A building’s energy efficiency has a negative and highly significant correlation with the risk of mortgage default, according to an Energy Efficient Mortgage Initiative (EEMI) study, which it says is the fullest analysis of the subject and a timely finding as the European Commission sets out its post-Covid-19 agenda.
Interest in the energy transition purpose of a €1.25bn 10 year debut green covered bond helped France’s BPCE achieve the biggest book on a euro benchmark covered bond since 2013 on Tuesday, according to an official at the issuer, allowing it to achieve “more normalised” pricing amid the crisis-hit market backdrop.
In June 2019, PKO Bank Hipoteczny issued the first green covered bond from central and eastern Europe, and has since followed up with a second deal as well as the launch of an energy efficient residential mortgage offer. Five years on from its creation, CEO Paulina Strugała tells Sustainabonds about the latest developments related to its green covered bond activity.
Berlin Hyp has enhanced its green bond reporting by calculating carbon emission savings based on the specific energy mix of buildings in its green finance portfolio, in what is understood to be a first for a green bond issuer. The lender has meanwhile transferred its Green Pfandbrief brand to support the Association of German Pfandbrief Banks in promoting the product.
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.