The five-year, €1.5bn blockbuster green bond issued yesterday (July 15) by German development bank KfW was subscribed to by leading European institutional investors including APG, the Dutch pension investment giant, insurers Zurich, Aegon and Munich Re as well as German asset manager Union Investment.
In all, 90 institutional investors placed €2.65bn worth of orders for the bond, the KfW said in a statement. Asset managers accounted for half of this group, followed by banks (17%), central banks (14%), insurers and pension schemes (11%) and corporates (8%).
The oversubscribed bond, which has a triple ‘A’-rating and a coupon, or interest rate, of 0.375% per annum, was then priced at 17 basis points above what German Bunds (10-year German government bonds) are yielding. Bookrunners were Crédit Agricole, Deutsche Bank and Swedish bank SEB. KfW said it was the largest green bond ever.
“If you want make a splash, that’s the way to do it,” said Sean Kidney, head of advocacy group the Climate Bonds Initiative, on his blog. He added KfW is already considering a second green bond, in US dollars, for the end of the year. The new bond will be included in the Solactive Green Bond Index, the index that was launched in March this year by German index provider Solactive.Proceeds from the sale, revealed in Responsible Investor on July 7, will go to finance renewable energy projects in Europe. KfW’s bond has been certified as “green” by the Oslo-based Center for International Climate and Environmental Research (Cicero). In addition, the German Center for Solar Energy and Hydrogen Research will gauge the impact of the KfW-financed renewable projects.
“We hit the mark with our sustainable investment offering”
“The issuance clearly shows that we hit the mark with our sustainable investment offering,” said Günther Bräunig, KfW Board Executive with responsibility for capital markets. He cited the “high degree of transparency and the quality standards” as helping to convince investors.
Thomas Kabisch, CEO of Munich Re’s asset management arm MEAG, said: “We consider lasting returns and sustainability as interdependent. So I welcome KfW’s initiative to issue green bonds.”
And Cecilia Reyes, CIO at Zurich, which this week said it would invest up to $2bn (€1.5bn) in green bonds, added: “We are especially impressed by the reporting framework put forward. It allows direct impact attribution and sets a market example we highly welcome.”