German state-owned development bank KfW says its inaugural US dollar-denominated $1.5bn (€1.18bn) green bond has been snapped up by socially responsible investors.
The issue was largest dollar-denominated green bond to date and among investors of the issue were AP4, Blackrock, Barclays’ Treasury, CalSTRS, Calvert Investment Management, Inter-American Investment Corporation, Morgan Stanley Wealth Management, Praxis Intermediate Income Fund, SSgA High Quality Green Bond Fund and TIAA–CREF Asset Management.
“The majority of accounts involved are US-based investors focused on socially responsible investments (SRI),” KfW said, adding total demand of $2.5bn was “well in excess of the issuance volume”.
The proceeds of the bond – which follows KfW’s well-received euro-denominated green bond issue in July this year – will be used for environment and climate protection projects. It was evaluated by Norway-based CICERO (Centre for International Climate and Research – Oslo).
A feature of the issue is that the impact of KfW’s financings under the program are certified by the independent, non-profit Center for Solar Energy and Hydrogen Research (ZSW).“We especially appreciate KfW’s willingness to provide investors with its impact measurement certified by ZSW, a unique positive attribute in today’s green bond market,” said TIAA–CREF Managing Director Stephen Liberatore.
The five-year bond pays an annual coupon, or interest rate, of 1.75%. The issue was led by Bank of America Merrill Lynch, Citi and Morgan Stanley.
KfW – which has an implicit AAA rating due to an implicit government guarantee – said its “high degree of transparency” and quality standards swayed US investors. The bank held investor meetings in the US ahead of the issuance to introduce its approach.
In addition it says it will enhance transparency by starting to publish the use of proceeds on a regular basis, with the first report expected to be on its website in the second half of October.
“The groundwork is done,” said Günther Bräunig, KfW’s executive board member for capital markets. “We have broadened our strategic dialogue on ‘responsibility in the capital market’ with investors.
“In issuing the two largest green bonds we have supplied the market with liquidity which was our aim from the beginning. We will further develop our green bond concept into other markets and products.”