Finance climate and environmental projects with green bonds

Finance climate and environmental projects with green bonds

Green bonds are issued with the goal of raising capital for sustainable projects aimed at protecting the climate and the environment. In the past few years, BayernLB and DKB have acquired extensive expertise in launching green bonds. This draws on the banks' many years of experience in dealing with sustainability issues, which is regularly evaluated by independent ESG rating agencies.

Wind is one of the pillars of the energy transformation. The BayernLB Group has extensive experience in structuring and placing its own bond issues.

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Money for green projects

Green bonds are a form of interest-earning securities. They are issued with the goal of raising capital for funding sustainable projects aimed at protecting the climate and the environment in general. What is special about them is that investors can clearly see the specific projects that receive the money collected through the green bonds. For example, these could include the construction of solar power stations and wind farms, upgrading energy systems in buildings or boosting the energy efficiency of production facilities. At the moment, green bonds belong to the fastest growing class of investment in the field of bonds. The European Investment Bank issued the first green bonds more than ten years ago. For several years now, it has not just been banks playing an active role on this market, but companies and even cities and federal states as well.

Video: On the environmental wave - Michael Pietzek, Bond Syndication specialist at BayernLB, on the boom in green bonds

Expertise in the Group

Over the past three years, BayernLB has accumulated extensive experience both in structuring and placing green securities for customers and issuing its own bonds.

DKB issues its own green bonds

In June 2016, DKB issued its first non-secured green bond with a term of five years and a volume of €500 million. Investor demand was in excess of €1.3 billion, making DKB the first private German commercial bank to issue a green bond. In recognition of the high quality of the bond, it received what was previously the top rating of “excellent” from well-known sustainability rating agency ISS-oekom in the Sustainability Bond Rating category out of around 250 bonds evaluated worldwide. Furthermore, it was notable that at more than 30%, a significant share of the investors came from the sustainability sector. The green quality of the bonds was confirmed by ISS-oekom as part of a second-party opinion (SPO).

In 2017, DKB then issued the second green bond, once again with a volume of €500 million but this time with a seven-year term. Once again, a very high demand of more than €1.2 billion with 170 or so investors was recorded. This meant that the bond was oversubscribed more than twice. DKB also volunteered to prepare an SPO through ISS-oekom for this issue.

For the fourth time in a row, the renowned rating agency ISS-oekom has given DKB a B- for its sustainability performance in November 2018. This is currently the highest grade issued by ISS-oekom for commercial and public sector banks. By conferring this top rating, ISS-oekom confirms DKB's “Prime” status, which is awarded exclusively to companies that demonstrate an above-average commitment to sustainable development. The organisation thereby certifies DKB’s leading position in the industry when it comes to integrating sustainability factors into lending and capital investment and complying with labour laws and ethical business standards.

BayernLB successfully places first green promissory notes

BayernLB was involved in the launch of the world's first green corporate promissory note loans. Therefore, wind farm manufacturer Nordex used the green promissory note with a volume of €550 million to finance a major acquisition. As the first of its kind, it is Climate Bond certified. BayernLB supported food producer FrieslandCampina in placing a green promissory note with an issue volume of €300 million.

Here, BayernLB assists issuers throughout the entire process, from making initial contact with the rating agencies and drawing up a timetable for issue, to organising special investor meetings or conference calls so as to present the green bond project to as many potential investors as possible.

Video: Verified quality - Philipp Rühle, head of Client Services at ISS-oekom, explains a second-party opinion