Kyriakos Christofidis | Regulatory Compliance Expert, LLB,BA

The International Bond (XS2610236445) issued by the Republic of Cyprus has been a great success and shows the way forward in terms of bonds with sustainability characteristics.

A few key characteristics of this issuance:

  • Cyprus entered the sustainable bond markets by launching its inaugural ten-year eco bond valued at €1 billion. The bond carries a coupon of 4.125% and a reoffer yield of 4.219%, as per the announcement from the Finance Ministry’s Public Debt Management Office.
  • The eco bond received significant attention and surpassed expectations by being instantly oversubscribed. The Public Debt Management Office reported that the offer book for the bond reached an all-time high, with bids exceeding €12 billion.
  • The funds raised from the bond issuance will be directed towards financing or refinancing projects and activities aligned with sustainability goals, climate change mitigation, and other environmental and social objectives outlined in Cyprus’ Sustainable Finance Framework.
  • The bond is set to mature on 13 April 2033.

Why so much interest?

Green or sustainable bonds are increasingly recognized as a crucial financing instrument, gaining prominence among international investors. The World Bank in a recent report (Global SSA Special Report 2023) stated the following:

“Climate is very important for the World Bank and 100% of our projects are screened for climate risk. Last year, 90% of all IBRD’s projects had a climate financing component. It doesn’t matter whether it’s an education project or an infrastructure project, every project is evaluated through a climate lens to ensure the relevant mitigation or adaptation measures are put in place.”

It seems the EU Taxonomy framework on sustainable activities is already paying off. A lot of hard work has already been done to standardize the investment screening process, but also to shut down any greenwashing attempts by bad actors.

It has become apparent that the green bond market has consistently prioritized factors such as visibility, transparency, and commitment rather than solely focusing on the green premium.

Prior to the Covid era, meetings typically involved discussions with a portfolio manager and credit analyst. However, under the current scenario, the addition of an ESG (Environmental, Social, and Governance) specialist has become a common occurrence with investors becoming more aware (and sensitive) to how their investments impact the social & environmental factors.