Berlin Hyp hopes to launch a second green bond in 2016, according to Bodo Winkler, its head of credit treasury and IR, as it released a first annual report on the only green benchmark covered bond so far, a day after selling a regular sub-benchmark Pfandbrief amid a dearth of private placement opportunities.

Berlin Hyp sold the first green benchmark covered bond a year ago today (Wednesday), a Eu500m seven year issue. This came after a Eu300m five year ESG (environmental, social, governance) Pfandbrief backed by cooperative housing loans from MünchenerHyp in September 2014, which was the first covered bond in the field of socially responsible investment (SRI).

Berlin Hyp today published its first annual report on its Green Pfandbrief and noted that the volume of green loans in its cover pool had risen from Eu657m a year ago to Eu1.021bn at the end of February, partly due to further existing loans in the cover pool having been identified as green and partly thanks to new financings of green buildings.

“Given the positive business development so far,” said Gero Bergmann, member of the board of management at Berlin Hyp, “I am optimistic about achieving a second issue much quicker than we would have imagined a year ago.

“However, it must also be said that the usual conditions apply, namely that new business development and the capital market situation must be appropriate.”

Berlin Hyp’s Bodo Winkler said that the issuer would very much like to sell a second green bond in 2016, although this could be either a green Pfandbrief or a debut green senior unsecured bond, and he raised the prospect of establishing a green bond programme allowing for the issuance of either instrument.

The issuer has meanwhile enhanced its green Pfandbrief reporting by, in conjunction with Crédit Agricole’s sustainable banking team, adding an impact report whose plausibility was reviewed by second party opinion provider oekom research. This quantifies carbon emissions avoided, but only in relation to the newly identified cover pool assets and new financings because it was added on the back of investor feedback during the Green Pfandbrief’s roadshow, Winkler said, and the relevant information for the initially earmarked green assets in the cover pool was not available.

According to the calculations, the estimated avoided carbon emissions of the new assets was 20.1 tonnes of carbon dioxide per million euros invested per year when compared with the average energy performance of existing European buildings, and 6.1 when compared against standards required in Germany for new buildings. The calculations are based on the avoided carbon emissions being allocated proportionately to Berlin Hyp based on its initial share of financings.

Since Berlin Hyp’s green Pfandbrief there has only been one further covered bond in the SRI space, a Eu1bn 10 year deal from Spain’s Kutxabank backed by social housing loans.

Winkler said he is a bit surprised at the lack of follow-up green covered bond issuance, but said that, in light of CBPP3-influenced market conditions, issuers’ focus is on other matters that need to be dealt with.

“But it is encouraging how many banks have embarked upon senior unsecured green bonds in 2015, particularly the last quarter,” he added. “For covered bonds there will be more supply in the future – it is just a question of when.”

He noted that the concept of a “green mortgage” being worked on by the EMF-ECBC would definitely help the asset class take off.

Berlin Hyp also announced that is has become a partner of the Climate Bonds Initiative.

The German lender yesterday sold a Eu325m eight year mortgage Pfandbrief at 3bp through mid-swaps via BayernLB, Commerzbank and Deka.

“The idea behind that was that we wanted to issue something longer than seven years, but in that longer maturity we have no need for a proper benchmark amount,” said Winkler. “It also compensates a little for the very limited opportunities in real private placements in these long maturities – for more than a year they are hardly requested anymore because of the low rates.”

A size of Eu250m was initially indicated and initial guidance of 1bp through mid-swaps, which was revised to 3bp-2bp through. A syndicate officials away from the leads said that the pricing for the sub-benchmark appeared to be in line with benchmark Pfandbriefe, with a MünchenerHyp Eu500m 10 year mortgage Pfandbrief, for example, having been priced at 1bp through mid-swaps on 11 April.

Germany was allocated 97% of the issue and Italy 3%. Central banks and official institutions took 54%, savings banks 39%, banks 4%, and funds 2%.