Mizuho1 has concluded the world's first SGS bond issuance by Bank of China Frankfurt Branch. The CNH 2.5 billion 2-year SGS bond was issued under the newly established SGS Bond Framework, the net proceeds of which will be used to finance/refinance eligible sustainability-linked loans, green loans, and social loans altogether. In this transaction, Mizuho acted as the Joint Global Coordinator, Joint Lead Manager, Joint Bookrunner, Joint ESG Structuring Bank and Billing and Delivery Bank.
1Bond underwriting was conducted by Mizuho Securities Asia Limited.
Unprecedented deal structure
This SGS bond is another ground-breaking sustainable bond issuance by the Bank of China (BOC) with an innovative use of proceeds structure. The key feature of an SGS bond is that it provides investors with extra transparency about the three types of sustainable loans funded by the bond, namely sustainability-linked loans, green loans, and social loans. Like the BOC's previous landmark issuances, this inaugural SGS bond issuance helps expand the selection of sustainable asset classes available for investors.
A total of 68 investors participated in the subscription, contributing to a final order book of CNH 19 billion and enabling a 47-bps tightening in pricing compared to the initial price guidance. This highlights the investors' recognition of the newly established SGS Bond Framework.
The SGS Bond Framework referenced the Guidelines for Sustainability-Linked Loans Financing Bonds newly published by the International Capital Market Association and Loan Market Association in June 2024. The core recommendation of these Guidelines is that the existing Sustainability-Linked Loan Principles should be used as the basis for constructing any such portfolio which may be communicated to the market via a bond instrument.
Bank of China's track record
The BOC has been an innovative issuer proactively exploring different aspects of ESG products. In September 2020, the BOC issued Asia's first blue bonds through its Macau Branch for the CNH tranche and Paris Branch for the USD tranche, the net proceeds of which were used to fund eligible marine-related green projects with environmental benefits. In October 2021, the BOC issued the world's inaugural Sustainability Re-Linked Bond. The net proceeds of this bond were used to finance or refinance the eligible sustainability-linked loan portfolio, with the sustainability target achievement of these sustainability-linked loans determining the coupon of the bond itself.
Mizuho's sustainability commitment
"Congratulations to Bank of China on the successful issuance of the world's first ever SGS bond. Mizuho is proud to support the transaction and the result achieved reflects a very strong reception from investors. This successful case paves the way for other issuers to explore the innovative and robust options in the sustainable finance market."
Ken Lee, Managing Director, Head of DCM, Mizuho Securities Asia Limited
"Innovation within the realm of sustainable finance is pivotal in closing the immense SDG financing gap. Mizuho is proud to have supported the world's first SGS bond by the Bank of China, which effectively channels funding into ESG-labelled loan portfolios that encompass both UOP and sustainability-linked structures concurrently. It is yet another solid testament to the Bank of China's commitment in promoting transparent, accountable, and responsible sustainable financing practices."
Ivy Lau, APAC Head of ESG Solutions, Mizuho Securities Asia Limited
At Mizuho, we continue to further incorporate sustainability initiatives into our business strategy. We are drawing on our expertise as a financial services group to proactively provide a wide range of solutions, including advisory and capital financing support, to clients that are contributing to the shift to a low-carbon, sustainable society.
About Mizuho Financial Group
Mizuho Financial Group is designated as a global systemically important bank (G-SIB). It offers comprehensive financial and strategic services through its group companies including Mizuho Bank and Mizuho Securities.
Mizuho is committed to advancing environmental, social, and governance (ESG) efforts, as well as the fulfillment of the Sustainable Development Goals (SDGs). It participates in a variety of initiatives both in and outside Japan, including the United Nations Global Compact, UNEP Finance Initiative, Principles for Responsible Banking, and Task Force on Climate–related Financial Disclosures etc. In October 2021, Mizuho Financial Group joined the Net-Zero Banking Alliance, an international initiative between banks aiming to align their lending and investment portfolios with net-zero greenhouse gas emissions by 2050. Mizuho was also the first Japanese financial institution to join the Partnership for Carbon Accounting Financials.