German state of NRW to issue second ‘sustainability bond’ worth at least €1bn

Projects to be funded are for climate protection, public transport & education

The German state of North Rhine Westphalia (NRW), the country’s most populous state, will issue its second “sustainability bond” later this month and hopes to raise at least €1bn from investors, Responsible Investor has learnt.

NRW issued its first sustainability bond a year ago, taking in €750m in the process. Rated triple ‘A,’ the ten-year bond paid a coupon, or interest rate, of 0.5% per annum.

The proceeds were used to finance 22 projects that NRW’s government considers sustainable. Apart from those related to climate protection, they were in the areas of biodiversity, sustainable city planning and habitats for senior citizens. NRW’s bond was also assured as sustainable by Oekom Research, the Munich-based ESG research firm.

Lead book runner for NRW’s latest sustainability bond is the German arm of UK banking giant HSBC and other book runners are Bank of America, BayernLB, Natixis and UniCredit. NRW’s finance ministry says its latest sustainability bond will indeed be targeted to SRI investors.RI understands that the European road shows to gauge investor support for the bond began last week and will continue until next week.

As the NRW government aims to raise at least €1bn with the bond, the number of projects to be financed has been increased to 48. Along with those for sustainable city planning, climate protection and biodiversity, public transport and education projects – for example integration of children with disabilities in schools – have been added. Indeed, the lion’s share of the proceeds will go to the education and transport projects. Oekom has again certified the NRW bond as sustainable.

“With our second sustainability bond we plan to reach investors that want to invest in sensible and sustainable projects. The success of the first such bond, which was many times oversubscribed, shows that we have touched a nerve among many investors,” said NRW Finance Minister Norbert Walter-Borjans.

Another big green bond issuer from NRW is the state’s own development bank, known as NRW.Bank. Last October, the bank issued the third such security, raising €500m from investors. NRW.Bank uses the proceeds specifically to finance projects aimed at climate change mitigation and adaption. They include biodiversity, flood control, renewables and energy efficiency.