The use of renewable energy assets as covered bond collateral under a proposed Luxembourg framework would bring extra risks versus traditional collateral, according to Moody’s, but the rating agency highlights various mitigants and says the law is overall credit positive for funding such assets.
The European Commission will in May propose a sustainable finance taxonomy that will provide the basis for EU labels for green bonds to be introduced in 2019, it announced today (Thursday), among measures including changes to fiduciary duty and an exploration of a “green supporting factor”.
The bank green bond market is primed to continue its rapid growth, according to S&P, with the rating agency highlighting the importance of reporting and transparency in achieving a top green score under its approach.
Draft guidelines for a planned European energy efficient mortgage have been published for a market consultation today (Monday), ahead of the launch in June of a pilot scheme, which will collect data that could substantiate a correlation between energy efficiency and lower risk.
National Australia Bank (NAB) took an innovative approach to green securitisation when it sold a A$300m green tranche as part of a A$2bn residential mortgage backed security (RMBS) on 8 February, with low carbon buildings part of a wider pool of mortgages.
The EU High-Level Expert Group (HLEG) on sustainable finance delivered a “manifesto for far-reaching change” in the form of its final recommendations to the European Commission today (Wednesday), with a call for an official EU Green Bond Standard to be introduced this year.
SpareBank 1 Bolgikreditt launched the largest single-tranche green bank bond outside China and the first green benchmark covered bond with residential mortgages on Tuesday, a EUR1bn deal made possible by taking building codes and years as a proxy for energy efficiency – a strategy that could be used by others.
SpareBank 1 Boligkreditt is preparing to issue an inaugural, euro benchmark green covered bond – the first from outside Germany – targeting the growing SRI investor base and aiming to highlight and enhance its member banks’ commitment to sustainability, SpaBol’s Eivind Hegelstad told Sustainabonds.
A world-first green covered bond law has been proposed by Luxembourg’s ministry of finance, with the draft bill defining a new product to finance renewable energy infrastructure. The move is just the latest green finance initiative in the country – whose covered bond market has meanwhile been in decline.
Lower capital requirements for green assets could be credit negative for banks, according to Moody’s, because they could lead to “real risks” being underestimated, but the EMF-ECBC’s Luca Bertalot argues that the industry could satisfy an evidence-based European Commission approach.
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