Salmon farmers increasingly look to tap USD 1 trillion green bond market
Chilean salmon farmer Ventisqueros’ announcement at the end of 2020 that it had landed a USD 120 million (EUR 98.7 million) green loan with banks Rabobank and DNB is the latest in a trend, as fish farmers have begun accessing financing with an environmental focus tied to it – in a global green bond market that may reach USD 1 trillion (EUR 822 billion) by year’s end.
Green bonds are considered “theme bonds,” meaning they have a designated goal for the investment. In this case, they aim to mitigate climate change or promote sustainable development, and may include financing for projects that look to increase energy efficiency and sustainable agriculture; improve fishery and forestry, clean transportation, clean water, and sustainable water management; prevent pollution or protect aquatic and terrestrial ecosystems; or finance the cultivation of environmentally friendly technologies.
“Green bonds are particularly attractive to potential investors because they are tax-exempt, providing fiscal incentives to aid in the fight against climate change or develop renewable energy. Additionally, these bonds have an investment grade which entice not only socially-responsible investors (‘SRIs’), but also mainstream investors looking for safe places to put their money,” Luke Trompeter, of American University's Washington College of Law, wrote in a Sustainable Development Law & Policy paper titled "Green Is Good: How Green Bonds Cultivated into Wall Street’s Environmental Paradox.”
When the European Investment Bank and the World Bank first created green bonds in 2007, few imagined the debt instrument would attract mainstream investors, Trompeter noted.
“However, by 2015, green bonds were issued by major corporations like Apple and municipalities like New York City at a record USD 40 billion [EUR 32.9 billion],” he wrote. “Major players on Wall Street have taken notice and look to cash in on the rapidly growing green bond market.”
It is estimated that some USD 200 billion (EUR 165 billion) in green bonds were issued in 2020, Johann Ple, portfolio manager at AXA Investment Managers, told Forbes. That amount will be eclipsed based on the projected growth of the bonds' popularity.
“The current rate of issuance … Is going to look small compared to the growth we will see in the next few years, especially as sovereigns enter the market,” Ple said. “As such, we think the overall market size could grow to USD 1 trillion [EUR 822 billion] by the end of 2021, but it will still only account for a small percentage of the overall debt markets, so it truly is at the start of its journey.”
A number of salmon famers have begun to take advantage of this financing being made available. Besides Ventisqueros’ USD 120 million (EUR 98.7 million) green loan signed in December, which will go towards financing its plan to sustainably expand production to 60,000 metric tons (MT) from the current 40,000 MT, other main players include Mowi, Grieg Seafood, and Agrosuper.
Mowi landed a EUR 200 million (USD 165 million) green bond at the beginning of 2020. The five-year, senior unsecured issue was significantly oversubscribed, with high investor demand from both dedicated green and regular bond investors. The bonds offered a coupon of 3 months EURIBOR plus 1.60 percent per year, and the proceeds will be used for green projects as defined by Mowi’s green bond framework, outlined in January 2020. Danske Bank, DNB Markets, Nordea (as Joint Global Coordinators and Green Bond Advisors), ABN AMRO, Rabobank and SEB acted as joint lead managers for the bond issue.
Then in November 2020, Grieg Seafood completed a NOK 500 million (USD 58.8 million, EUR 48.4 million) tap issue under the company’s existing senior unsecured green bond, with a maturity on 25 June, 2025. The proceeds from the tap issue were to be used for green projects as further defined under the voluntary Green Bond Principles, published in June 2018 by the International Capital Market Association (ICMA). DNB Markets and Nordea acted as arrangers for the tap issue.
AgroSuper – a leading supplier in Chile of salmon, chicken, beef, and pork – was an early adopter in the trend when it signed what it called Chile’s first “green and social loan” from Rabobank.
The USD 100 million (EUR 82.3 million), seven-year loan – arranged with technical support and advice from WWF – was to finance some of its acquisitions in the local salmon sector and contained several environmental and social conditions with which AgroSuper must comply, including a commitment to reduce antibiotic use in salmon farming, increase its Aquaculture Stewardship Council certifications, and implement an aquaculture improvement program for production centers – to get 100 percent of its production sites actively striving for ASC certification.
AgroSuper brand AquaChile is Chile’s leading salmon company and the second-largest salmon producer in the world.
Considering the amount of cash being made available, and the salmon market’s increasing focus on sustainability, the growth projections for green bonds make it likely that more salmon companies will utilize them in the future.
Photo courtesy of Mowi