South Carolina capital sets a precedent with green bond deal

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Columbia, South Carolina, successfully tested the waters in issuing its first green bond deal.

The city Dec. 6 priced $38 million of stormwater revenue bonds certified by the Climate Bond Initiative. Closing on the deal is Wednesday.

The bonds are the first stormwater revenue-secured green bonds in the U.S. to receive the CBI seal, according to Siebert Cisneros Shank & Co., the lead underwriter.

Loop Capital Markets was co-manager.

Bond proceeds will be used as the first tranche of a $95 million program over the next five years addressing the city’s flooding and stormwater drainage issues.

Orders were received from 36 investors with “several stating that the green bond designation was a key factor in their investment decision,” Siebert Cisneros Shank said. The deal priced to yield 1.86% with a 4% coupon in 2020, 2.71% with a 5% coupon in 2031, and 3.31% with a 5% coupon in 2048.

Columbia Mayor Steve Benjamin, who is chairman of Municipal Bonds for America, launched the city’s green infrastructure program, which is using new, low-impact technologies and modular storage for flood control.

“As climate change brings more extreme weather, cities must prepare by building more resilient infrastructure that can withstand more powerful storms, even as populations increase,” Benjamin said. “At the same time, we must invest smartly and in an environmentally responsible way so that we are helping to mitigate these problems and leave a safer, more sustainable world for the next generation.”

Moody's Investors Service assigned its Aa2 rating to the bonds, while S&P Global Ratings rated them AA-plus. Both have stable outlooks. Analysts said the city’s stormwater system is well-managed and has a strong financial profile, including good debt service coverage and liquidity.

“By issuing green bonds, the city has joined America’s leaders in environmentally-friendly infrastructure investment,” said Suzanne Shank, chief executive officer of Siebert Cisneros Shank. “We continue to see an increase in demand for green bonds as investors implement enhanced environmental, social and governance investment criteria.”

Sustainalytics, an environmental, social, and governance data firm, provided the pre-issuance verification letter for Columbia’s certification by the Climate Bond Initiative.

“With the issuance of its inaugural green bond, the city of Columbia is aiming to finance stormwater infrastructure projects that will contribute to the adaptation and resilience of the city in the face of ongoing and potential climate impacts, allowing the city to improve its response to extreme weather events, such as flooding, related to climate change,” Sustainalytics said in its verification letter.

The company said it conducted an assessment of the city’s water infrastructure projects in accordance with the Water Infrastructure Criteria of the Climate Bonds Standard.

The improvements planned by Columbia have been prioritized to protect human life and health, maintain transportation and public infrastructure, and to reduce flooding and erosion, according to city officials.

Stifel, Nicolaus and Co. is the city’s financial advisor.

McNair Law Firm PA and Johnson, Toal & Battiste PA are co-bond counsel. Parker Poe Adams & Bernstein LLP and Starkes Law Firm PA are co-underwriters’ counsel.

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Primary bond market Green bonds ESG Climate Bonds Initiative South Carolina