France has attracted major institutional backers for its inaugural green bond, launched yesterday, including Dutch and French pension investors.

Dutch asset managers APG, PGGM, and MN subscribed for a combined amount of €967m, with French pension funds ERAFP and Ircantec also among those known to have participated in the issuance.

The deal was a €7bn 22-year green bond issued by Agence France Trésor (AFT), the government office managing French sovereign debt. The bond will pay a coupon of 1.75% and was priced at 100.162 for an issue yield of 1.741%.

It was the first green bond to be issued by a euro-zone sovereign. In December last year, Poland became the first European sovereign to issue a green bond, having priced a €750m five-year deal.

It was also the largest and longest-dated green bond to have been issued so far, according to AFT.

France’s green bond issue was more than three times oversubscribed, drawing €23bn of demand.  


With a share of 37%, French investors made the largest investment. Dutch investors came second, buying a total amount of €1.3bn (19%).

Asset managers were allocated the largest chunk of the €7bn bond, buying €2.31bn (33%). Pension funds took the third largest amount, just behind banks, with €1.4bn. Insurers were next in line after pension funds, being allocated 19% of the bonds.

ERAFP said it was proud to have contributed to the deal, having allocated €40m.

“For an investor as involved as we are in financing the green energy transition, it is natural to support this kind of initiative,” said Philippe Desfossés, chief executive of the €26bn civil service pension fund.

Ircantec last year decided to launch a fund dedicated to green bond investments.

In the Netherlands, APG invested €600m in France’s issue, of which €540m was on behalf of its largest client, the civil service scheme ABP. PGGM and MN purchased €330m and €37m for their clients the healthcare scheme PFZW and the metal pension fund PME, respectively.

Achmea Investment Management, NN Investment Partners, Kempen Capital Management, and Actiam also made investments.

The Dutch investors stated that green bonds were a good match for their sustainable investment goals, with APG adding that the yield of 1.74% included a “small” surcharge relative to regular French government bonds with the same duration.

An APG spokesman cited the fact that the green bonds were the first in the euro-zone as the reason for the surcharge.

PGGM emphasised that the credit-worthiness of the green bonds was equal to any other regular French government bond, and said that it expected proper liquidity.

Other major French institutional investors that participated in the deal were AG2R La Mondiale, Amundi, Aviva Investors France, AXA France, BNP Paribas, HSBC Assurances Vie (France), and Mirova. (See a fuller list below*).

‘Milestone’ for ESG investors

Marc Briand, head of fixed income at Mirova, the specialist socially responsible investment arm of Natixis Asset Management, told IPE that the green bond represented “a new stage of market development”.

He said: “We need major investment to meet the climate targets agreed at COP21, and after agencies, regions, utilities, other corporates, and banks, the next step was for governments to issue green bonds.”

The French government said that it has made “an unprecedented reporting commitment” for the bond, including reports on the use of proceeds from the issue and on the “ex-post environmental impact of eligible green expenditure at appropriate intervals, depending on the type of expenditure”. 

A key preoccupation for those wanting to see the green bond market grow has been the shoring up of the instrument’s green credentials, not least to to address “greenwashing” concerns. Briand said that reporting was “key for the integrity of the market” and “critical” for Mirova as an investor. 

“We need to finance the green revolution and we are happy to do that, but we need to pay attention to the integrity of the market to be sure that the impact is real and that we are financing projects that go beyond business as usual,” he said.

Alex Struc, portfolio manager at PIMCO and co-head of the asset manager’s ‘ESG Initiative’, said France’s deal is “a milestone for global investors who are exploring or emphasizing assets focused on ESG [environmental, social, and governance] principles”.

The French Treasury has identified €13bn of eligible proceeds to back yesterday’s deal and future issuance of green bonds. Struc said that although some sceptics may argue that this was a relatively small amount, “the number still represents around 5.2% of the outstanding green bond market and is substantially larger than green issues from any corporate”.

The French government has indicated that it will use the funds largely to tackle climate change and its effects, including increasing the energy-efficiency of buildings, environmental research, and sustainable forest management.

It expects to issue €20bn worth of green bonds in total for sustainable projects, and plans to grow the 22-year bond it issued yesterday to €10bn by the end of the year.

MN has called for the issuance of green bonds by the Netherlands, but the Dutch cabinet doesn’t have any plans at the moment. However, Italy, Sweden, China, India, and Nigeria have all announced plans to issue green bonds.


*As at 25 January, Agence France Trésor listed the following investors as having “wished to disclose their participation in the issue”:

Achmea lnvestment Management, Actiam, AG2R La Mondiale, Amundi, APG Asset Management , Apicil, Aviva Investors France, AXA France, Barclays Treasury, BlackRock, BNP Paribas, BNP PARIBAS CARDIF, Caisse Régionale du Crédit Agricole Mutuel de Paris et d’Ile de France, COVEA FINANCE, Crédit Agricole SA, DekaBank, ERAFP, HSBC Assurances Vie (France), IRCANTEC, JP Morgan Asset Management, Kempen Capital Management N.V., MIF : MUTUELLE D’IVRY (la Fraternelle), MIROVA, Nippon Life Insurance Company, NN Investment Partners, Nordea Asset Management, PGGM, Pro BTP, SCOR SE, Standard Life Investments, Sumitomo Mitsui Trust Bank Limited, WWF FRANCE.