Commerzbank attracted as much as EUR1.25bn of orders from over 100 investors to its first green bond yesterday (Tuesday), a EUR500m five year senior non-preferred benchmark with proceeds earmarked for renewable energy financing.
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.
Recent inaugural green senior non-preferred issues could represent the first green steps down the capital stack by financial institutions. Crédit Agricole CIB and our sister publication Bank+Insurance Hybrid Capital gathered together specialists in bank capital and green bonds to explore how green subordinated debt could work and help put the financial system on a path to sustainability.
NordLB Luxembourg Covered Bond Bank is preparing to issue what it expects to be the first covered bond backed by renewable energy assets and launched under a dedicated law, with its debut likely in early 2019, according to officials at the issuer.
The green bond market could grow by as little as 13% this year, according to Moody’s, which has slashed its forecast after having previously anticipated a 60% rise in issuance. The rating agency nevertheless noted increases in sustainable and social bond issuance, and highlighted covered bonds’ potential.
Investors active in green bonds stressed the importance of accountability and impact reporting offered by bonds aligned with the Green and Social Bond Principles, but showed flexibility in their investment strategies, in responses to a survey that evinced a mainstreaming of the product.
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.
Issuers wishing to win over investors with SRI mandates not only need to deliver green and social bonds, but must demonstrate how these fit into a broader sustainability strategy for the future — that was the key takeaway from a Sustainabonds roundtable hosted by SFIL in Paris on 24 May, where the market’s growth, EU initiatives, and pricing were debated.
Sustainable covered bond pioneer MünchenerHyp is working on a distinct green bond framework to accompany its prior social framework, in a move driven by investor preferences. Proponents have meanwhile denied a claim green bonds are a “lose-lose”, pointing to new issuer-investor benefits.
Green covered bond issuance looks set for significant growth thanks to regulatory measures, increasing investor interest and banks’ efforts to improve the identification of green assets and determination to finance such assets, according to S&P, with initiatives such as EeMAP deemed supportive.