The Covered Bond Report

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Awards for Excellence citations: Caffil, Luminor, Green & Social Bond Principles

Our third round of citations for the winners of The Covered Bond Report Awards for Excellence 2020 has a pioneering theme to it, as we elaborate upon the reasons for our choice of green, social or sustainability deal of the year, and our pioneer and editor’s awards.

Green, social or sustainability deal of the year: Caisse Française de Financement Local (Caffil)
€1bn 0.01% May 2025 social (Covid-19) bond
Bookrunners: Barclays, BNP Paribas, ING, NatWest, SG

Covid-19 is unsurprisingly a part of the narrative behind several of our winners, but nowhere more so than when it comes to our green, social or sustainability deal of the year: Caffil’s €1bn five year social bond issued on 28 April was the first covered bond with use of proceeds linked to the fight against the coronavirus.

Armed with its existing social bond framework focused on public hospitals, and in the wake of similar SSA issuance and Social Bond Principles guidance, the French public sector issuer attracted €4.5bn of orders to a transaction that not only supported the healthcare sector, but also aided the recovery of the asset class.

The successful execution of the transaction built on Caffil and parent SFIL’s leading position in French ESG issuance and pointed the way to the greater prominence social bonds are set to play in both the recovery from the impact of the pandemic and the “just transition” that is increasingly discussed.

Pioneer: Luminor

The creation of a pan-Baltic covered bond market with the critical mass to play a meaningful role in the wider euro benchmark market was heralded by a €500m five year inaugural trade for Estonia’s Luminor on 4 March. The transaction came on the back of coordinated efforts involving many parties across Estonia, Latvia and Lithuania to establish a unique multi-jurisdictional market.

If this weren’t challenging enough, when Luminor was finally ready to issue in early March, the Covid-19 pandemic began to rear its ugly head in financial markets and the bank had to call off a planned roadshow. It nonetheless successfully proceeded with its debut and attracted over €1.6bn of demand at a the lowest (negative) yield paid by any Baltic non-government issuer.

The landmark efforts of Luminor win it our pioneer award and we look forward to the growth of the Baltic market, which compatriot LHV Pank already joined on 2 June with a €250m five year deal.

Editor’s award: Green & Social Bond Principles

One characteristic the burgeoning green, social and sustainability bond market and the covered bond market appear to share is a spirit of community not always evident in the capital markets. And while the covered bond market has the European Covered Bond Council, its ESG counterpart has at its heart the Green & Social Bond Principles (G&SBP), adeptly handled by the International Capital Market Association (ICMA).

The principles are, of course, not unique to the covered bond market, but they are the backbone of many of the pioneering green and social projects that have been undertaken in recent years. Leading ESG covered bond issuers have played an active role in the relevant working groups that steer the market towards a sustainable future, while the G&SBP members and secretariat have responded in a timely and helpful manner towards developments such as Covid-19.

The covered bond industry also fully understands the need for pro-active and skilfull management of emerging regulatory initiatives and potential threats, and in this respect the G&SBP have remained ahead of the curve.

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