German real estate lender Berlin Hyp secured the sustainability-linked bond of the year award for its landmark €500 million ($550 million) issuance in April 2021, after it became the first bank in the world to issue the performance-related instrument.
The 10-year bond was tied to targets to reduce the carbon intensity of the entire lending portfolio by 40% between 2020 and 2030, with the 0.375% coupon subject to a 25 basis points step-up if it fails to achieve this target.
Berlin Hyp set this target despite facing challenges in data availability, with just 35% of its buildings financed providing the necessary data to assess their real energy performance – the remainder has to be assessed using proxy data at present.
Berlin Hyp funding and investor relations head Bodo Winkler-Viti told Environmental Finance the bank has used its SLB issuance to accelerate work to expand energy performance data coverage across its portfolio, however. By the end of February 2022, Winkler-Viti said coverage now stood at 45% – with the majority of the portfolio expected to be covered by the end of March.
Prior to the SLB, Berlin Hyp had already established itself as a prolific green bond issuer since it first entered the market in 2015. Nonetheless, Winkler-Viti believes the SLB format could prove even more important for greening its portfolio than green bonds.
"In the end, I think it is an even more valuable product [than green bonds] because it is about getting our entire lending [to be] climate neutral – and achieving this on a defined path," he said. "That is more valuable, from my point of view, than just enlarging the portfolio of green assets [through green bonds]."
Issuer: Berlin Hyp
Size: €500 million
Maturity: April 2031
Settlement date: April 2021
KPI: The interest rate of this bond will increase by 25 basis points in its final year if the company does not reduce the carbon intensity of its loan portfolio by 40% between 2020 and 2030.
Lead managers: Commerzbank, Crédit Agricole, DZ Bank, HSBC, LBBW, Bankhaus Lampe
External Reviewer: Sustainalytics
Credit rating: Moody's (Aa2); Fitch (AA-)