SSA carbon exposures: JBIC New Year's announcement

5 minute read

The 30 Dec 2021 announcement of a USD500mn facility for a Russian oil company on behalf of Japan Bank of International Cooperation (JBIC) leads us to take a further look at the issuer, not least in the context of a potential coming green bond issuance. Investors looking to align their SSA bond portfolios with net zero targets should have a closer look at news flow around benchmark-relevant SSA issuer JBIC.

JBIC announced the loan into a facility for Irkutsk Oil (IRK), a Russian upstream oil and gas operator, in order for IRK to equip a petrochemical plant in Eastern Siberia. We again recommend investors to review whether the risk-premiums of the JBIC bonds offered in the market are proportionate to the potential carbon emission funding liabilities through the entity’s balance sheet.

We expect the carbon intensity of SSA portfolios to come under further scrutiny in 2022. Furthermore, with JBIC having roadshowed a green bond framework in Dec 2021 and a deal just being announced, we opine that potential investors should conduct a thorough due diligence on the climate strategy of the issuer as well as potential reputational risk factors associated with these investments.