Anthropocene Fixed Income Institute

The new EIGPRL USD benchmark bonds have been snapped up by ESG investors as they are included in the JPMorgan ESG CEMBI index. We opine that this is an error with regards to investor expectations on the index as EIGPRL effectively is Aramco exposure. This could lead to divestment flows once ESG ratings are produced.

A bond pipeline is building following the large EIG/BlackRock oil/gas Aramco pipeline network transactions announced in 2021. The first bonds out of the door, from Luxembourgian SPV EIG Pearl, are illustrative for what can be expected.

Saudi Aramco appears to be close to issuing bonds again. We think putting money into Aramco shareholder(s) pockets is not a particularly good idea, especially since it seems quite straightforward to replicate the risk-return profile of Aramco bonds without the potentially negative ESG reputational and real impact.

The Saudi sovereign wealth fund is looking to do a green bond deal in the midst of a historical inflow of oil money. We argue this is a 27 bank marketing exercise: green bonds rarely sit well in a pari passu position to a major stake in Aramco. 

A private consortium led by BlackRock is looking to the bond market to refinance/leverage their investment in Aramco's pipeline subsidiary. This note makes the argument that the resultant bonds, if they come, should align with the parent company in terms of ESG metrics.

(6 Feb 2023)

Saudi Public Investment Fund (PIF), the second largest recent issuer of green bonds, now holds 8% of Aramco, which comprises nearly a quarter of its portfolio.

We encourage the market to discuss the suitability of those securities for green funds.

(18 Apr 2023)