LONDON, April 20 (Reuters) - The EIB banker dubbed the “mother” of the green bond has a new baby on the way — a “sustainability” bond the proceeds of which will be used in a range of well-meaning areas from clean water and sanitation to education and health.
Eila Kreivi is Head of Capital Markets at the European Investment Bank’s finance division and pioneered the bank’s move in 2007 to launch the world’s first ‘green’ bond whose proceeds are invested in products that tackle climate change.
It has sold roughly 20 billion euros ($24.64 billion) worth of them since then in 11 different currencies and Kreivi sees the new ‘Sustainability Awareness Bond’ as it will officially be called as a natural evolution.
“There starts to be a lot of focus on the wider agenda beyond pure climate now, so we wanted to come with a product which can accompany this development,” she told Reuters.
“We will start with the water sector first but we will enlarge the use of proceeds into other areas for example health and education.”
It is all part of the push by global governments, under the umbrella of the United Nations’ 17 Sustainable Development Goals, to end poverty, protect the planet and ensure prosperity by 2030.
The first of EIB’s new bonds is expected to be sold sometime around September. Raising the equivalent of around 500 million euros ($616.10 million) “would be perfect” Kreivi said though none of the details have been finalised.
“It will be a major currency but we have not decided which one yet,” she added.
The tenor or the lifespan of the bond is likely to be somewhere between 5 or 10 years, “it depends on the currency,” she added.
“In euros, 7 to 10 year demand is very healthy whereas in dollar it is exactly the opposite. The better demand is in the five year area.”
What will be most important is what the money the bonds raise will be used for.
The EIB’s experts are still working on what exactly what will qualify as being ‘sustainable’ and a framework of new metrics and improvement indicators that will differentiate the bonds from financing that already exists.
“It is not just a label,” Kreivi said. Given some examples she added: “If you take waste water treatment it can be the cubic meters of water purified or otherwise the number of people that get clean drinking water.”
In terms of where the money will be spent, it is clear the Luxembourg-based bank wants to focus on parts of the world where it will make the biggest difference.
The EIB operates mainly in the European Union but 10 percent of its money is spent in other parts of the world, from the Middle East and Africa to Latin America and Asia.
“We are not going for geographical screening but an impact level screening.”
Replicating the success of its green bonds creation will also be key. It issued 4.2 billion of them last year.
Kreivi is keen to see whether green bond enthusiasts also buy into the new ones and also sees the significance of her status as ‘the mother of the green bond’ in the new push.
“I’m a bit old for all that (birth) business, but maybe in the bond market I can still have babies.” ($1 = 0.8116 euros) (Editing by Matthew Mpoke Bigg)