Automakers Rev-Up Green Bonds for Hybrid and Electric Vehicles

Bloomberg June 2018

Investors expect more automakers to tap the green bond market after auto companies raised $2.5 billion in 2016 to finance electric and hybrid vehicles.

This month, the financial arm of Toyota Motor Corp. sold a $1.6 billion green bond to fund consumer purchases and leases of energy-efficient Toyota and Lexus vehicles. To meet demand, the bond was upsized from an earlier plan to sell $1.2 billion. Zhejiang Geely Holding Group, which manufactures London taxis, raised $400 million this month in a green bond sale to finance development of zero-emission black cabs in the U.K. The Chinese automaker’s bond was close to six times oversubscribed.

More automakers are likely to come to market with green bonds, said Stephen Liberatore, a portfolio manager at TIAA. “It helps the automakers to create positive focus on what they are attempting to do, but also diversify their funding base,” said Liberatore, whose TIAA-CREF Social Choice Bond Fund holds about $75 million of Toyota’s green bonds. The firm didn’t participate in the most recent deal because they viewed the pricing as “rich,” compared to other AAA-rated asset-backed securities currently trading, he said.

Toyota’s financing unit, which issued its first asset-backed green bond in March 2014, has raised $4.6 billion in three different issuances since then. Buyers of the debt have included asset managers, insurance companies, and pension funds, including California State Teachers’ Retirement System.