KfW offers investors liquid bonds again in the second half of 2019
Press Release from 2019-07-09 / Group, Investor Relations
- Funding volume for 2019 remains unchanged at around EUR 80 billion
- International investors can continue to expect liquid KfW bonds to be issued, including “Green Bonds – Made by KfW”
- Strong commitment to alignment of capital markets to sustainability
KfW maintains its borrowing requirements on the capital markets to refinance its promotional business for 2019 at around EUR 80 billion – this is the result of its semi-annual review. As of 30 June 2019, the promotional bank had already raised around EUR 54 billion on the international capital markets by issuing 90 bonds in 11 different currencies – this is equivalent to around 67% of the total funding volume in 2019. When adding to this the bonds KfW issued in the first week of July, the funding volume now reaches nearly EUR 59 billion.
Despite market conditions which were characterised by falling yields, KfW bonds remain in high demand worldwide – for example, in June a five-year Euro Benchmark bond with a record low yield of -0.31% was placed. Currently all KfW bonds in euros with maturities of up to 10 years are trading with negative yields.
KfW is very confident about the green bond market segment. In May 2019, it successfully enhanced the appeal of its green bonds by expanding its green bond issuance programme: while since 2014 the proceeds from issuing these bonds have been used to refinance the “Renewable Energies – Standard” promotional programme, since May 2019 they have also been used to finance energy-efficient new buildings, enabling higher volumes and thus more liquid bonds to be issued. Right after this innovation was announced, KfW issued a EUR 3 billion green bond with an 8-year term, which was oversubscribed by a factor of almost three. Shortly thereafter, KfW issued a SEK 7 billion green bond, making it the largest green bond in Swedish krona so far.
“The expansion of our green bond issuance programme has been very well received by market participants. It is very encouraging to see that demand for sustainable investment is growing steadily both nationally and internationally,” explains Dr Frank Czichowski, Treasurer of KfW Group. The total volume of “Green Bonds – Made by KfW” now amounts to around EUR 18.3 billion and should reach over EUR 20 billion by the end of the year.
KfW also supports the development of the green bond market segment as an investor. Year-to date EUR 142 million were invested. KfW’s green bond portfolio thus now amounts to EUR 1.4 billion.
Strong commitment to sustainable finance in the financial hub of Frankfurt and in Europe
Two events in June of this year particularly testify to the commitment of Germany and German market participants to the issue of “green and sustainable finance”:
On the one hand, the Annual Meeting of the “Green Bond Principles and Social Bond Principles” (GBP, SBP) was held on 13 June 2019 in Frankfurt. The activities of GBP/SBP and essential market developments were presented and discussed. KfW is pleased to have been re-elected as a member of the Executive Committee (ExCom) and will thus continue to be involved in ExCom and in the working groups “Impact Reporting” and “Green Projects Eligibility”.
Only a few days later, on 18 June 2019, the European Commission published the reports of the Technical Expert Group (TEG) under the “EU Action Plan on Financing Sustainable Growth” on taxonomy, the EU Green Bond Standard and benchmarks. German representatives were involved in all TEG workstreams. KfW was active in the expert group on taxonomy and the EU Green Bond Standard, thus contributing its expertise as one of the largest financiers in environmental protection and climate change mitigation.
KfW welcomes TEG's recommendations for introducing a voluntary EU Green Bond Standard based largely on existing best practice. The green bond market has shown very positive development, especially since the introduction of the Green Bond Principles in 2014, and this development is supported by the recommended standard.
From KfW's point of view, the TEG recommendations on taxonomy are generally welcome, as they provide all market participants, regulators and policymakers with the basis for a common understanding of what can be classified as “green and sustainable”; this saves time and money in the long term and helps to prevent reputational risks. In particular, the recommenda-tions set out basic principles and thresholds that must be respected in order for a financing measure to be considered sustainable. The use of the taxonomy by market participants will largely depend on the necessary qualitative and quantitative availability of information and data. KfW also takes a positive view of the recommendation to define not only measures as sustainable that are already low-carbon today, but also those that will contribute to the transition to a net zero carbon emission economy in 2050.