Funds raised through RBC's sale of US$750-million in green bonds will be used to finance sectors linked to sustainability, such as renewable energy, green buildings and clean transportation businesses.Mark Blinch/Reuters
Royal Bank of Canada sold US$750-million of green bonds on Thursday and augmented the offering’s social impact by marketing the debt through a group of U.S. investment dealers with female, Black and Hispanic ownership.
RBC , Canada’s largest bank, raised money that will be used to finance sectors linked to sustainability, such as renewable energy, green buildings and clean transportation businesses. The five-year bonds pay 1.15-per-cent annual interest, a lower rate than the bank pays on a comparable traditional corporate bond.
Green bonds were launched in 2008 by the World Bank. This year, corporations and governments are expected to issue US$1-trillion of offerings linked to environmental, social and governance (ESG) standards.
Four global investment dealers, including RBC Capital Markets and Goldman Sachs & Co. , led this week’s RBC offering. In a press release, the bank said the sellers also included U.S. investment dealers “owned or operated by leaders across underrepresented groups, including people of color, women and service-disabled veterans.”
The sales syndicate included Academy Securities Inc., led by armed forces veterans, some of whom were disabled during their time in the services. It also featured Hispanic-owned Samuel A. Ramirez & Co., Inc., female-led R. Seelaus & Co. and Siebert Williams Shank & Co., where the ownership team features female and Black executives.
Lindsay Patrick, RBC Capital Markets managing director and head of strategic initiatives and ESG, said these dealers then sold bonds to a number of clients who have never previously owned green bonds or RBC debt.
“We have long believed that capital can be a positive force for change” Ms. Patrick said. “Partnering with a diverse syndicate of underwriters and issuing in the U.S., RBC’s second home market, further diversifies our green bond investor base.”
On Thursday, RBC was able to sell green bonds at an interest rate 38 basis points above the comparable U.S. government Treasury bond. Ms. Patrick said this is the lowest premium, or tightest spread, RBC has achieved since the 2008 global financial crisis, and showed ESG and related diversity initiatives make for good business.
Diversity is an increasingly important component when raising capital for company, Ms. Patrick said. She said RBC Capital Markets has won a number of client mandates to ensure underrepresented groups play a role as underwriters and investors in offerings, including a recent asset-based financing for telecom company Verizon.
Thursday’s financing marked RBC’s second green-bond offering. In 2019, the bank raised €500-million ($743.6-million) with a five-year offering targeting European institutional investors.
Since then, the bank and many other Canadian corporations and governments have introduced sustainable bond frameworks and done extensive marketing to educate consumers on ESG-linked financing. To date, RBC Capital Market’s data show Canadian companies have issued more than $60-billion of ESG-linked bonds.
Stay up to date on all our Streetwise stories. We have a Streetwise newsletter, covering mergers and acquisitions, plus financial services news. It is sent Monday to Friday evening. Sign up today.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Andrew Willis