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Saudi National Bank

Issues debut sustainable sukuk


Issuance Details

  • Company: audi National Bank
  • Rating (Fitch): A1 / A- / A
  • Sector: Financial
  • Market: ISM

Transaction Details

  • Issue Date: 19 January 2022
  • Issue Size: $750 million
  • Coupon: 2.34 %
  • Maturity: 5 years

Saudi National Bank completes issuance of $750 million sukuk

  • Saudi National Bank (SNB) is the largest financial institution in Saudi Arabia. It plays a vital role in supporting the economic renewal of Saudi Arabia through transformation of the banking sector and facilitating the delivery of Saudi Arabia’s Vision 2030
  • In January 2022, SNB sold $750 million of its debut sustainable sukuk, with demand topping $3.2 billion
  • The five-year Islamic bond was issued on London’s International Securities Market (ISM) at an annual yield of 2.34%.
  • Proceeds from the sale will be used for projects eligible under the bank’s Sustainable Finance Framework such as funding renewable energy facilities, including loans to develop such projects and loans related to tree-planting
  • HSBC was the sole ESG structuring agent on SNB’s sukuk sale and was joined on the deal by Citi, Emirates NBD Capital, Goldman Sachs, Mizuho
  • Securities and SNB Capital

Source: London Stock Exchange, Refinitiv, May 2022


Riyad Bank | Technical Case Study | The Knowledge Portal

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Riyad Bank

Sells world’s first sustainability-linked AT1 Islamic bond


Issuance Details

  • Company: Riyad Bank
  • Rating (Fitch): N/A
  • Sector: Financial
  • Market: ISM

Transaction Details

  • Issue Date: 17 January 2022
  • Issue Size: $750 million
  • Coupon: 0.00 %
  • Maturity: –

Riyad Bank sells $750 million in perpetual sustainability sukuk

  • Riyad Bank is one of the largest financial institutions in Saudi Arabia and the Middle East
  • In January 2022, Riyad Bank sold $750 million in Additional Tier 1 (AT1) Islamic bonds linked to sustainability on London’s International Securities Market (ISM)
  • The world’s first sustainability-linked AT1 Islamic bond will be non-callable for five-and-a-half years and is marked as the world’s first sustainability linked AT1 Islamic bond.
  • Its yield was tightened from initial price guidance of around 4.375% after demand exceeded $3 billion
  • The deal was arranged by BofA Securities, HSBC, Riyad Capital and Standard Chartered

Source: London Stock Exchange, Refinitiv, May 2022


Infracorp | Technical Case Study | The Knowledge Portal

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Infracorp

Issues Bahrain’s first-ever green sukuk


Issuance Details

  • Company: Infracorp
  • Rating (Fitch): B
  • Sector: Financial
  • Market: ISM

Transaction Details

  • Issue Date: 15 March 2022
  • Issue Size: $900 million
  • Coupon: 7.5%
  • Maturity: Perpetual

Infracorp completes issuance of $900 million sukuk

  • Infracorp is the infrastructure and sustainability arm of GFH Financial Group. It manages nearly $3 billion of infrastructure assets, including a 250 million-square-foot land bank earmarked for sustainable economic and social infrastructure
  • In March 2022, Infracorp sold $900 million in sustainable sukuk, the first-ever green sukuk issued by a Bahraini entity
  • The perpetual Islamic bond was issued on London’s International Securities Market (ISM) at a semiannual yield of 7.5%
  • Proceeds from Infracorp’s debt sale will be used to accelerate the growth of sustainable infrastructure across the Middle East and South Asia
  • GFH Financial Group BSC underwrote the deal

Source: London Stock Exchange, Refinitiv, May 2022


Aldar Investment Properties | Technical Case Study | The Knowledge Portal

Technical Case Study

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What is the added benefit of listing on a dedicated exchange or market such as London Stock Exchange’s Sustainable Bond Market, compared to listing on the Main Market or International Securities Market?

London Stock Exchange’s dedicated Sustainable Bond Market (SBM) champions innovative issuers in sustainable finance and improves access, flexibility and transparency for investors. Sustainable finance debt instruments are an ideal way for business to tap into a $100 trillion pool of private capital managed by global institutional fixed-income investors.

Issuing a sustainable finance bond or sukuk provides a signal that the issuer has a meaningful sustainability strategy and has identified material environmental risks and opportunities that the business faces and is investing to deliver on them.

The additional disclosure required to issue a sustainable bond or sukuk creates greater levels of dialogue between issuers and investors.

Sukuk issuers can also display their issuance alongside high-profile international issuances on SBM from supranationals, local governments and municipalities, as well as corporates. Many bonds on SBM have been world firsts in terms of currency, geography and structure, including the first certified green bonds out of China, India, the Middle East and North Africa, and the first sovereign bonds from Asia Pacific and the Americas.

What are the different classifications of securities available for listing on the SBM?

Distinct segments further enable investors to distinguish between different types of sustainable bonds, based on independently verified frameworks and use of proceeds.

There are three main categories: use of proceeds certified (green, social or sustainability); issuer-level classified (green revenues or sustainability-linked instruments); and transition.

Green bond proceeds are used exclusively to finance green projects, or projects with clear environmental benefits, whilst social bond proceeds are used exclusively to finance eligible social projects as defined by the relevant international standards used. Sustainability bonds, however, are a blend of the two, with proceeds used exclusively to finance any combination of eligible green and social projects as defined by the relevant international standards used.

As more issuers choose to make sustainability central to their operations, we have seen an increase in companies deciding to issue all funding products within a single green or sustainable format. To reflect this, issuers can utilise a new issuer-level classified segment for bonds by issuers whose core business activity is aligned with the green economy or where the sustainable nature of the instrument is not based on distinct and predefined use of proceeds.

The two sub-segments are for issuers demonstrating they have greater than or equal to 90% of revenues derived from green revenues, and sustainability-linked bonds, which are forward-looking, performance-based bond instruments where the issuer is committing to future improvements in sustainability outcomes within a predefined timeline.

Transition bonds are a subset of sustainability bonds, whereby the issuer is raising funds in debt markets for climate and/or just transition-related purposes. These bonds are a financing tool available to issuers that are crucial if the ambitious global carbon-emission-reduction targets are to be realised, as activities in higher-emitting sectors require significant financing in order to move towards less carbon-intensive operating models. The concept of climate transition focuses principally on the credibility of an issuer’s climate change-related commitments and practices.

What is the screening or verification process that issuers must undergo to access the Sustainable
Bond Market? What is the significance of third-party review or opinion in this process?

To list on the SBM, issuers must list or be admitted on one of the fixed income primary markets operated by London Stock Exchange and must submit a completed SBM Declaration and Application Form. The form will ask issuers the classification of the securities (green, social, sustainable, etc.), for acknowledgement and commitment to post-issuance reporting obligations, and for the disclosure of mandatory sustainability-related documents as applicable, such as an Independent External Review.

The Exchange requires issuers to provide proof of an external review of the securities from an independent third-party reviewer at the time of application before any green, social or sustainable securities can be admitted to SBM.

The external review increases the confidence of investors in the robustness of market standards and provides additional visibility for those issuers admitting securities on SBM.

Sam Dodd

Manager, Fixed Income, Primary Capital Markets
London Stock Exchange