BayernLB

BayernLabo social bond – we are bringing Bavaria under the umbrella

Social bonds offer the opportunity to raise capital for projects that contribute to sustainable development. As a pioneer on the German and European market, BayernLabo issued a social bond for residential development programmes in Bavaria in November 2017.

BayernLabo social bonds - we are bringing Bavaria under the umbrella

While issues of green bonds reach new peaks from year to year, only very few social bonds have been on the market until now. Like their green equivalents, they offer the opportunity to raise capital for projects that contribute to sustainable development. As a pioneer on the German and European market, BayernLabo issued a social bond in November 2017.

The BayernLB social bond was issued with a term of 10 years and a volume of €500 million, making it the first social bond from a development bank in Germany. Within just an hour and a half, the syndicate banks involved in the issue received 85 orders worth more than €2 billion.

Video: A dream first start - Miriam Scuka, head of Strategic Asset Liability Management at BayernLB, on the first social bond issued by BayernLabo.

Broader investor base created

At 46%, the share of foreign investors was significantly higher than for previous benchmark issues by BayernLabo. Particularly well represented were investors from Germany and Austria with a share of 58%, followed by investors from the Benelux region with 10% and investors from Scandinavia with 9%. With placing shares of 35% and 30%, the bond generated lively demand, especially among banks, asset managers and funds.

It was pleasing to see that some 37% of investors submitted an offer for this bond, especially in view of the ESG (Environmental, Social and Governance) criteria and therefore takes into account the intention of this transaction in particular.

Second-party opinion confirms social quality of bonds

To support its social bond issue, BayernLabo commissioned sustainability rating agency oekom research to prepare a second-party opinion. As part of this independent report, oekom research confirmed the bond’s sustainable added value. The foundation for oekom research’s sustainability evaluation and confirmation was the challenging oekom Social Bond Analysis Framework.

Funds pour into residential development and modernization

The proceeds of the issue of social bonds are flowing into financing new or existing loans for the following support programmes:

  • Bavarian interest rate reduction programme for supporting home ownership
  • Bavarian modernisation programme
  • Municipal support programme to create rented housing in Bavaria

BayernLabo had the relevant use of the proceeds of the issue reviewed and confirmed by its auditor.

BayernLabo creates transparency

BayernLabo is also required to provide investors with annual reporting on the use of the proceeds of the issue. The first report will appear a calendar year after the floating of the issue, so November 2018. In this, BayernLabo creates transparency around the sufficient support loans as part of the financed programme and the number of residences supported by the proceeds of the issue. In addition, examples of the support in the three programmes will show specifically how the proceeds of the issue are being used.

BayernLB's participation in successfully placing BayernLabo social bonds

In the issue of the social bonds, BayernLB acts as a joint lead and structuring advisor. It supported BayernLabo throughout the entire process, from making initial contact with the rating agencies and drawing up a timetable for issue, to preparing and carrying out many investor meetings across Europe (roadshow) and conference calls. Thanks to the very successful pan-European roadshow, BayernLabo succeeded in bringing about significant investor diversification.