Europe's largest economy entered the green bond market with a €6.5 billion ($7.7 billion) syndication under its twin-bond concept, which means it was issued with an identical non-green federal security.
The terms for the twin issues are exactly the same, however their volume can be different, with the conventional bond being larger.
The conventional bond will act as a reference for the green bond in both the primary and secondary markets. Through anchoring the green bond in this way Germany argue they have shown the undisputable existence of a green premium or 'greenium'. This is because the green bond priced one basis point tighter than its conventional bond twin in the primary market and this then tightened further, three to five basis points, in the secondary market.
"Preparing the Green Bond Framework for the Federal Republic of Germany was a great challenge and an exciting exercise: extremely detailed and ambitious selection of the eligible expenditures; unique financial innovation in the preparation of the twin bonds; tremendous collaboration among very different ministries; fascinating execution and – more importantly – inspiring work with very nice people. Germany has clearly created a new standard in the green bond market, and we were very honoured to be part of this journey," said Tanguy Claquin, head of sustainable banking at Crédit Agricole CIB.
Having initially issued the first twin-bond with a ten-year maturity in September, followed by a twin bond with a five-year maturity two months later, both having a value of €5 billion, Germany plans to issue a 30-year tenor twin bond in order to build a green yield curve in the medium term.
"Adds new concepts into traditional green bonds, such as twin-bond concept, greenium, and international cooperation as one of the use of proceeds (UOPs)," said one Environmental Finance Bond Awards judge.
Issuer: Federal Republic of Germany
Size: $6.5 billion
Maturity: 15 August 2030, 10 years
Use of Proceeds: Transport, international cooperation, research, energy and industry, agriculture and forestry
External Review: ISS ESG
Lead managers: Crédit Agricole CIB, Barclays, Commerzbank, Deutsche Bank, JP Morgan, UniCredit
Credit rating: Aaa(stable)/AAA(stable)/AAA(stable)
Other highlights/notable features: €33.5 billion order book, priced 1 basis point tighter than its conventional 'twin bond'