BPCE became the first French commercial banking group to issue an EuGB last Monday, as BPCE SFH sold a €1.5bn 6.5 year that drew a €5bn-plus book and is only the second EuGB covered bond, with the issuer describing the format as a perfect fit given its sustainability efforts and ambitions.

The only previous covered bond in EU Green Bond (EuGB) format has been a €1bn three year issued by Nordea Mortgage Bank in March. Take-up of the format by banks overall has been only gradual, as they have worked to understand and meet the requirements of moving from issuance under the ICMA Green Bond Principles to the EU Green Bond Standard.

“The discussions around the Taxonomy and then bringing the standard to life was a very long process,” said Anne-Laure de Saqui de Sannes, head of financial solutions at BPCE. “Like many others, we were initially kind of sceptical, but we followed developments and, with the help of the Natixis Green Hub, focused on what we would be able to do.

“And once it was established and we knew exactly what it would mean to issue an EuGB, it was a natural step for us, because it perfectly fits the strategy that we have at Groupe BPCE level, our transition plan and the decarbonisation of the economy.”

BPCE has also been keen to be at the vanguard of new sustainable developments in the bond market, as evinced by its issuance: the latest deal is BPCE SFH’s seventh green covered bond, while a variety of entities of the French group have issued a range of other green and social bonds, some of theme themed, as well as an innovative “defence bond” in September 2025.

“As an issuer in the sustainable finance market, keeping being innovative and offering scalability to investors is really close to our hearts at BPCE,” said de Saqui de Sannes, “and being one of the first to issue an EuGB was a way to achieve that.

“It’s the highest standard in sustainable finance right now.”

While the first issuers of EuGBs have at times found the process – including interpretation of the new standard and interactions with regulators – challenging, BPCE found the process relatively smooth, according to de Saqui de Sannes, with the issuer able to learn from the examples of preceding EuGB issuers as well as benefit from Natixis’s experience in such issuance.

“Regarding data and the full Taxonomy alignment,” added de Saqui de Sannes, “the key thing is that, as a French bank, we have already released our Green Asset Ratio, and all the assets we use in this cover pool are within the GAR. So we already had some data and on that side things went well.

“What we did have to double-check and explain to the external reviewer was how we were handling climate risks and evaluating physical risks – here, we have a methodology based on data sourced externally.”

Preparing the associated EuGB factsheet meanwhile took less time than preparing a new green framework, according to de Saqui de Sannes.

“It was a question of being perfectly straightforward and clear – not saying too much, but not saying not enough, either.

Some quirks of the EuGB standard nevertheless emerged during preparations. For example, under the regulation, BPCE must publish the first allocation report either one calendar year after issuance or by 31 December, meaning that it cannot be aligned with its ICMA-aligned green bond reporting, which de Saqui de Sannes said is not very practical.

“But overall,” she concluded, “we did so much work on Taxonomy alignment before the EuGB, and it’s something we have placed such emphasis on, that the whole process was frankly easier than I would have expected, even if it still involved a lot of work many different people.”

A combination of factors played into BPCE’s decision to focus its EuGB issuance on BPCE SFH and French residential mortgages in its cover pool.

“Firstly, it makes sense because we finance more than €369bn of mortgages, and buildings are responsible for some 40% of carbon emissions,” said de Saqui de Sannes. “Secondly, it is much easier to demonstrate Taxonomy alignment for some activities than others, and we chose 7.7 – acquisition and ownership of buildings – because we are more advanced for this when it comes to the GAR, also given the importance of mortgages on our balance sheet.

“And thirdly, we had to ask ourselves, what will be the narrative and the link for investors in our EuGB strategy? We thought it would be rather confusing to, for example, issue one unsecured EuGB but the next then be not EuGB but ICMA, and hence to say that the new standard could apply to any instrument. We wanted to be perfectly clear in our plans and – since we are a big issuer of covered bonds – it made sense for us to use the standard only for covered bonds.”

Many banks have focused their green bond issuance in unsecured instruments where the format may offer a greater de-risking effect in execution and any greenium may be more evident than in than in the more dependable and tighter covered bond asset class. The resultant lack of green covered bond issuance has contributed to demand for BPCE SFH’s issuance, according to Cédric Perrier, head of medium and long term funding, Groupe BPCE.

“This is evident each time we meet with investors,” he said. “They are asking, when is your next green covered bond? Also, within our group, CFF is not issuing green. So it’s really something that ticks a lot of boxes for us internally and vis-à-vis the market.”

BPCE teed up its inaugural EuGB issuance when it published its factsheet on 5 May and, with the issuer typically hitting the market at this time of year, a debut issue was anticipated. The issuer meanwhile felt comfortable approaching the market without a roadshow given its existing green bond credentials and the growing volume of EuGBs, including Nordea’s in covered bond format.

This gave BPCE an added bonus of being able to move quickly in a market that has this year proven volatile on the back of the Iran war and periodic outbursts from US president Donald Trump.

“Being out in the market for more than a day or half a day has been getting trickier and trickier,” acknowledged Perrier.

He noted that the market in general and specifically French government bonds had been relatively stable going into the new week, while the start of the new month offered a good dynamic vis-à-vis investors.

The six-and-a-half year maturity, he added, was also on the safer side – BPCE SFH’s last two green bonds, in May 2024 and June 2025, were 10 year deals. As well as suiting the market and issuer ALM needs, the shorter tenor chosen this time mitigates potential challenges issuers might face in meeting EuGB asset eligibility requirements on longer dated issuance.

On Monday morning (1 June), leads Danske, Deutsche, DZ, ING, Natixis, NordLB, Santander and Swedbank opened books with guidance of the mid-swaps plus 43bp area for a euro benchmark-sized January 2033 issue, expected ratings Aaa/AAA (Moody’s/S&P).

After around an hour and a half, the leads reported books above €3bn, including €475m of joint lead manager interest, and after around two-and-three-quarter hours, they set the spread at 36bp for a size of €1.25bn-€1.5bn on the back of books above €4.4bn, including €545m of JLM interest. The size was after around three hours set at €1.5bn on the back of more than €5bn of orders.

The final book was above €5bn, with some 120 accounts allocated.

“I was expecting a nice transaction, but having more than €5bn in the book was not a given,” said Perrier.

Banks and private banks were allocated 52%, asset managers 27%, central banks and official institutions 15%, insurance companies and pension funds 5%, and others 1%. Germany, Austria and Switzerland took 24%, the Nordics 23%, the Benelux 16%, France 13%, southern Europe 12%, the UK and Ireland 10%, and others 2%.

“The Nordic share was very strong,” highlighted Perrier, “much more than we have seen previously – they also received good allocations, because the quality was high.

“That’s probably down to a combination of factors: they take ESG very seriously, we have made some marketing efforts there, we had the support of two Nordic leads, and they may have also been educated by Nordea’s EuGB.”

Allocations to accounts deemed green-oriented accounted for 61% of the paper, compared to 65% and 67% on BPCE SFH’s last two green covered bonds.

The pricing of 36bp over mid-swaps was seen as flat to fair value. The perennial challenge of calculating any greenium was further complicated by the magnitude of the trade, according to Perrier.

“In the beginning, I had €1bn to €1.25bn in mind,” he said, “but the quality of the order book was so good, and because this was our inaugural EuGB, we decided to go for a bigger size and have a very visible transaction, as well as ease the allocation process.

“So it’s difficult to call a greenium – maybe we could say 1bp – but in this context a successful and larger transaction were the priorities.”