Setting a green record: KfW issues largest non-sovereign green bond to-date & achieves landmark orderbook

We’re delighted to have supported KfW with the largest ever Green Bond issuance from any non-sovereign issuer.

KfW

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“Green Bonds – Made by KfW”

German state-owned KfW is one of the world’s leading development banks. Founded in 1948, its aim is to improve economic, social and environmental living conditions across the globe on behalf of the Federal Republic of Germany.

To do this, KfW, which raises money for its work almost entirely via the international capital markets, provided funds totalling €135.3billion in 2020 alone, with 33% of these funds used for climate and environmental protection. Since 2014, KfW has been actively supporting the green bond market as an issuer to drive forward the transition to a low carbon economy. The proceeds of its “Green Bonds – Made by KfW“ programme are going towards two green loan initiatives: the ‘Renewable Energies Programme’, which mainly funds wind, photovoltaics, biomass and hydropower projects; and the ‘Energy-efficient Construction’ programme which supports energy-efficiency in new residential buildings in Germany.

Since April 2015, KfW has also been actively investing in green bonds on a global scale, reaching its initial target investment volume of €2billion in February this year. Going forward, KfW will continue investing in green bonds at a level of €2–2.5 billion.

Orderbook doubles in size from KfW’s previous green issuance                     

Capturing the positive market tone following the Easter weekend, KfW announced their € 8-year Green Bond benchmark transaction, which NatWest supported in the role of Joint Bookrunner.

When books opened, investor demand flooded in, resulting in orders of more than €14.3billion just over an hour later, highlighting the incredible investor demand undeterred by the busy market. In view of the exceptional investor demand with a final order volume of €18.5billion – more than double the volume compared to KfW’s previous green bond book – the German development bank opted for an issuance size of €4billion with a 0% coupon, at reoffer price 101.766% and yield at -0.214%.

The transaction saw significant participation from Western European and UK investors, with 20% allocated to Germany, 23% to Nordics and 18% to UK/Ireland. Green investors were central to the deal, with 80% of the orderbook allocation going to green-shaded investors.

KfW’s green bond scored E1/75 in S&P Global Ratings’ Green Transaction Evaluation – E1 is the highest score, while E4 is the lowest – highlighting the transaction’s strong governance and transparency, and the favourable environmental impact of the projects that will be financed through the proceeds. The rating agency’s Green Transaction Evaluation provides an assessment of the environmental credentials of a financing transaction or portfolio. It includes a ranking of its relative net environmental benefit along with an assessment of its governance and transparency provisions.

Investors play crucial role in supporting the energy turnaround

Damien Carde, Head of FBG DCM, NatWest, commented: “We’re delighted to have supported KfW with their largest green bond ever issued by any non-sovereign issuer. The incredible investor demand highlights the compelling sustainability credentials of our customer and the climate mitigation projects KfW supports financially. At NatWest we recognise that climate change is a global issue with significant implications for our customers, colleagues, suppliers and partners, and we believe we have the duty to play a leading role in the transition towards a low-carbon economy and support customers, economies and communities.”

Petra Wehlert, Head of Capital Markets, KfW, said: “We are supporting the energy turnaround and expect to contribute more than €100billion to SDG7 (affordable and clean energy) over the next five years, making a crucial contribution to restructuring our energy supply. Private households, municipalities and public institutions can use energy more efficiently, while companies can push ahead with technological innovations for climate protection. We are very pleased with the strong support we receive from investors on our Green Bond programme.”

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