MUMBAI: Deutsche Bank and Continuum Energy Levanter Pte Ltd, a subsidiary of Continuum Green Energy (Continuum), on Tuesday said they have executed the world’s first green hedging transaction, with a second party opinion based on a specially designed green hedge framework.
Arvind Bansal, chief executive at Continuum Green Energy, said the company’s underlying green project revenues are generated in Indian rupee while the principal and interest are to be repaid in dollar, giving rise to currency risks. The green hedge, he explained, manages the currency exposure, ensuring the underlying green projects are financially sustainable, while ensuring investors receive their returns on the green bond.
They will work together to develop a green hedge framework to support the implementation of Continuum’s green bond framework. External reviewer, Cicero Green, has issued the second party opinion on the green bond and the green hedge frameworks, it said.
Rahul Jain, head of sustainable and special solutions for Deutsche Bank in Asia, said the hedge structure has the potential to set new standards for increased transparency and risk management particularly for emerging markets hard currency green bond issuances.
The forex hedge solution, the statement said, is for a six-year tenor in US dollars/Indian rupees on notional of $185 million, linked to Continuum’s green bond US dollar primary issuance and based on their green bond framework.
“With new green debt issuance in emerging markets (EMs) continuing to grow, investors are increasingly looking for ways to distinguish well-managed, quality green issuers from the rest," Jain added.
Deutsche Bank was the lead bookrunner and green structuring agent for Continuum’s 144A/RegS green bond priced in February this year.
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