Teekay Shuttle Tankers’ attempt to float a green bond has partially run aground, with investors balking at the notion that a company specialising in oil tankers can qualify for eco-friendly financing.
The Bermuda-headquartered company, which owns one of the world’s largest fleets of ships that transport oil from offshore drilling sites, issued its green bond earlier this month. It was seeking between $150m and $200m to finance the construction of four new fuel-efficient tankers but fell short, raising just $125m.
The cool reception comes despite the fact that the bond qualifies for a tax incentive from the Norwegian government. The bond was brought to market by Danske Bank, Nordea, SEB and DNB Markets and pays a significantly higher coupon than the market average for high-yield debt.
Teekay’s struggle to raise capital is a rarity in the green bond market, which has been especially hot this year. Global issuance has been on a record-setting pace and many of the securities coming to market have been oversubscribed by investors.
The fundraising shortfall was largely attributable to investors being “skittish” over the notion that Teekay could be considered green, said Maria Christina Dikeos, head of global loans contributions at Refinitiv. “Looking at this, [investors] were like ‘Hold on, we are actually funding tankers which will fundamentally enable a company to transport fossil fuels’,” she said.
Teekay’s sale highlights an ongoing struggle to define terms in the world of sustainable finance. The London Stock Exchange announced last week that it was tightening its standards on green bonds and the EU is working to publish an official taxonomy to help define different types of sustainable assets, but there is currently no established set of rules.
“Because there is no industry standard, anyone can issue a bond and call it green or sustainable,” said Ray Dhirani, head of corporate stewardship, finance and extractives at the World Wildlife Fund.
In the case of Teekay, the bond was rated as “light green” by Cicero, a sustainability analytics company. “To qualify for the green bond label, the assets financed by the green bonds must show significant impact,” said Nina Ahlstrand, head of sustainability at DNB Markets. “What qualifies as green is not necessarily, nor should it be, binary.”
This sentiment echoes a speech given by Mark Carney, Bank of England governor, at last month’s UN Climate Summit where he opined on how the market must embrace “50 Shades of Green” in financing the transition to a low-carbon economy.
Many investors agree with the notion that green financing should be made available to companies trying to improve their emissions, but their reluctance to invest in this issuance was not rooted in concerns over how Teekay is using the bonds. The problem is the non-green nature of Teekay’s business.
Green financing should be used to spur a business’s transition to selling green products and services, said James Rich of Aegon Asset Management. He called the Teekay green bond “oxymoronic”.
“Just because you’re shipping more efficiently does not change the fact you’re selling a product that’s contributing to global greenhouse gas emissions,” said Mr Rich.