Bawag PSK is set to issue a debut green bond shortly, a €500m no-grow eight year covered bond announced today (Monday) that will be the first green benchmark covered bond from Austria, with use-of-proceeds including the financing of Austrian, Dutch and German residential buildings.

Joint structuring advisors HSBC and ING as well as Erste, LBBW and NordLB have been mandated for the inaugural issue, which is slated for launch in the near future, subject to market conditions. The Austrian issuer established a green finance framework last month and flagged its intention to approach the market soon.

The only previous green covered bond from Austria was a €250m 10 year for Oberbank, issued on 24 June. Like that deal, the use-of-proceeds of Bawag’s covered bond will be lending against green buildings. This is one of eight categories in the issuer’s broader framework, which also covers other Bawag group entities and other types of debt instrument.

The green buildings criteria encompass financing of the top 15% most energy efficient buildings in the relevant country, buildings that have undergone refurbishments resulting in an energy efficiency improvement of at least 30%, and certain other measures defined in the EU Taxonomy. Bawag has identified more than €2.8bn of green assets, and the portfolio is split 83% Austria, 9% the Netherlands, and 8% Germany.

Among sustainability measures relevant to green buildings cited in Bawag’s green finance framework, potential borrowers are given a “funding map” detailing available subsidies, including for alternative energy and energy-saving measures, and the bank will reimburse up to €250 of the cost of an energy certificate. Bawag also last year launched a pilot exercise to promote financing for energy efficient buildings, whereby retail clients borrowing against buildings with an EPC label of at least A have been given a €1,000 bonus, and is considering whether to implement this going forward.

“Sustainalytics recognises the bank’s commitment to key sustainability principles and environmental initiatives and encourages it to include quantifiable and time-bound environmental targets for its lending portfolio to further strengthen its sustainability practices, where feasible,” said the second party opinion (SPO) provider. “In this context, Sustainalytics is of the opinion that the Bawag green finance framework is aligned with the group’s overall sustainability strategy and initiatives and will further the bank’s action on its key environmental priorities.”

Bawag’s last benchmark covered bond was a €500m no-grow 10 year issued on 4 May at 1bp through mid-swaps.

According to pre-announcement comparables circulated by the leads, Bawag January 2028s were quoted at mid-swaps flat, mid, and its October 2029s at plus 0.5bp.