Green bond sales from automakers could double in global EV push

AUTOMAKERS looking to fund their transition to electric vehicles (EVs) could potentially borrow about US$28 billion in green bonds globally this year, double the amount raised by the sector last year, said Bloomberg Intelligence (BI) on Monday (Jan 23).

The research house found that up to US$132 billion worth of automakers’ bonds would be maturing in 2023, with March and April having the highest dollar amounts. BI analyst Christopher Ratti said the sales surge would partly be driven by these bonds, which could be rolled into green bonds.

In addition to the large maturities, automakers are tapping debt markets to finance cuts in carbon emissions and the transition to EVs from internal combustion engines.

“The commitment to carbon neutrality remains a key component of our expectations that green-bond issuance could potentially double for automakers this year,” Ratti said.

The global sustainable-debt market posted its first decline on record in 2022, as higher borrowing costs and heightened scepticism about the label turned borrowers away. Green bonds saw the smallest year-on-year decline, dropping 11 per cent to about US$480 billion, propped up by a surge in sales from China.

Meanwhile, debt investors rewarded the auto sector with the largest price benefit on average for selling green bonds earlier in 2022. But now the so-called “greenium” has vanished across sectors and may impact sales this year.

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Volkswagen, Honda Motor, General Motors (GM) and Ford Motor were among the 10 largest issuers of green bonds from the auto sector last year. Volkswagen issued the most – more than US$4 billion – and might not need to return this year, said Ratti. Honda and GM, which tapped the green debt market for the first time in 2022, came in second and third in issuance, and there may be potential for more sales.

Honda said that while it did not have specific plans for the issuance of its next set of bonds, it would “consider raising funds with the most appropriate method, and in the most appropriate market, while taking various factors into consideration, such as the market, environment and funding costs”.

Meanwhile, Ratti said that Toyota, which has not had an issuance since 2019, could revisit the market. He added that Mercedes-Benz, which did not come to the market in 2022, could also issue more green bonds to fund its expanded electrification needs.

Mercedes-Benz said green bonds helped it align its “ambitious decarbonisation goals” with its financing strategy, by giving investors the opportunity to fund projects that accelerated its transition towards emissions-free mobility.

Ratti also said BMW and Nissan could consider green bonds in 2023, as they look to meet lower emissions and EV targets.

A Nissan representative said the company would like to “continue to have regular access to the corporate bond market”, but has not made any decisions regarding its next issuance.

“Consideration will be given to the future bond issue environment and funding needs.”

The company said last Friday that it was looking to raise 200 billion yen in sustainability bonds, to help finance eligible green projects that could include the design, development and manufacturing of EV and autonomous driving.

GM and Toyota declined to comment. BMW did not immediately respond to a request for comment. BLOOMBERG