Berlin Hyp open to green private placements as it hits 20 target early

Berlin Hyp has opened up its green bond issuance to private placements ahead of the fifth anniversary of the launch of its pioneering green Pfandbrief today (Monday), with the German issuer having hit one year ahead of schedule a target of 20% of its lending being green by the end of 2020.

Berlin Hyp launched the first ever green covered bond on 27 April 2015, a €500m seven year mortgage Pfandbrief. It now has eight benchmarks outstanding across secured and senior formats, the most of any European commercial bank.

On 17 April, Berlin Hyp expanded its green bond issuance to include private placements, with the execution of a €25m three year senior preferred medium term note (MTN) that it subsequently tapped for €10m. It has since issued a 10 year senior preferred Schuldschein for around €25m, and the bank can also issue green Pfandbriefe senior non-preferred as private placements under updated documentation.

“It’s a new step for us, because so far we’ve always saved our precious green assets for the bigger stage,” Bodo Winkler, head of funding and investor relations at Berlin Hyp (pictured), told Sustainabonds. “But by the end of last year, we managed to increase our green finance portfolio by quite a lot, more than we could use for benchmark issuance in 2020, so we thought it could be the right time to open it up to day to day business, meaning MTN funding, too.”

Berlin Hyp’s green finance portfolio grew almost €2bn from March 2019 to February 2020, more than in any previous reporting period.

“Introducing private placements was a good decision,” added Winkler, “because it attracted investors we might not have seen if it weren’t green.”

DZ Bank led the two private placements and Nico Braun on the bank’s MTN desk said its cooperative sector client base is keen on sustainable investments, making the trades opportune for both sides at a time when many issuers are shying away from issuing at elevated levels.

The trades came ahead of the release of Berlin Hyp’s fifth annual green bond report today, in which it flagged that it has achieved a year early its target of having green lending constitute at least 20% of its loan portfolio by the end of this year, and that it is now working towards a new, “ambitious” strategic climate goal.

“The coronavirus pandemic, its effects and how best to cope with it are currently challenging each of us in our own environment,” said Gero Bergmann, member of the Berlin Hyp board of management responsible for capital markets, “nevertheless, it is still necessary to jointly continue the fight against climate change with unchanged, if not increased, strength.”

Its framework has been updated to incorporate anticipated elements of the EU Green Bond Standard that is in development, according to the bank, with reference to where its impact reporting can be found and the methodology behind this. Eligibility criteria have meanwhile been tightened, partly in anticipation of how it expects the EU taxonomy to turn out, with a reduction in the maximum final energy demand for heat and electricity in the office building class of 20 kWh per square metre per annum each.

ABN AMRO