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Germany’s KfW targets responsible investors with inaugural green bond of up to €1bn

Will be lead managed by Crédit Agricole, Deutsche Bank and SEB

German state-owned development bank KfW is breaking into the burgeoning green bonds market later this month via the issue of its own product that will have a volume of between €500m and €1bn and be independently certified as “green.”

Lead managers for the planned “Green Bond – Made by KfW” are Crédit Agricole, Deutsche Bank and Swedish bank SEB. Target buyers are institutional investors in Europe, particularly those in the responsible investment space.

“We see great potential for the bond in Scandinavia, the Netherlands, which has a huge pension fund market, and in France, where there are several big insurers,” Horst Seissinger, Director of Capital Markets at the KfW, told journalists.

For the next two weeks, the bank will hold road shows with European investors to gauge demand. After then, it will decide the exact volume of the issue and then list the bond in Luxembourg. Proceeds from the sale will be used to finance renewable projects, like those for solar and onshore wind, around Europe.

In addition, the integrity of KfW’s first green bond will be certified by Oslo-based Cicero (Center for International Climate and Environmental Research). “This means that Cicero will keep watch to ensure that we keep our pledge to investors that their money is going to renewable energy projects,” said Solveig Pape-Hamich, Head of Investment Strategies and Sustainability at the KfW. Cicero competes with the likes of French ESG firm Vigeo and Norway’s DNV to assure green bonds.It follows a raft of green bond issues, most recently a 32.3-year C$231.5m (€160m) issue to finance a public-private partnership hospital project in British Colombia, Canada. The issue, underwritten by National Bank Financial and Bank of Nova Scotia, attracted insurance companies and fund managers.

The KfW is already the world’s biggest green financier. Last year, no less than 38% of the €72.5bn in financing the bank provided went to projects related to climate- and environmental protection. Beyond renewables, these were for energy efficiency and the green renovation of old buildings.

But the KfW, which has a triple ‘A’ rating due to an implicit government guarantee, has now decided to target the fast-growing green bonds market specifically. According to the Climate Bonds Initiative, a UK research group, that market is expected to swell to $100bn (€73.5bn) by the end of next year from $20bn currently.

Said the bank: “Owing to our years of experience as a green financier and our excellent reputation on international capital markets we will be able to help shape this new market segment and help it further develop in a positive way.”