Berlin Hyp is set to publish a new, stricter green bond framework that will give a more precise view of the energy efficiency of properties, citing a need for constant development in green bonds, while the issuer has also become the 100th to join the Covered Bond Label.

With its signing up to the Label, announced today (Thursday), Berlin Hyp becomes the fifth German issuer to sign up to the market-led initiative.

“In labelling our Pfandbriefe with the Covered Bond Label, Berlin Hyp wants to demonstrate again its strong belief in the importance of transparency in capital markets, and especially concerning covered bonds,” said Sven Schukat, head of treasury at Berlin Hyp.

Berlin Hyp issued the first green covered bond in April 2015, and issued its second, a EUR500m long six year issue, last June.

The German bank becomes the second issuer to have a green covered bond flagged on the Label website, following SpareBank 1 Boligkreditt, which issued an inaugural green deal in January. MünchenerHyp, Caja Rural de Navarra and Kuxtabank have sustainable deals flagged under the Label.

“Welcoming Berlin Hyp, a household name in the German Pfandbrief market and the pioneer of green covered bonds, to the Covered Bond Label is an important milestone which signals the increasing importance of environmentally sustainable finance in the traditional realm of covered bonds,” said Luca Bertalot, Covered Bond Label Foundation Administrator and secretary general of the EMF-ECBC.

“This new addition to the Covered Bond Label family marks a significant step forward in terms of the importance of green finance in the covered bond arena.”

Speaking on a panel discussion at a Climate Bonds Initiative conference on Tuesday, Bodo Winkler, head of investor relations and sales at Berlin Hyp, announced the issuer will publish a new, stricter green bond framework on 27 April – the anniversary of its first green covered bond issue.

The updated framework will offer a more precise view on the energy efficiency of a building by splitting up its energy demand into different components, namely the demand for warmth/heating and for electricity.

“This way you prevent from financing a building with a poor building envelope but a very low electricity consumption, or the other way around,” Winkler told The CBR.

Speaking at the CBI event, he said one of the biggest challenges involved in issuing green bonds is the need to “redefine and redevelop, again and again”, noting that when Berlin Hyp was preparing its first deal, it had not yet identified the green loans in its portfolio.

“We were naïve then and thought everything that had a sustainability certification on it was green,” he said. “We then did a pan-European roadshow, and met some really experienced investors, who said ‘well, this is a nice first try, go on along this path, but just relying on external certifications regarding the overall sustainability is not enough for the future’.

“So, we got more precise and we learned quite a lot on our path to becoming a regular issuer in this market. We now know what is really green for us.”

Given an absence of an official definition for green commercial real estate, Berlin Hyp keeps its own definitions that it shares with investors and the market, Winkler said, developing these definitions constantly and adding stricter requirements.

“We get new ideas every time,” he said.