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Second green Berlin Hyp due, with growth, experience cited

Berlin Hyp is planning to launch only the second green covered bond benchmark next month, after having doubled its green lending in the past year and learned lessons since its pioneering debut two years ago, according to head of credit treasury and investor relations Bodo Winkler.

Berlin Hyp imageThe German lender announced today (Tuesday) that it is planning to launch a medium term benchmark after a roadshow starting on 29 May, subject to market conditions. Commerzbank, Crédit Agricole, JP Morgan, LBBW and UniCredit have the mandate.

The deal will be only the second green covered bond, following Berlin Hyp’s Eu500m seven year debut in April 2015. That had been preceded by an ESG (environmental, social, governance) Pfandbrief from MünchenerHyp, while Spanish issuers KutxaBank and Caja Rural de Navarra have since launched sustainable deals, although none have had a solely environmental focus.

Berlin Hyp followed up its first green Pfandbrief with a Eu500m seven year senior unsecured issue in September 2016, which inaugurated a combined green programme allowing senior and covered bond issuance.

“The Pfandbrief is our most important funding tool,” Berlin Hyp’s Bodo Winkler told The CBR, “while our senior unsecured needs are at the moment a little bit limited.”

The new issue will make the bank the first repeat issuer of a sustainable covered bond, two years on from its debut.

“We have learned quite a lot,” said Winkler. “When we came to the market for the first time with a green Pfandbrief, we were looking at the overall sustainability of buildings. We have since discovered that what is most interesting for investors is energy efficiency and we have also found that it is the element that you can measure the best, and that is reflected in our current criteria.

“We also have more experience in this market, as we have now issued impact reporting twice. I would say that within this quite young green bond market Berlin Hyp has managed to establish itself as one of the issuers that has really developed over time.”

On 27 April Berlin Hyp published its latest annual green bond reporting, highlighting that its green finance portfolio had increased from Eu1.021bn to Eu2.024bn over the year, reaching 11% of the bank’s total mortgage portfolio.

“We continue to pursue our passion and are also offering financing for green buildings in the current year at terms of 10 basis points lower than normal loans,” said Gero Bergmann, member of the board of management responsible for markets at Berlin Hyp. “Our objective is to raise the share of green building financing in our loan portfolio to 20% by 2020.”

Over three-quarters of the green finance portfolio, almost Eu1.572bn, is in Berlin Hyp’s cover pool.

According to a Berlin Hyp impact report – produced in conjunction with Crédit Agricole – investors helped to avoid between 4.5 and 28.7 tonnes of carbon emissions each year for every Eu1m invested (depending on which underlying benchmark is used). The green bond programme was also verified by second party opinion provider oekom, which confirmed a positive sustainability performance.

Berlin Hyp’s last, standard Pfandbrief benchmark was a Eu500m eight year priced at 10bp through mid-swaps on 15 February.

“Based on the current outstanding benchmarks, at Berlin Hyp there are presently no spread differences between the green Pfandbrief issued in 2015 and its conventional bonds,” said Kai Ebeling, covered bond analyst at NordLB. “However, we believe the larger investor base means that differentiation in the market cannot be ruled out in future.”

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