This week Deutsche Bank helped the New Development Bank (NDB) raise the first Sustainable Development Goals (SDG) Panda bond in emerging markets.
The NDB is a multilateral development bank established in 2015 by Brazil, Russia, India, China and South Africa (BRICS) with the objective of financing infrastructure and sustainable development projects in BRICS and other emerging and developing countries.The SDG Panda (RMB denominated) issuance, with a coupon of 3.22%, raised 5 billion renminbi (648 million euros) in China’s onshore bond market. The bond is supported by NDB’s Environmental and Social Framework and issued with reference to the UNDP Sustainable Development Goals Impact Standards for bonds and the SDG Finance Taxonomy (China) and aims to finance sustainable activities and deliver solutions supporting the 17 United Nations’ SDGs in NDB member countries.
Deutsche Bank Head of ESG for APAC, Kamran Khan said: "This SDG panda bond by NDB demonstrates that multilateral development banks have an important role to play in setting the standards for capital market instruments supporting sustainability and achievement of SDGs, particularly in emerging markets. The capital raised and benchmarks established by this bond will have a very material impact on the standards under which public and private entities raise capital to support the achievement of SDGs in NDB’s member countries.”
Deutsche Bank was the only European bank selected by the Shanghai headquartered NDB to act as Joint Lead Manager and Joint Bookrunner for the offering.
Deutsche Bank’s Head of China Onshore DCM Sam Fischer said, “This transaction is another milestone for Deutsche Bank (China) and our fast growing DCM and SSA franchise. The offering enabled us to bring a high quality credit to our international investor base, and leverage our Bond Connect expertise to the fullest.”
The inaugural SDG Panda bond garnered a solid investor response, with the final orderbook 2 times oversubscribed with a broad diversification of investors by geography and type. Numerous high quality global sovereign and institutional investors showed keen interest.
Deutsche Bank Head of ICG Macro Sales China, Lillian Tao said: “NDB saw high (45%) participation among international investors for their COVID-19 Panda in April last year. This SDG Panda transaction saw 49% international investor participation and we saw significant indicators of interest during the bookbuild process.”
Yuan-denominated debt issued by foreign borrowers in onshore China market are called ‘panda bonds’. The NDB offering was structured for both onshore and offshore institutional investors. The latter can invest through the Bond Connect mechanism which is overseen by the People’s Bank of China.
At more than RMB 114 trillion (more than US17.5 trillion dollars), China’s onshore bond market is the second largest in the world after the US. China’s bond market is opening up to foreign investors, and with global reserve allocation demand and RMB bond index inclusion, Deutsche Bank expects foreign ownership to increase from 2.9% in December 2020 to 3.3% by the end of 2021.