Toyota says investors are driving growth in green bond market

Bloomberg

Bond buyers are spearheading the development of the green bond market, according to Toyota Motor Corp, which has been selling the debt through one of its units for years.
“It’s really starting to be driven by investors,” said Adam Stam, director of capital markets at Toyota Motor Credit Corp, the finance arm of the Japanese car company. At a recent structured finance conference in Las Vegas, investors asked about environmental, social and governance issues in about two-thirds of the company’s meetings without being prompted, Stam said.
“More and more investors are wanting to know how their money is being managed and what sort of larger environmental and societal goals those funds are having,” said Stam.
Toyota is sitting out the global markets volatility, which has closed the window for new issuance. The company raised debt earlier this year and plans to revisit the green bond market.
“We haven’t made a decision on which market the next green offering will be in, but we certainly intend that there will be another green offering,” said Stam. Toyota Motor Credit has issued green bonds in US dollars and euros.
Toyota’s dollar-denominated deal in January was the first US corporate green bond of 2020. It priced in line with non-green debt, while also bringing in new investors that allowed Toyota to increase the size of the deal, said Stam.
In the secondary market, Toyota’s euro-denominated green bonds have mostly outperformed the company’s regular bonds, Stam said. “Green bonds [in euros] tend to remain priced slightly tighter than what would be implied by our overall secondary curve,” said Stam.

“Europe investors continue to lead the way in their demand and appetite for green bonds.”
The automaker borrows between $20 billion and $25 billion each year and favours the dollar market because Toyota’s assets are in that currency. Since starting its green financing program in 2014, it has sold five green bonds — including one in euro and three green US asset-backed security issues– totalling about $6 billion.
The carmaker has outlined a green bond program that will help finance new loans and lease contracts for eligible Toyota and Lexus vehicles, such as gasoline-electric hybrids like the Prius.