NBK pioneers sustainable finance with $500m debut green bonds

Kuwait: National Bank of Kuwait (NBK) has successfully priced its first $500 million green bonds under its Global Medium Term Note program. The Green notes have a 6-year maturity and first call date after 5-years. The inaugural issuance not only marks the first Green issuance by NBK but the first of its kind out of Kuwait, marking a pivotal step towards NBK’s commitment to sustainable and transition finance. Issued in both Reg S and Rule 144A formats, these bonds represent a landmark debut in the realm of green bonds from a Kuwaiti financial institution.

NBK remains the sole FI issuer in 144A format, allowing investors from the US access to the scarce paper out of the country. Notably, they also stand out as one of the largest green issuances from conventional financial institutions in the MENA region, underscoring NBK’s pioneering role in advancing sustainable financial practices. The issuance aligns with the Group’s strategy to enhance the Bank’s foreign currency liquidity, improve regulatory ratios, diversify funding sources, and showcase its commitment to ESG practices and principles.

The total order book for the new issuance peaked at $1.5 billion (Excluding Joint lead managers interest), resulting in an over subscription of more than 3 times. This reflects global investors’ strong interest and confidence in the quality of NBK’s credit position and its sustainability initiatives as well as the attractiveness of Kuwait as an investment destination. The bank’s bond issuance saw strong reception from a diverse array of global investors and financial institutions. US investors made up 49 percent of the issuance, followed by Middle East investors at 26 percent, UK investors at 18 percent, European investors at 5 percent, and Asian investors contributing 2 percent of the coverage.

In terms of the bond coverage by investor type, asset managers accounted for 69 percent, followed by banks and private banks at 22 percent, while governments, insurance companies and pension funds made up 9 percent of the total investor base. NBK continues to be the tightest non-sovereign issuer out of Kuwait. Strong investor demand provided the bank with a significant advantage in pricing the bonds, which featured a spread of 95 bps over US Treasuries, the equivalent of a 5.522 percent reoffer yield.

The notes were issued at a discount and had a final coupon of 5.500 percent, fixed with semi-annual coupon payments until their first call date, followed by a floating rate of SOFR + 116 bps paid quarterly thereafter. The bonds will be listed on the Irish Stock Exchange (Euronext Dublin). The Bank will allocate an amount equivalent to the net proceeds from the bonds exclusively to finance eligible green assets, in accordance with the Sustainable Financing Framework launched by NBK Group in 2022.

Citigroup, JPMorgan, along with HSBC and Standard Chartered acted as Global Coordinators on the issuance. Additionally, Citigroup, JPMorgan, HSBC, Standard Chartered, Goldman Sachs International, First Abu Dhabi Bank, Emirates NBD, and National Bank of Kuwait acted as joint lead managers. NBK Group’s ambitious sustainability strategy is meticulously crafted on a robust four-pillar framework. Rooted in a profound commitment, this strategy spearheads the drive towards a sustainable economy while championing the cause of sustainable finance within the region. At the core of its strategy lies the pillar of “Responsible Banking,” shaping the bank’s trajectory towards achieving net-zero emissions.

This fundamental principle drives the evolution of products, services, and financing solutions offered to customers, embodying NBK’s unwavering dedication to sustainability and environmental stewardship. NBK has achieved significant milestones on its ESG journey. By introducing its comprehensive Sustainable Financing Framework, NBK has elevated its commitment to driving sustainable initiatives. This framework now serves as a cornerstone incorporated throughout NBK’s diverse business models, operational strategies, and corporate culture.

Embracing a future of sustainability and fostering a transition toward a low-carbon economy, NBK’s progressive approach harmoniously aligns with Kuwait’s vision of achieving carbon neutrality by 2060. Looking ahead to 2030, the bank is steadfast in its commitment to cultivating a sustainable asset portfolio exceeding $10 billion. NBK has also set interim targets for its gross operational emissions (Scope 1 and Scope 2), targeting reduction of 25 percent by 2025.

Furthermore, NBK is committed to integrating ESG standards into its business activities and decisions and has taken significant steps towards this commitment by joining the United Nations Global Compact (UNGC), the world’s largest sustainability initiative for responsible business practices. Setting new benchmarks in environmental accountability and as part of its carbon neutrality commitment, NBK has recently joined the Partnership for Carbon Accounting Financials (PCAF) initiative.

This landmark move positions the Bank as the trailblazer from Kuwait and among just six banks within the MENA region to enlist alongside global financial giants. By participating in this initiative, the Bank commits to meticulously tracking and identifying the greenhouse gas emissions linked to its lending and investment activities, underscoring its dedication to transparent and responsible financial practices. In a notable achievement, and for the second consecutive year, the bank has recently received a score of “C” from CDP for its Climate Change and Forests 2023 Categories.