Award for innovation - use of proceeds (social bond) - DKB

Channels: Green Bonds

Deutsche Kreditbank (DKB)'s €500 million ($558 million) 'blue' social Pfandbrief was the first deal of its kind.

Proceeds from the German bank's November issue will be allocated to water and waste water services. The Pfandbrief is underpinned by a "blue" lending pool of €1.3 billion.

Armin Hermann It is believed to be the first social covered bond that is aligned with both the Social Bond Principles (SBP) and the UN's Sustainable Development Goals (SDGs), in particular SDG6 for clean water and sanitation.

An EF Bond Awards judge called the deal "thoughtful and well structured".

The deal was four times oversubscribed, and attracted orders from almost 100 investors.

The demand enabled DKB to tighten pricing from its initial guidance of seven basis points (bps), to three bps.

Deal highlights:

Issuer: Deutsche Kreditbank (DKB)
Date of issue: November 2019
Size: €500 million ($558 million)
Maturity: November 2029
Coupon: 0.01%
Use of proceeds: Sustainable Water Management
UN SDGs: Goal 6: Clean water and sanitation
External review: ISS ESG (Oekom)
Lead managers: ABN Amro, BayernLB, DZ Bank, Natixis, UniCredit

62% of the bond's orders came from Germany, with 38% from foreign investors. Almost one-third (30%) were characterised as 'ESG investors' by DKB. Asset managers were allocated 40% of the deal, banks 30%, official institutions 12%, central banks 11% and insurance companies 6%.

DKB also became the first German bank to issue in green and social format, when it issued a €500 million social bond in 2018.

It has now issued a combined €2 billion in green and social bonds since its first green deal, in June 2016.

Armin Hermann, head of treasury at the bank, said: “DKB Blue Social Bond was our second transaction issued out of our existing Framework – this time a thematic bond focusing on loans for water plants and associations active in water purpose and sewage treatment. This transaction convincingly reflects DKB’s concept of “blue sustainability”: a combination of ecological and social aspects oriented to the SDGs.

"An order book of over €2 billion echoes the huge success of this first blue covered bond issued worldwide and underlines DKB’s ambition to be a leading example of a sustainable bank in the future.”