Could Apple's $1.5bn green bond be a game changer for corporate issuance?
The story of the green bond market is one of impressive growth. The market was started by sovereign, supranational and agency issuers, as giant organisations such as the EIB and the IFC threw their weight behind the asset class.
The last three years have been notable for the growth of other types of issues, which have joined the green bond party.
Private sector banks have made a significant impact on growth, as many of them expanded their activities beyond underwriting and have joined the ranks of issuers. US municipalities have also been a significant growth story, helping to drive the expansion the market has seen in recent years.
Corporate issuance has also grown – but has come nowhere near hitting its potential. Data collected by Environmental Financeshows that there was some $11.1 billion of corporate issuance in 2015 (not including private banks), out of a total market figure of $42.9 billion. In the US, corporates accounted for $3.6 billion of issuance in 2015.
Bearing in mind that the first corporate green bond only came to market in 2013, this is an impressive feat.
But there is potential for corporates to do much more. And having the world's biggest company by market capitalisation – more than $500 billion at the time of writing – tapping the market, could mark a turning point in its history.
That is the view of Suzanne Buchta at Bank of America Merrill Lynch, who described it as a watershed event, and has already seen more enquiries from potential corporate issuers.
Ulf Erlandsson of Swedish pension fund AP4 agrees: "If the Apple treasury is on top of green bonds, it will be hard for any other Treasury to argue why they should not be."
It is encouraging that Apple has sought a second opinion on the green credentials of the issue. It is believed to be the first US non-bank corporate issuer to do so.
Apple is already taking steps to address its environmental impact, through sourcing renewable energy, for example. But it is no corporate angel, and has been criticised previously on environmental and social grounds. So, it was interesting that the bond's proceeds are also being used to help make Apple's products more sustainable. Sustainalytics, in its second opinion, felt that Apple "is well positioned to issue a green bond" for this reason.
There are many other companies who are on similar journeys to Apple in trying to address their environmental footprint. Look at Google, HP and IKEA, which are also sourcing renewable energy. These companies could issue green bonds. Data centres across the globe are also taking action to address the carbon footprint of their vast energy consumption.
More power companies with green capex could issue, following in the footsteps of the likes of Southern Power and EDF. If Siemens reaches a deal to acquire wind turbine manufacturer Gamesa, it could issue a green bond to help fund the deal.
Then there are the themes of energy efficiency in real estate or industrials, or low-carbon transport. The possibilities for corporates are seemingly endless.