SpareBank 1 Boligkreditt set for first Nordic green covered bond

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.

SpareBank 1 Boligkreditt (SpaBol) announced on Friday that it has mandated ING as green bond structuring advisor and joint bookrunner and Deutsche Bank, Natixis and UniCredit as joint bookrunners to arrange a European roadshow ahead of the debut issue. The euro-denominated benchmark trade will have an intermediate maturity, and could be launched as soon as next week, according to bankers at the leads. The roadshow will start on Wednesday and end on Friday, visiting the Netherlands, Frankfurt and Munich.

The deal will be the first green covered bond from Norway and the Nordic region. The only Norwegian green bond to date is understood to be a NOK1bn bond for DNB, issued in 2015 for the financing of renewable energy projects.

Eivind Hegelstad, COO and head of investor relations at SpareBank 1 Boligkreditt (pictured), told Sustainabonds that the issuer wanted to “take the lead” in issuing green bonds in Norway.

“Green bonds are in demand, and while we are not expecting a price differential, we are keen to address this growing investor segment for diversification of the investor base – we expect this segment of investors will grow,” he said.

The project is also aimed at showcasing and enhancing the commitment to sustainability of the banks within the SpareBank 1 Alliance, said Hegelstad.

“The banks have been on the back-foot with regards to disclosure, but as with many businesses and financial institutions in Norway, are working to a very high ESG standard,” he said. “The Norwegian operating environment has ESG built in to it through laws, regulations, standards and culture.

“We think that issuing green bonds now will focus the mindset in the Alliance banks even more on environmentally friendly lending, and also in residential mortgages.”

Hegelstad noted that one of the banks in the SpareBank 1 Alliance, SpareBank 1 Hallingdal Valdres, is already offering mortgages “on very advantageous terms” to customers seeking to improve their energy efficiency by upgrading existing buildings or building new “passive” houses.

The proceeds of the first issuance will be used to finance a portfolio of new and existing mortgages for energy efficient residential buildings in Norway. The bond will be issued under a Green Bond Framework aligned with ICMA’s Green Bond Principles, and an eligibility assessment of the green bond has been undertaken by DNV GL Business Assurance Services.

Together with Norwegian building consultant Multiconsult – a Climate Bonds Initiative-approved consultant – ING and SpaBol have developed a methodology that allows the issuer to identify the top 15% low carbon residential buildings in Norway, despite the typical measure of energy efficiency for residential properties, Energy Performance Certificates (EPCs), not being publicly available in Norway.

The deal will make SpareBank 1 Boligkreditt only the third issuer of a benchmark green covered bond, following Germany’s Berlin Hyp – which has issued two such deals to date – and Deutsche Hypo – which made its debut in the format in November. The overall green bond market has grown rapidly in recent years, but the green covered bond market has lagged behind somewhat, with most bank issuance coming in the senior market – although a handful of social covered bonds have added to the overall sustainability issuance in the asset class.

SpareBank 1 Boligkreditt is jointly owned by an alliance of saving banks under the SpareBank 1 brand, and its cover pool consists solely of Norwegian residential mortgages originated by the SpareBank 1 parent banks.

ABN AMRO