We knew it was coming, but the size is a surprise. Go Germany!
German’s development bank, KfW (Kredit für Wiederaufbau) has just issued its inaugural Green Bond, at a whopper EUR 1.5 billion (£2.03 billion). If you want make a splash, that’s the way to do it.
Interest rate is 0.375%; yes, that is very very low, like all AAA German government bonds ... this really is the time to finance a rebuild of the world's infrastructure as green!
Gunther Braunig, the bank’s executive board member in charge of capital markets is quoted on the KfW site as saying: “Our aim as a green bond issuer is to establish the same systematic dialogue with investors to get them engaged in climate protection finance. I am convinced that capital can provide very strong stimuli for sustainable development. The more capital market participants are committed to responsible investment, the bigger the effect.”
They say they want to attract new investors and “support the development of responsible investing from its niche into the broader capital market.”
So far so good: the bond was heavily oversubscribed, with KfW receiving EUR 2.65 billion of orders “within a short period of time”. An unusually high number of investors - 90 - participated with an average ticket size of below EUR 30 million. Lead managers were Crédit Agricole, Deutsche Bank and SEB.
The bond proceeds are linked to KfW’s environment investment program, “Erneuerbare Energien” (“KfW Renewable Energies Programme – Standard“), financing renewable energy generation.
Second opinions were provided by the Centre for Solar Energy and Hydrogen Research, Baden-Württemberg (ZSW) and CICERO. Excellent!
The use of proceeds is subject to ongoing monitoring and will be published quarterly on KfW’s website.
KfW are already considering a second green bond, in US dollars this time, for the end of the year.
This will help kickstart a German green and climate bonds market; KfW’s model has set the right precedent for other domestic issuers to follow.
