Europe’s largest mortgage covered bond issuer, Nykredit Realkredit, is to join compatriot Realkredit Danmark in issuing green covered bonds, with the Danish model meaning that cheaper financing costs will be passed on directly to end-borrowers, among whom Swedish clients are “leading the pack”, the issuer’s IR head told Sustainabonds.
SBAB’s Swedish Covered Bond Corporation issued the largest Swedish krona green bond on Wednesday, a SEK6bn (EUR585m) covered bond backed by energy-efficient mortgages – the first in Sweden – that attracted over SEK14bn of orders and was priced inside SCBC’s secondary curve.
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.
Thirty-seven banks with a 45% share of European mortgage lending are participating in the pilot scheme of the Energy Efficient Mortgages Initiative, which was launched yesterday (Thursday), under which they will test implementation of a new framework with a view to creating a final product.
DNB Boligkreditt has established a green covered bond framework based on residential mortgages for the most energy efficient properties in Norway, after compatriot SpareBank 1 Boligkreditt tightened its criteria on the basis of feedback during its Climate Bonds Initiative certification process.
The European energy efficient mortgages initiative – comprising EeMAP and EeDaPP – aims to bring together lenders, builders, utilities and others to create a standardised product to benefit 500 million EU citizens and the planet. Luca Bertalot, secretary general of the EMF-ECBC, which is leading the project, spoke to Sustainabonds ahead of the launch of a pilot phase in June.
Green bonds backed by mortgages might seem a natural source of supply from banks. However, a lack of joined-up data is forcing banks to be creative in carving out pools of energy efficient loans. Neil Day explores the building blocks for a bigger market with ABN AMRO’s Joop Hessels.
Hypo Vorarlberg reflected its state’s environmental ambitions with the first Austrian green bank bond on 12 September, a EUR300m five year deal that was also the first senior unsecured issue from the country since the Heta crisis, with its green status deemed a factor in smooth execution.
The EMF-ECBC is hoping to gain European Commission support and funding for developing a data protocol that would help optimise its energy efficient mortgages initiative, although a speaker at a plenary meeting of the industry body warned that “the best is the enemy of the good”.