• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

MBA develops ESG bond framework

0
  • by Editor
  • in Blogs · Treasury
  • — 28 Jan, 2021

Top: Tim Seagrave, Victoria Worsfold, Peter Findlay. Bottom: Chistian Wall, Fraser McKay.

Room151’s LATIF event saw news that the Municipal Bonds Agency is working on a plan that will allow local authorities to issue ESG bonds.

“Music to my ears.” Those were the comments of one expert at Room151’s Local Authority Treasurers’ Investment Forum (LATIF) after hearing that the Municipal Bonds Agency (MBA) is developing an ESG framework for local government bonds.

There is reason to celebrate. The framework should allow capital markets investors to lend to local government for projects that meet ESG criteria. Revealed by Christian Wall, a director at PFM, the MBA’s managed service provider, at LATIF, the good news is that the framework should also offer cheaper money for local government.

June Matte, PFM’s managing director, told Room151 that there is a supply imbalance: The level of ESG bond issuance has failed to keep up with demand. For that reason investors are willing to pay a “premium” to ESG issuers to purchase bonds.

According to Wall, ESG bonds in Europe have offered savings of between 10 and 15 basis points (bps). UK bonds so far have offered between two and seven bps. Wall believes ESG bonds could beat PWLB rates.

“It’s still worth having, particularly if you are issuing below the PWLB rate: you get a much bigger saving,” said Wall.


A Practical Guide to Investing

February 16th – March 23rd, 2021
Six free weekly CPD-certified tutorials – view brochure
Register here with a .gov.uk email address


Draft

A draft ESG framework was due to be considered by the MBA’s board this week, according to Matte. If approved the next step will be developing the procedure to move either a standalone or pooled bond to market.

“The agency will have its ESG framework in place very shortly,” said Wall, “…that will lead to more savings that will demonstrate very clearly for local authorities that have clear political and public commitments to green and sustainable financing, that they can get a better rate than PWLB.”

It was Tim Seagrave, group finance lead at Manchester City Council, who greeted the news with the most enthusiasm.

“This is something the sector is really looking for,” he said. “There’s an appetite out there for investors wanting to put their money in local government infrastructure.

“A lot of what we do is around social benefit, be that a tram system, be that care homes or social care facilities. The more we highlight those virtues, the more we can have one-to-one conversations with investors and explore options.”


Room151’s Monthly Online Treasury Briefing

February 26th, 2021
Sustainable investing for treasurers
Register here with a .gov.uk email address


Alternatives

Room151’s conference last week took place after a year in which the PWLB rate was raised by a percentage point and then cut again in November as the Treasury revealed new borrowing rules for councils.

The rate rise caused local government to look at the capital markets for alternatives sources of borrowing.

Despite the rate cut, councils have retained interest in alternative sources of borrowing. A Room151/CCLA survey revealed that of those inclined to look beyond PWLB almost 35% of treasurers consider the MBA an attractive source of borrowing while private placement bonds scored support of more than 20%.

Victoria Worsfold, 151 officer at Guildford Council, backed suggestions that borrowing diversity remains a key consideration and debt portfolios should be managed “as you would an investment portfolio.”

She added: “I think there’s a big place for the capital markets to reach out to local authorities. You need a whole suite of options.”
However, there may still be some work to do in helping capital markets investors understand the strengths of local government finance.

“There’s a good deal of investor education still needed,” said Wall. “We’ve been asked how much of the debt Northamptonshire defaulted on, how much has there been a haircut? Of course, there’s been none.”

To watch the full discussion of alternative sources of funding on Day 2 of LATIF, click here.

FREE monthly newsletters
Subscribe to Room151 Newsletters

Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address

Room151 Webinars
Visit the Room151 channel

Share

You may also like...

  • Supreme Court ruling: No charter for LGPS boycotts 26 May, 2020
  • Expertise and risk management key to LA bond investments Expertise and risk management key to LA bond investments 26 Sep, 2013
  • Andrew Lovegrove: Purchasing power and the limits of treasury strategy Andrew Lovegrove: Purchasing power and the limits of treasury strategy 5 Dec, 2016
  • US debt and corporate margins US debt and corporate margins 21 Nov, 2011

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 12 hours ago

    What role will climate change have on the pricing of government bonds?: Sponsored article: Kerry Duffain finds that “vulnerability and resilience to climate change” have a significant impact on the cost of government borrowing. Ardea Investment… dlvr.it/RtNKv7 pic.twitter.com/wDjT31x4Yt

    Room151 1 day ago

    ESGenius: Slashing emissions will fuel green growth for decades: Sponsored article: Velislava Dimitrova argues that a big enough investment could mean transition to a low, or no, carbon economy can become a reality. The world needs to slash carbon[...] dlvr.it/RtKZJp pic.twitter.com/cd8S3ijERl

    Room151 1 day ago

    Prudential code: “Not perfect, but its heart is in the right place”: The new Prudential Code offers revised rules for borrowing. Nikki Bishop is sceptical it will work while Gary Fielding offers his support. Nikki Bishop I have been asked to give[...] dlvr.it/RtKZFh pic.twitter.com/OriN28lXcb

    Room151 2 days ago

    Tremendous report from @MarkSandford3 citing @room_151 no fewer than six times (despite what the @lgcplus fact checking/counting dept might tell you) #localgov commonslibrary.parliament.uk/research-brief… 1/5

    Room151 1 week ago

    Dan Bates: Capitalisation directions are not the only tool for rebuilding finances: Dan Bates argues deep seated problems are contributing to a rush for capitalisation directions. For some time now we have been reading that a number of councils are in… dlvr.it/RspKff pic.twitter.com/xRRsgVim9u

    Room151 2 weeks ago

    Is local government funding “broken”?: Andrew Hardingham looks at the underlying issues that caused more than a third of respondents in the Room151/CCLA treasury survey to say that the funding system for local govenrment is[...] dlvr.it/RsYhsg pic.twitter.com/plNp7Ayys6

    Room151 2 weeks ago

    GameStop: A lesson for LGPS in the risks of short selling: Day traders coordinating their efforts through the social media platform Reddit have not only boosted the stock of US GameStop, but also badly hurt hedge funds engaged in huge bets[...] dlvr.it/RsGdVV pic.twitter.com/NTMC3j6J2u

    Room151 2 weeks ago

    Room151 panel backs unitary councils and devolution: Bigger isn’t always better when it comes to local government, according to Sir Bob Kerslake, chair of the Peabody Trust, but “ …we need to move to unitary government and[...] dlvr.it/RsFPNv pic.twitter.com/lT4eCi0TmV

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Funding reforms pose a ‘threat’ to financial planning while some councils benefit
  • Next story Treasurers back multi-asset funds and property but pessimistic about yields

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK