EBRD invests €72.5 million in Zagreb Holding’s first sustainability-linked bond

• EBRD subscribes to Zagrebacki Holding’s first sustainability-linked bond
• Bank invests €72.5 million in Zagreb utility’s €305 million issue
• EBRD President met Zagreb Mayor last week to discuss city’s green potential

The European Bank for Reconstruction and Development (EBRD) has invested €72.5 million in a €305 million sustainability-linked bond (SLB) issued by Zagrebacki Holding, the first SLB issued by a local municipality or public-sector company in Croatia. Zagrebacki Holding is the country’s largest utility company, responsible for water supply and wastewater collection, solid waste management, road maintenance, public surfaces maintenance, gas distribution, parking and other communal services in the City of Zagreb through a network of branches and subsidiaries.

Issuers of SLBs commit to achieving specific sustainability performance targets. If these are not met, they have to pay a financial penalty. As part of this new issue, Zagrebacki Holding will work on specific targets related to municipal waste management and increasing renewable energy as a share of Zagreb’s total electrical energy consumption.

The issue is dated 11 July 2023, with a bullet repayment and five-year maturity. The bond has a yield of 4.94 per cent and a fixed interest rate of 4.90 per cent, paid semi-annually.

Victoria Zinchuk, EBRD Director for Central Europe, said: “We are proud to support Zagreb Holding’s sustainability-linked bond as the first instrument of its type issued by a local public-sector company in Croatia. The EBRD stands ready to continue supporting Zagreb Holding and the City of Zagreb on their sustainability path.”

This is the EBRD’s second SLB in Croatia, both of which were pioneering issues in their sectors (the previous issue was carried out last year by a corporate issuer). The EBRD has supported other innovative financial instruments in Croatia (such as the country’s first sustainability bond issuance last year), which have contributed both to the development of the local capital markets and to the sustainable development of the real economy. 

Last week, EBRD President Odile Renaud-Basso, visiting Croatia for the first time in the post, met with Mayor of Zagreb Tomislav Tomašević. They discussed potential future cooperation on energy efficiency in public buildings and urban regeneration initiatives.  

The EBRD has a long-standing relationship with the City of Zagreb and Zagreb Holding, supporting the city’s vital municipal infrastructure and services through five successfully implemented projects to date.

This year, the EBRD marks 30 years of activity in Croatia. The Bank was created in 1991 after the fall of the Berlin Wall to help countries in emerging Europe transition to a market economy. In the last three decades, it has invested almost €4.5 billion in Croatia, provided advisory services to more than 800 small and medium-sized enterprises and supported the country’s European Union (EU) approximation process.

While most EBRD investment in Croatia has been in the private sector, key programmes with municipalities since 1995 have helped Croatia meet EU environmental standards. The cities where EBRD programmes have improved water quality include Zagreb, Split, Pula, Šibenik, Rijeka, Karlovac, Poreč, Zadar and 44 smaller municipalities. Other environmental programmes have improved solid waste management and urban transport.