Romania’s first green bond issue was a real success, being marked by a series of records, such as the extraordinary demand from the investment circles, according to the Minister of Finance, Marcel Boloş.
On February 15, 2024, the Ministry of Finance carried out the second transaction on the international financial markets, by launching two tranches of bonds with maturities of 7 years and 12 years, denominated in euros. The 12-year tranche represented Romania’s inaugural green bond issue.
According to a statement from the Ministry of Finance, the total value of the bond issues, of four billion euros, had a final subscription of over 14.8 billion euros through the participation of a total number of over 250 investors. The issues raised impressive interest from investors, their orders exceeding the value of 17 billion euros during the transaction.
In the process of elaborating the Framework regarding green bonds, the Ministry of Finance benefited from technical assistance from the World Bank.
“We congratulate the Government of Romania for this exceptional transaction. As we navigate an era of pressing challenges, where the possibility of living on our planet is contested, and conflicts and growing disparities are pressing, the role of sustainable financing has never been more important to support World Bank member countries We are extremely pleased to have provided technical assistance to facilitate Romania’s first green bond issue and look forward to working with the Government of Romania on the next steps of the process, such as allocation and impact reporting,” said Anna Akhalkatsi, country manager of the World Bank for Romania.
The volume attracted for the tranche with a maturity of 7 years is 2 billion euros, at a yield of 5.394% and an interest rate of 5.375% per year, and for the green tranche with a maturity of 12 years, the volume of 2 billion euros was attracted, at yield of 5.734% and an interest rate of 5.625% per annum. The funds obtained from this issue were settled on February 22, 2024.
“I am glad that Romania’s first green bond issue was a real success, being marked by a series of records. Behind this issue is a complex process, which involved the development and evaluation of a solid framework for financing green projects, for which I want to congratulate my colleagues from the Treasury. I would like to point out the extraordinary demand from the investment circles, the credit risk margins obtained which reflect including a “greenium” of 10bps, as well as the quality of these investors, around 45% of the investors in the green tranche being socially responsible investors/with green mandates (ESG). In addition to diversifying the public debt investor base, this issue is a concrete step in our mission to achieve our sustainable development goals, but also to support projects with positive impact for improving the quality of life of Romanians,” Minister Marcel Boloş said.
According to the MF, the 12-year maturity represents the largest euro-denominated green tranche launched so far by an issuer from emerging markets (ESG debt financial instruments). Also, the transaction represents the largest issue of green bonds denominated in euros by an issuer from emerging markets. Last but not least, the issue was the largest transaction on Romania’s international financial markets, and the final subscription obtained was the largest so far for our country.
The bond issue, launched on February 15, is part of the external financing plan for the year 2024, through which the Ministry of Finance aims to ensure the financing needs from external markets for this year, as well as the consolidation of the financial reserve in foreign currency at the disposal of the State Treasury .
The bond issue was oversubscribed more than 3 times for the 7-year tranche, respectively more than 4 times for the 12-year green tranche. At the same time, the issue benefited from a very diversified investment base both geographically and from the perspective of the types of investors, MF representatives state.
“The issue premium for the 12-year tranche was the lowest premium achieved by a sovereign issuer in the CEE area from 2015 until now,” the cited source states.
From the point of view of the types of investors, for both tranches the preponderance of “real money” type investors can be distinguished, i.e. privately managed asset funds that had a weight of 67% and 66% respectively within the 7- and 12-year maturities . At the same time, pension funds and insurance companies had a distribution of 10% and 5%, sovereign funds and official institutions an allocation of 6% for both tranches, commercial and private banks had a distribution of 6% and 13% and speculative funds and brokers benefited from an allocation of 11% and 10%, respectively.
“The 12-year green tranche was allocated in percentage of approximately 45% to socially responsible investors / with green-ESG mandates or who are known to use socially responsible investment principles / the principles regarding green investments”, emphasized the representatives of the Ministry of Finance.
Regarding the geographical distribution of investors, for the 7-year maturity, it was as follows: Great Britain and Ireland 46%, rest of Europe 22%, USA 13%, CEE 7%, Germany, Austria and Switzerland 5%, Romania 4 % and the rest of the states 3%.
For the 12-year maturity, the geographical distribution of investors was: Great Britain and Ireland 48%, the rest of Europe 19%, Romania 11%, the USA 9%, CEE 8%, Germany, Austria and Switzerland 3%, and the rest of the states 2% .