Berlin Hyp is set to launch the first green covered bond after having today (Tuesday) announced the mandate for a Grüner Pfandbrief that will be backed by commercial real estate loans that meet certain environmental and sustainability standards.

Münchener Hypothekenbank in September launched the first covered bond in the field of socially responsible investment (SRI), a Eu300m five year ESG (environmental, social, governance) Pfandbrief that was backed by cooperative housing loans, but this focused on sustainable rather than more narrowly green criteria.

Berlin Hyp has mandated Crédit Agricole, DZ, JP Morgan, LBBW and UniCredit to arrange the European roadshow, which will start on 14 April, ahead of an expected mortgage Pfandbrief issue.

“This is to my knowledge the first green covered bond and it has to be explained to investors,” said Bodo Winkler, head of credit treasury and investor relations at Berlin Hyp. “This is not a plain vanilla Berlin Hyp mortgage Pfandbrief, but has additional features.

“It is, for instance, aligned with the Green Bond Principles. And we have earmarked certain projects in our cover pool that fulfill certain environmental and sustainability requirements.”

As reported previously, Winkler said at a European Covered Bond Council (ECBC) plenary in Amsterdam two weeks ago that he sees a good fit between covered bonds and sustainability.

“The Pfandbrief is an old product that has survived many difficult periods in history,” he said, “so it is sustainable as well.”

The deal will have a second party opinion from oekom research – which provided one for MünchenerHyp’s ESG Pfandbrief and already assigns Berlin Hyp “prime” status.

“Berlin Hyp already has comprehensive sustainability management in place,” Winkler told The CBR today, “but there was one piece still missing, namely a funding instrument designed for the needs of green bond investors. So this Green Pfandbrief is an addition to our overall sustainability management system within the bank.

“And there is one more very important aspect,” he added. “In these times where you have almost no interest anymore, where spreads in covered bonds are in negative territory, it’s a good thing to be able to offer added value to investors, and sustainable assets might be one such addition you could make. That’s one more reason why we think now is the right time to go ahead with it.”