Berlin Hyp issues €500m unsecured green bonds

German mortgage bank Berlin Hyp has issued its first unsecured ‘green’ bond, raising €500 million, more than a year since it issued a green pfandbrief.

The proceeds of the bond, an unsecured bank bond in benchmark format, will be used to refinance loans for buildings deemed to meet certain energy efficiency and sustainability criteria. As with the green pfandbrief, the bank will also aim to invest an amount equivalent to the proceeds of the issue in additional new green building finance for the term of the bond.

It was placed by a consortium of banks comprising ABN Amro, Commerzbank, Credit Agricole, JP Morgan and LBBW.

The bond has a term of seven years, offers a coupon of 0.5 percent and is rated A+ and A2 (positive) by Fitch and Moody’s respectively. The re-offer spread was set at mid-swaps plus 52 basis points.

The order book reached more than €1.2 billion, meaning that the bond was oversubscribed by a factor of 2.4. German investors accounted for 53 percent of investments in the bond, while 13 percent was attributed to Austria and Switzerland. UK and Scandinavian investors were the next largest investor groups, accounting for 11 percent and 9 percent of investments respectively.

The majority of the green bond, 42 percent, went to asset management firms, followed by banks including German saving banks with 28 percent. Insurance companies accounted for 14 percent. Sustainable investors accounted for 41% percent.

“After the resounding success of the Green Pfandbrief, we established a Green Building Commission in which employees from five different departments of the bank define and regularly review the criteria for green buildings and monitor processes involved in the financing of sustainable, energy-efficient buildings,” said Gero Bergmann, member of the board of management at Berlin Hyp.

“We support the financing of green buildings with a discount of between five and ten basis points,” he added.

Berlin Hyp’s green financing portfolio had a volume of €657 million as the green pfandbrief was issued, but the volume has since risen to around €1.5 billion.

“Berlin Hyp intends to generate further growth in this segment,” Bergmann continued. “The huge demand for the green bond we issued is a testament to the fact that our products are meeting the requirements of investors with an increasingly sustainable perspective to their investments.”

“Our green bond programme will put us in a position to engage in the green bond market with far lower one-off costs and therefore on a regular basis,” he added.