Germany’s Deutsche Kredit Bank prices €500m green bond for renewable energy lending

Five-year notes were more than twice oversubscribed

Germany’s Deutsche Kredit Bank (DKB), a Berlin-based arm of BayernLB, has issued a €500 million green bond for renewables, in a deal that was “much appreciated” by investors.

The five-year notes, which are the first under DKB’s recently-launched green bond programme, were more than twice oversubscribed. The bond, with a coupon (interest rate) of 0.625%, will be used to refinance loans for the construction and operation of onshore wind and solar plants in the country. DKB has identified 181 assets – 66 wind and 115 solar projects – that may be financed by the proceeds. Each meets German national standards in relation to broader sustainability issues such as health and safety and biodiversity, it said. Its overall loan book for renewable energy is more than €9 billion.

Sustainability analysis firm Oekom provided a second-party opinion on DKB’s green bond framework, concluding that it was “positive” but encouraging more work to be done in relation to broader sustainability issues.

For example, it recommended that DKB introduce measures to guarantee that wind farms eligible under the framework are developed with the engagement of local residents, and supply chains are monitored to ensure “high labour standards”.Oekom awarded DKB itself a B- score for environmental, social and governance performance, putting it in the lowest tier of the analyst’s ‘good’ category, but making it the highest-scoring German bank under the ratings system so far.

The green bond has received certification from the Climate Bonds Initiative.

ABN Amro, SEB, BayernLB, Credit Agricole and DZ Bank were managers on the deal.

Joop Hessels, head of green bonds at ABN Amro, said the deal was “very well received” by the market, and had strong interest from investors with a green mandate.

“The bond is exclusively for renewable energy, but DKB still got a second-party opinion, assurance and certification, as well as committing to impact reporting,” he said. “This approach was very much appreciated by investors in the market.”

Some issuers of renewables-only green bonds have come under fire for not securing any independent assessment of the environmental credentials of the deals. Others argue that it is unnecessary in those cases, because renewable energy projects tend to be uncontroversial in their green merits.