The final EU Taxonomy delegated act looks set to prove accommodating to green covered bonds, with a new leaked version aligning with current market practice of the top 15% most energy efficient buildings, as originally recommended by the TEG, and other criteria also relaxed.
Berlin Hyp became the first bank to sell a sustainability-linked bond (SLB) yesterday (Tuesday), issuing a €500m 10 year senior preferred bond with a coupon step-up should it not hit a carbon reduction target, in a “courageous” move that met with dedicated investor interest and achieved tight pricing.
Berlin Hyp is set to become the first bank to launch a sustainability-linked bond next week, a 10 year senior preferred issue tied to a sustainability performance target of a 40% reduction in the carbon intensity of buildings financed by its loan portfolio.
A leaked updated draft of the EU Taxonomy delegated act contains looser eligibility criteria that would be applicable to a wider range of buildings, but it could still exclude green bonds under several existing frameworks and has been deemed inconsistent and still overly restrictive.
OP Mortgage Bank issued the first Finnish green covered bond yesterday (Thursday), a €750m deal with proceeds earmarked for energy efficient buildings that achieved a peak €1.6bn-plus book and the tightest 10 year spread since May 2019 – “a great outcome,” according to head of funding Tom Alanen.
Crédit Agricole Italia sold the first Italian green covered bond on Monday, a €500m 12 year deal that achieved the tightest pricing of any Italian covered bond, and its head of financial management said the debut delivered on the French group’s ESG strategy and commitment to investors.
MünchenerHyp issued its first senior green bond on Wednesday, a €500m eight year deal that is also its first senior non-preferred euro benchmark, with the German bank moving to take advantage of persistent demand in credit markets at higher yields in spite of elevated rates volatility.
Deutsche Kreditbank (DKB) will in future only tap the bond markets in green and social format, after having sold the first deal compliant with the latest draft of the EU Taxonomy and Green Bond Standard, a €500m five year that is also the first senior preferred bank bond issued at a negative yield.
The Energy Efficient Mortgage Label will be launched on 12 February, offering a platform for lenders to provide data and transparency around green products and providing a “bridge” towards a greener market and potentially higher Taxonomy standards, according to the EMF-ECBC’s Luca Bertalot.
Draft EU Taxonomy standards threatens to stymie green bond issuance to finance green buildings by limiting eligibility to those with EPC A labels, with one pioneering covered bond issuer floating a switch to KPI-linked bonds, although there are suggestions the Commission may be open to compromise.