail bonds: Russia, Thailand, Japan, France, USA: Climate Bonds Certified: Network expansions & new rolling stock

Rail Certifications Gather Steam: Russian Railways, BTS, JRTT on track with first green bonds: Big repeat issuers SGP and NY MTA back for more!

SCSOFT

image: scsoft.com

New rail entrants using green bonds to fund low carbon transport have appeared from Russia, Thailand and Japan. Meanwhile in Paris and New York, urban transport giants SGP and NY MTA continue their multiple Certification programmes. 

The Global Firsts: 

Russia - A Flock of new Swallows  

Russian Railways issued a benchmark EUR500m, 2.2% (the lowest rate ever for Russian-Euro denominated bond of any kind) Certified green issue. Heavily oversubscribed reaching an orderbook of EUR1.8bn; proceeds will go to finance, and re-finance high speed Lastochka ‘Swallow’ passenger rolling stock as part of Russian Railway’s wider electrification and emissions reduction targets.

This the first international green bond from the Russian Federation, the first from their railways sector, the first Climate Bonds Certification and only the second labelled green bond from the Russian Federation.  

Russian Railways is set to increase its fleet of the new Lastochka with the current 183 train sets in service, increasing to 270 by 2021. More than half of the 85,500km Russian rail network has now been electrified, and over 85% of all rail movement in Russia takes place on the electric network. 

Global Railway Review reports more on their green plans. 

Thailand - New Lines for Bangkok's Skytrain 

BTS Group is one of the largest companies in Thailand and operates the well known Bangkok Mass Transit System, an elevated network commonly known as the BTS or Skytrain. 

Their inaugural THB13bn (USD408m equivalent) green bond in 5 tranches are the first to be Certified under the Low Carbon Transport Criteria and only the second green bond from the Thai Kingdom, after the ground-breaking B.Grimm Certified solar bond issued in December with the support of Asian Development Bank (ADB). 

The new bond will help finance extensions to the Skytrain with 64km of new overhead track and 53 new stations, doubling of its current network.

Japan - JRRT and High Speed Rail 

JRTT: The first Certified green bond out of Japan has come from Japan Railway Construction, Transport and Technology Agency. JRTT is responsible for the high-speed Shinkansen rail network as well as airport and urban lines. Proceeds of the JPY 55.3bn (USD500m) green issuance will go to network and infrastructure upgrades.

JRTT has previously signalled they intend on using Climate Bonds streamlined Programmatic issuance process in the future. This bond was issued with prominent support from a host of institutions including Mizuho Bank, SMBC Nikko and Nomura, so expect to see more green bonds down the track. 

Programmatic Repeats:

NY MTA’s 10th Green Issuance 

NY MTA: It seems like a long time ago when we announced NY MTA’s very first green bond in Feb 2016. MTA was the first to open green bonds to retail investors with their ‘Invest in the Planet - Invest in the MTA’ campaign aimed at New Yorkers. In February 2017 with their 3rd green bond they did it again.  

The latest is the 10th green bond issued under our Programmatic process to large organisations considering ongoing green debt programmes. MTA reach a cumulative Certified issuance at USD6,359m making NY MTA the largest Programmatic issuer to date.  

Don’t miss this snazzy YouTube clip marking some of their achievements. 

SGP and the Biggest Infrastructure Project in Europe 

SGP: As of May 2019, Société du Grand Paris have issued 8 green bonds in total mounting to a total of EUR4,995m (USD5,675m equivalent) all Climate Bonds Certified under the Programmatic route.

SGP joined Programmatic Certification in October 2018, the first bond in a massive 10-year multi-stage EUR35bn infrastructure project (the largest project in Europe) to upgrade the Paris rail network. SGP are financing the construction programme with a combination of public funds and a long term series of green bonds. 

The Last Word - Why transport matters 

Transport makes up 14% of GHG emissions. 72% of emissions from transport sector are attributed to roads with rail being the lowest contributor to this mix. 

Greening existing cities and the 2050 megacities of Asia, Africa and LATAM nations requires a significant shift to mass transit investment. This includes EV Bus Rapid Transit (BRT) networks and Mass Rapid Transit (MRT), Light Rail Transit (LRT), commuter rail, inter-city rail and regional rail services as well as increased freight capacity.  

Indonesia an example 

Developing investment pipelines and large-scale project funding that address urban population growth, emissions, and air quality is the goal. Indonesia is an Asian microcosm of this triple challenge, with rapid population growth, increasing density and is on track according to UN forecasts to become the 5th most populous nation on earth. 

Our Green Infrastructure Investment Opportunities (GIIO Indonesia) report of 2018 identified a plethora of low carbon transport infrastructure projects that will help create the low carbon development path needed for a population which is set to grow to 360 million by 2050. 

Developing the frameworks and pipelines that help shift capital towards low carbon transport in the cities and urban conurbations of emerging economies is an area governments, development banks and global finance have yet to adequately address. 

Rail Investment & SDGS

The diversity of these new entrants into the green bond market is an encouraging sign.

The SDGs linkage identified by Russian Railways and JRTT with these new bonds is another positive. SGP has previously made this connection in their Green Bond Frameworks. 

Climate Bonds is of the view that transport green bonds effectively contribute towards targets within SDGs 9, 11 and 13.

From adressing the climate crisis to changing the nature of cities, increased green investment rail infrastructure, rapid & mass transit, light rail, intercity and regional rail investment has multiple benefits. 

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