Oberbank will hold investor calls early next week for what is set to be the first green covered bond from Austria, a €250m seven to 10 year mortgage-backed deal, while KHFC is preparing its latest social euro benchmark, with sustainable issuance this year having already surpassed 2020’s total.

The Austrian bank has mandated Crédit Agricole, DekaBank, Erste and RBI for investor calls on Monday and Tuesday, with the €250m no-grow deal expected to follow, subject to market conditions.

Oberbank’s green bond framework is to finance green mortgages against residential buildings in Germany and Austria, with its criteria based on the EU Taxonomy: existing buildings must have class A energy performance certificates (EPCs) or otherwise be in the 15% most energy efficient buildings in the country/region; new buildings must beat the relevant nearly-zero energy buildings (NZEB) threshold by 10%; and renovations must qualify as major renovations or reduce primary energy demand by at least 30%. Alongside EPCs and in line with other green bond frameworks, Oberbank’s methodology uses year of construction combined with regional building codes to determine eligibility for existing buildings.

The framework allows for the issuance of senior preferred and non-preferred debt as well as covered bonds. Erste is sole green structuring advisor.

ISS ESG, which ranks the issuer 32nd out of 276 companies in its sector, provided the second party opinion.

“ISS ESG finds that the use of proceeds category financed through this bond is consistent with the issuer’s sustainability strategy and material ESG topics for the issuer’s industry,” it said.

Oberbank has been active in the public markets with sub-benchmark covered bond issuance since May 2018, when it sold a €300m 15 year debut, followed by a €250m 10 year in January 2020.

Its new issue will be the first green covered bond from Austria, with previous ESG-themed issuance from the country having only been in social format – Hypo Tirol sold the first benchmark Austrian social covered bond in March, a €500m 10 year mortgage Pfandbrief, after Kommunalkredit opened sustainable covered bond issuance for the country in 2017 with a sub-benchmark public sector-backed social covered bond.

Korea Housing Finance Corporation (KHFC) is meanwhile holding investor calls on Monday ahead of the launch of a Reg S/144A five year social covered bond, subject to market conditions. BNP Paribas, HSBC, ING, SG and Standard Chartered have been mandated as leads.

Its last covered bond benchmark, also a social bond, was a €500m (KRW676bn) five year in June 2020. Since then, compatriot KEB Hana has entered the covered bond market with a €500m five year social debut in January, while Kookmin Bank in July 2020 debuted in euros with its first social covered bond.

Euro benchmark covered bond issuance in sustainable formats last week surpassed 2020’s volumes, with the launch of a €500m 10 year green bond debut from Eika Boligkreditt, according to Joost Beaumont, senior fixed income strategist at ABN Amro. It now stands at €7bn, or 16.7% of total issuance, with green euro benchmarks comprising €5.25bn of this and 12.5% of total supply.

“We expect the market to grow steadily, especially as the EU Taxonomy has embraced the ‘top 15%’ criteria for energy-efficient buildings, for which mortgages can be financed with green covered bonds,” said Beaumont.

Issuance of sustainable euro benchmark covered bonds (EUR bn)

Source: ABN Amro, Bloomberg