Investors are turning to safe, sustainable assets
Press Release from 2019-05-13 / Group, Investor Relations, Sustainability
- High demand for KfW bonds, with benchmark and sterling-denominated bonds in the spotlight in the first four months of 2019
- With international investor demand for green bonds exceeding supply: KfW responds by expanding its Green Bond issuance programme
- KfW underscores its role as responsible bank with its ‘Roadmap Sustainable Finance’
Despite of the uncertainty witnessed at the beginning of the year, mainly due to Brexit developments and expectations for a more restrictive central bank policy, KfW has proven to successfully ensure its funding in the first four months of the year. During this period, it raised around 42 billion EUR in the international capital markets, which is more than half of the funding needs announced for 2019.
KfW’s euro benchmark bonds have seen some record-size order books year-to-date, which enabled it to secure excellent funding conditions as investors snapped up safe haven assets, even with negative yields. Furthermore, demand for its sterling-denominated bonds has also peaked in 2019. KfW opened up this market segment on 3 January with its largest GBP bond issue ever. Overall, KfW has issued 10 GBP bonds with a euro equivalent amount of 6.3 billion EUR in the first four months of this year. Diversity continues to be an important feature of KfW’s funding, as it has placed bonds in 11 different currencies with a diverse international investor base since the beginning of the year.
KfW expands its Green Bond issue programme
The green bond market segment is also very promising as it reached a record high new issue volume of around 110 billion EUR in 2018 (+10% on the previous year). And the trend continues – the new issue volume in the first quarter of 2019 was already around two thirds higher than in the same quarter in 2018. “Notwithstanding, we see that demand for Green Bonds is now clearly outstripping supply. We are very pleased with that, especially since we entered this market segment in 2014 with the intention of raising awareness in the international capital markets for green finance”, explained Dr Frank Czichowski, KfW’s Treasurer, on the occasion of a press briefing in Frankfurt.
Now KfW is responding to growing demand by expanding its corresponding issuance programme. So far, KfW’s Green Bonds have only been used to fund projects in the ‘Renewable Energy – Standard’ promotional programme (programme no. 270). However, going forward, issue proceeds will also be used for a promotional programme that finances energy-efficient new buildings (programme no. 153). This promotional programme is standardised, makes a clearly measurable contribution to climate action and generates substantial volumes. In this way KfW can further support the positive trend in the capital markets. “Credibility, quality, liquidity and transparent reporting remain characteristics of ‘Green Bonds – Made by KfW’“, explained Czichowski. Furthermore, KfW will draw the attention of market participants to another important topic (besides renewable energy) related to the transformation of the economy: energy efficiency.
KfW wants to maintain investors’ confidence with its Roadmap Sustainable Finance
When taking investment decisions, especially with respect to Green Bonds, international investors nowadays not only look at the issue as such but also at the issuer and its positioning in terms of sustainability. As a ‘bank committed to responsibility’ that has embedded sustainability in all its business areas for a long time, KfW is very well positioned in this regard. “But we are not resting on our laurels. Rather, we want to be among the most sustainable financiers and issuers in the future as well”, explained the Treasurer.
For this reason, KfW’s Executive Board last year declared the bank’s sustainability ratings to be one of the key components of strategic management. The goal is to remain among the Top 5 promotional banks worldwide. Moreover, the Executive Board adopted a ‘KfW Roadmap Sustainable Finance’ in which the bank’s future-proof and sustainable orientation is defined as its central strategic remit. KfW completed the first part of this project by adopting the new sustainability mission statement in February 2019. Currently, the promotional bank is intensively working on new management strategies to adequately take into account the SDGs (Sustainable Development Goals of the UN) and the Paris climate targets. Furthermore, its risk management also takes into account the TCFD recommendations to assess which impact ESG and climate risks may have on the economy, particularly with respect to KfW’s business partners and customers, and may thus affect the bank’s risk exposure. Finally, KfW is intensifying its dialogue with its stakeholders in order to ensure transparency and obtain their views and suggestions.
“The ‘KfW Roadmap Sustainable Finance’ is a complex project that requires much effort. But I am convinced that it will be worthwhile for KfW, also in its role as an issuer. Our sustainable and future-oriented position will enable us to convince investors all around the world that their investments with us are always in responsible hands”, said Czichowski.
More detailed information may be retrieved by following these links: