Investors have rallied to a wave of social-style bond issuance from supranationals aligned with the issuers’ role in the fight against the impact of the Covid-19 pandemic, providing at the same time a tonic for ailing fixed income markets. Neil Day explores the trend and the potential for such bonds.
The broader sustainability strategies of green and social bond issuers and the impact of their issuance across a range of metrics are increasingly being focused on. Meanwhile, new varieties of sustainable bonds could yield benefits, but complicate the picture. Sustainabonds gathered leading public sector issuers and ESG-focused investors for a roundtable, hosted by SFIL, to discuss key developments.
Berlin Hyp issued its first green bond in senior preferred format and eighth overall on Monday, a €500m no-grow 10 year deal that attracted more than €1.2bn of demand, and head of funding and IR Bodo Winkler said the issuer had reached the point where its issuance was almost “self-explanatory”.
Rabobank recently aligned its green bond framework with the latest draft of the proposed EU Green Bond Standard and Sustainabonds spoke to Maarten Biermans, head of sustainable capital markets at the Dutch bank, about the issuer’s support for the initiative, notably the “do no significant harm” principle.
Münchener Hypothekenbank can now issue green commercial paper, after having added the option to its EUR5bn programme, with the short term debt earmarked to refinance green assets that have not yet been included in its cover pool or the parts of loans that are cover pool-ineligible.
Stakeholders have largely welcomed the release of long-awaited green EU taxonomy proposals, which attempt to lay down green criteria to support sustainable finance, but opinions were divided over the extent to which weaknesses in the first draft had been addressed.
Moody’s has warned that the development of energy efficient mortgages, and increasing momentum in the clean energy transition that this reflects, will hit the value of buildings that do not meet new minimum requirements, as well as securitisations and cover pools exposed to such collateral.
The Energy Efficient Mortgages (EEM) Initiative unveiled its definition of an energy efficient mortgage today (Monday), in response to European Commission and EeMAP pilot needs. Only last week a Pimco portfolio manager called for greater additionality from green covered bond issuers.
DZ Hyp will at the beginning of 2019 begin work on a green bond project, after the issuer on Tuesday launched its first benchmark Pfandbrief since being created from the merger of DG Hyp and WL Bank to become Germany’s biggest covered bond issuer.
Support is being sought from the European Commission for a “market activation framework” to take the Energy Efficient Mortgages Initiative into its next stage, an EMF-ECBC official told an ECBC plenary, which also heard positive noises, with caveats, on sustainable finance from the German Ministry of Finance and BaFin.