Hyundai Capital said Tuesday it has raised $500 million in bonds dedicated to eco-friendly investments, in the first private-sector issue of green bonds in Korea.

The debt was sold with a maturity of 5 years and was priced with a yield 150 basis points above the benchmark Treasury.

Proceeds from the bond sale will be spent on investments in the hybrid and alternative fuel car projects of affiliates Hyundai Motor and Kia Motors, the company said.

Green bonds, issued specifically for funding of clean business projects, have become a new investment trend in the global market. The size of the green bond market surpassed $88 billion last year, according to Bank of America and Merrill Lynch.

Hyundai Capital is Korea’s first private company to issue green bonds. The state-run Export-Import Bank of Korea has issued green bonds twice before, in 2013 and last month.

A Hyundai Capital official said the bond issue was to diversify the company’s funding portfolio and expand its network with global investors.

“We were able to enhance our network with quality investors in the U.S. and Europe” who usually prefer to invest only in high-quality bonds issued by governments and international institutions, the official said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)