In a sign of the growing popularity of green bonds, KfW’s first offering was oversubscribed
By Megan Darby
German development bank KfW has issued a €1.5 billion (US$2 billion) green bond.
The 5-year bond, which pays out 0.375% interest, was oversubscribed. Investors ordered €2.65 billion worth “within a short period of time”.
The proceeds will be used to finance environmental and climate protection projects, mainly in wind and solar power.
For every €1 million invested in these projects in the past, the bank says 800 tonnes a year of greenhouse gas emissions have been cut.
Dr. Günther Bräunig, member of KfW’s executive board, said: “The issuance clearly shows that we hit the mark with our sustainable investment offering – our first Green Bond is a huge success. Especially the high degree of transparency and the unprecedented quality standards of our Green-Bond-concept convinced the investors.”
The value of green bonds issued in 2014 passed the US$20 billion mark earlier this month, according to not-for-profit NGO the Climate Bonds Initiative.
While this is only a fraction of the estimated US$45 trillion that the International Institute for Applied Systems Analysis predicted would be needed by 2050 to prevent dangerous climate change, the market is growing rapidly.
Institutional investors increasingly look for financial products that are resilient to climate change.
Nor is it just development banks offering such products; consumer goods conglomerate Unilever and European utilities GDF Suez and EDF are among those to have issued large-scale green bonds in the past year.
Insurance giant Zurich earlier this week announced it would double its green bond commitment to US$2 billion, in response to the increase in supply.
The company has already invested US$400 million in such offerings.
Cecilia Reyes, chief investment officer at Zurich, said: “Managing over 200 billion dollars of Zurich’s assets, we acknowledge a wider responsibility.
“Green bonds are a great example of an investment that allows us to have a positive impact on society and the environment, while meeting our financial criteria.
“Through green bonds investments, Zurich will effectively support more sustainable growth and development around the globe – without sacrificing investment return.”