Kestrel to offer green, social bond verification on competitive muni sales

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Kestrel Verifiers has rolled out a new program that lets underwriters add green, social and sustainable designations to competitive municipal bond sales, the firm said on Monday. Kestral said it has qualified its first deals under the new program, which are selling this week.

“As the world, the market and all of our friends in munis are reeling from the devastating impacts of COVID-19, we took into deep consideration launching a new service at this challenging time,” said Dana Villanova, Kestrel COO. “Ultimately, with the support of many of our underwriter colleagues, we decided that our innovative solution could give more market participants the ability to differentiate their deals in such a tumultuous market.”

"We decided that our innovative solution could give more market participants the ability to differentiate their deals in such a tumultuous market," said Kestrel's COO, Dana Villanova.

Kestrel, a certified women’s business enterprise, said the program would work somewhat akin to municipal bond insurance, with the firm pre-qualifying competitive sales to make sure they meet the International Capital Markets Association’s green or social bond principles.

Underwriters will then receive a list of pre-qualified deals and can incorporate the verification fee and market the deal as green, social or sustainable bonds on pre-sale wires.

Post-sale, the firm said it would supply underwriters with closing documentation, logos and language for the final official statement and provide a second party opinion report, which will describes how the deal met the bond principles.

Regarding sales this week, Kestrel said both series from Berkeley, California, have been designated as its first pre-qualified deals.

Kestrel said Berkeley’s $38 million of Series 2020 taxable general obligations (2018 Election Measure O: affordable housing) have been qualified as sustainability bonds. Sustainability bonds are a combination of both green with social benefit.

Kestrel also said Berkeley’s $7.6 million of Series 2020 A GO refunding bonds (2008 Election Measure FF: Neighborhood branch library improvement project) have been pre-qualified as green bonds.

Both deals are slated to sell on Wednesday but timing may change due to market conditions.

Kestrel said it expects to pre-qualify additional deals throughout the week and will notify underwriters of any additions.

Kestrel said a green, social or sustainability designation doesn’t require issuers to do any additional reporting beyond the normal annual continuing disclosure.

“Even before coronavirus we saw that supply could not keep pace with investor demand for green, social and sustainable bonds for ESG, impact, sustainability, climate and green funds,” Villanova said. “The solution became clear; create more green/social bond supply by giving more market participants the ability to add those labels to their deals.”

As of today, Kestrel has verified over $2.4 billion in municipal and corporate bonds, both closed and in-progress deals under contract.

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