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China Green Finance Awards

Green deal of the year 2020

Bank of China’s $960m Sofr-linked multi-currency green bond

Bank of China’s $960 million Sofr-linked deal, issued in dollars, euros and offshore renminbi, was a landmark deal in more ways than one.

Sofr (Secured Overnight Financing Rate) is one of the top candidates to replace Libor after the end of 2021. The rate has been published daily by the Federal Reserve Bank of New York since April 2018, but so far, there has been little issuance. Until Bank of China’s deal, not a single Asian issuer had linked a bond to the rate.

It was a sign of the growing maturity of the green-bond market that the issuer did not opt to sell a conventional deal to test demand for Sofr-linked notes. Instead, it pushed ahead with a deal that advanced the green-bond and the wider market.

As if that wasn’t enough, Bank of China scored another first: this was the first green bond sold in Macau.

Although Sofr-linked bonds were an innovation in the market and many banks were not ready to buy the deal, the transaction still attracted a total of 59 investors.

The proceeds will be used to provide green loans to Chinese domestic corporations in areas of green transportation, green energy and sewage handling systems. The bond is also verified green by EY and the Climate Bond Initiative.

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