A “Climate Awareness Bond” linked to the performance of a new index of companies with environmental policies has been launched by the European Investment Bank.
In what is expected to be the largest syndicated equity-index linked bond to date, the 5-year euro bond will be used for the bank’s lending projects in renewable energy and energy efficiency.
“The EU has taken a leading role in tackling climate change. With this bond EIB is inviting investors and the banking community to join that endeavor, further highlighting EIB’s commitment to promoting EU objectives,” Bertrand de Mazieres, director general of finance at the bank, said in a statement.
Instead of paying a coupon, the bond will be redeemed at 100% of face value plus an amount at maturity linked to the performance of the FTSE4Good Environmental Leaders Europe 40 index, floored at 5 percent.
If the amount exceeds 25%, investors can use the excess to buy and cancel CO2 allowances under the European Union emission trading scheme.
Dresdner Kleinwort, Merrill Lynch and UniCredit are managing the sale. The bond will be offered to investors from May 29 to June 22.
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