Deutsche Bank and Continuum Energy Levanter, a subsidiary of Continuum Green Energy, have executed the world’s first green hedging transaction with a second party opinion based on a specially designed green hedge framework.

Together both companies developed a green hedge framework to support the implementation of Continuum’s green bond framework. External reviewer Cicero Green issued the second-party opinion on the green bond and the green hedge frameworks.

The foreign exchange (FX) hedge solution is for a 6-year tenor in US dollars and Indian rupees on notional of US$185 million, linked to Continuum’s green bond US dollar primary issuance and based on their green bond framework.

“This hedge structure has the potential to set new standards for increased transparency and risk management, particularly for emerging market hard-currency green bond issuances,” says Rahul Jian, Deutsche Bank’s head of sustainable and special solutions for Asia. “With new green debt issuance in emerging markets continuing to grow, investors are increasingly looking for ways to distinguish well managed, quality green issuers from the rest. 

“This solution sets a high water mark for disclosure and transparency for green bond investors. By adopting this green hedge framework, Continuum will increase transparency for investors by combining metrics and reporting of a project’s ESG [environmental, social and governance] impact as well as providing important reference points for financial risk management.”

Bond proceeds are to be used for renewable energy projects in India, which exposes the company to US dollar and Indian rupees FX risks. The green hedge framework provides a methodology for Continuum to risk manage their currency exposure while providing additional transparency for the green bond holders.

Deutsche Bank was the lead bookrunner and green structuring agent for Continuum’s 144A Reg S green bond, which priced in February this year.