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    Nordic Investors Sweep Up Largest Non-Sovereign Green Bond

    Stockholm (NordSIP) – On April 7th, Kreditanstalt für Wiederaufbau (KfW) issued the largest green bond issued by a non-sovereign to date. The issuer is Germany’s state-owned development bank, the largest such national institution in the world.

    KfW’s green bond framework is aligned with the green bond principles. It is rated “Medium Green” by Cicero Shades of Green, which has also assessed the governance procedures in the framework to be “Excellent”. Funds from the issuance of green bonds are to be directed towards renewable energy and energy efficiency projects. According to KfW’s impact assessment, as of 2020, investments from its Green bonds has reduced/avoided 15.776 million tons of CO2 emissions, generated 19.975 million MWh of renewable electricity and helped create or preserved 421,681 jobs.

    The Largest Non-Sovereign Green Bond Yet

    KfW’s green bond is worth €4 billion 2029 and pays a zero-coupon. The security was priced at a 101.766 premium to yield -0.214%, 26.9 basis points (bps) over the underlying German government bond, 11bps below mid-swaps, 2 bps less than initial price thoughts (IPTs).

    Danske Bank, DZ Bank and Natwest were joint lead managers on this transaction. “The trend of capital moving in the direction of ESG is truly underlined by the massive interest in this Green Bond made by KfW, which holds the largest ever book, size, and share of green investors to a KfW benchmark offering,” Lars Mac Key, Head of DCM Sustainable Bonds says.

    “As one of the largest Green Bond issuers globally, KfW is already an appreciated name to the Green Bond investor community, yet this offering managed to attract a set of new investors. The Nordics was the largest region with 23% of the allocation, and 80% of the deal was bought by Green bond investors, emphasising KfW’s strong ESG profile and Green Bond programme.”

    Demand from 169 global investors swelled orderbooks leading final order to reach €18.5 billion, KfW’s largest-ever orderbook for a Green Bond. “The Green Bond market continues to grow significantly and following record demand, KfW issued its largest EUR Green Bond ever, which is by the way also the largest from a nonsovereign issuer. This underscores again our commitment to the Green Market segment – globally,” comments Tim Armbruster, Senior Vice President and Treasurer at KfW.

    Dominant Nordic Demand

    Geographically, demand from Nordic investors was dominant, representing 23% of the total issuance volume. German investors represented another 20% followed by UK and Ireland-domiciled investors’ 18%. Investors from the Benelux (10%), Italy (10%), the rest of Europe (10%), Asia (5%) and other miscellaneous locations (4%) purchased the remaining tickets. Sectorally, Banks represented 32% of the investors, followed by asset managers (24%), pension and insurance companies (20%), central banks and official institutions (18%) and other miscellaneous investors (6%).

    Green investors made up more than 80% of the allocated orderbook, including Achmea Investment Management, AP3, ATP, Cardano Risk Management, Danica, Danske Bank AM, De Volksbank, Natixis AM, PGGM, amongst others.

    “KfW Green Bonds have been part of ATPs Green Bond Portfolio since we started building up our Portfolio back in late 2017. By investing in KfW Green Bonds, ATP can combine decent return characteristics with sustainable investments for our members,” says Lars Dreier Kristensen, responsible for sustainable bonds in ATP.

    Image by Sebastian Ganso from Pixabay

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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