PKO preparing green covered bond framework in CEE first

PKO Bank Hipoteczny is in the early stages of preparing a green covered bond framework from which it could issue the first green covered bonds from the CEE region, with potential for issuance in euros or Polish zlotys, to finance energy efficient residential properties.

Agnieszka Zdziennicka, head of treasury at PKO Bank Hipoteczny, told Sustainabonds that the project is still in the very early stages and that it is too early to say when the framework may be finalised or when the first deal will materialise.

“We are aware that there is a lot of work ahead of us but we want to join the green covered bond market,” she said.

Six issuers have so far sold green covered bonds, but none yet from central and eastern Europe.

Zdziennicka said PKO Bank Hipoteczny, the covered bond-issuing subsidiary of PKO Bank Polski, plans to issue green covered bonds off its two existing covered bond programmes, off which the PKO Bank Polski subsidiary issues conventional euro and zloty-denominated covered bonds, financing zloty-denominated assets in its one existing cover pool.

The green covered bonds will finance mortgages for energy efficient residential properties. The issuer is currently going through the process of developing a methodology for identifying eligible loans.

It has not yet been decided whether its first green covered bond issuance will be denominated in euros or Polish zloty.

PKO is in discussions with potential second party opinion providers, added Zdziennicka, and has spoken to investors and other market participants to learn from their experience.

Poland was the first country to issue a green sovereign bond, selling a EUR750m five year in December 2016, and issued a second, a EUR1bn 8.5 year in January, to also become the first repeat issuer in the green government bond market.

Polish bank green bond activity has to date been limited to private placement-type issuance without fully-fledged programmes.

PKO sold the first Polish benchmark covered bond after the country’s legislation was updated in 2016 and in October that year sold the first euro benchmark covered bond from Poland.

ABN AMRO