July 24, 2014

Deutsche Bank strengthens the “Green Bonds” growth market

As one of the three lead managers of the new “Green Bond – Made by KfW”, Deutsche Bank is contributing towards further boosting interest in sustainable investments.

On July 15th, 2014, Kreditanstalt für Wiederaufbau (KfW) issued its first “Green Bond – Made by KfW”. Deutsche Bank is making a contribution towards strengthening the market for green bonds as one of the lead managers.

With a volume of 1.5 billion Euros, the “Green Bond – Made by KfW” is currently the largest bond in this market segment. The proceeds of the bond will be used for projects from the KfW loan programme “Renewable Energies – Standard”, which primarily supports wind power and photovoltaic plants.

Green Bond makes convincing impression thanks to high level of transparency and quality

The bond, which was issued within the scope of an existing Euro Medium Term Note programme, has a term of five years and will pay out a nominal interest of 0.375 percent per annum, whereby investors will benefit from the excellent credit rating and liquidity of the KfW bond. But above all, the Green Bond makes a convincing impression thanks to the high level of transparency and quality:
The green bond concept of the KfW is reviewed by CICERO, an independent research facility that has established itself in the market for green bonds.
In addition, the KfW bond is the first green bond for which the impact on the environment and jobs is being certified by independent experts. Among other things, the KfW constantly has investigations conducted to determine how much CO2 the bond saves by means of “impact tracking”. Empirical values have shown that it is possible to avoid roughly 800 tons of CO2 emissions with an investment of 1 million Euros a year.

Investors demonstrated correspondingly great interest: Within very few hours the bond was over-subscribed with securities orders from 90 institutional investors (50% fund managers, 17% banks) amounting to a total volume of 2.65 billion Euros. Investors included the leading Dutch pension fund APG, the insurance companies Zürich, Aegon and Munich Re as well as the German asset manager Union Investment, for example.

The “Green Bond Principles”

Deutsche Bank supports the expansion of this segment of the capital market. For instance, it participated in developing the Green Bond Principles published at the beginning of the year, which were originally drawn up by 13 international financial institutes. The banks developed those principles in order to define criteria for issuers of green bonds according to which a bond can be designated as “green”, which has been lacking up until then.

The Green Bond Principles describe
- what investments or projects can be financed by issuing green bonds,
- how green projects are to be selected,
- how the proceeds from green bonds are to be managed and
- how reporting on how they are used is to be effected.

In order to ensure the market has the greatest possible trust in the information provided by the issuer, the principles also recommend the integration of verification by independent external third-parties.

Financing the low-carbon transition

Using the debt capital markets is a priority to finance the low-carbon transition. Financial institutions can help society and their clients to invest in forward-looking environmental technology. According to estimates, the switch to a greener economy will require annual investments of $1 trillion – a significant business opportunity.

“We are convinced that green bonds play an important role in unlocking the green market capital that is necessary to finance the transformation to a cleaner and more sustainable future. As one of the three lead managers of the new ‘Green Bond – Made by KfW’, we as Deutsche Bank want to contribute towards further boosting interest in sustainable investments and strengthening the market for green bonds. The KfW bond is the first 'green bond' that Deutsche Bank has ever issued for an issuer in Germany and - with an issue volume of EUR 1.5 billion - it is simultaneously the largest transaction worldwide.” states Stefan Reiner, Director in Corporate Finance and responsible for the bond business of German development banks, commenting on the standpoint of Deutsche Bank.