Issuing Green Bonds

Channels: Green Bonds

Companies: NRW.BANK

Contributed article

Work on the Emscher River

NRW.BANK's Green Bond Programme

The NRW.BANK Green Bond 2016 – expected to be issued this month – will be the fourth green bond from the promotional bank. Its first green issue, in 2013, was the first time a European regional agency had successfully launched a green bond. (see Box)

These transactions demonstrate NRW.BANK's commitment to issue green bonds on an annual basis. NRW.BANK is a member of the ICMA Green Bond Principles (GBPs) and these define the basic framework of the bank's 'Use of Proceeds' bonds, which meet all criteria laid down in the GBPs. To be selected for NRW.BANK green bonds, projects need to satisfy specific criteria.

Project selection

The selection criteria include a commitment date in the current calendar year of the corresponding bond.

Additionally, those projects are favoured that contribute to the climate protection policy of North Rhine-Westphalia as well as the UN's Sustainable Development Goals. By allocating projects to the portfolio based on the greatest reduction in carbon footprint, climate benefits are maximised.

But projects supporting adaptation to the unavoidable implications of climate change also qualify for inclusion. All funded projects either serve to reduce and/or avoid adverse impacts on the climate (mitigation) or deal with the consequences of unavoidable climate change (adaptation) in North Rhine-Westphalia. To ensure adequate reporting, borrowers who agree to provide transparent disclosure about their project are favoured over others.

As the maximum term of the issue is determined by the shortest loan maturity, all selected projects are operational and there is no risk of a 'green default'. As a consequence, the loan portfolio remains unchanged during the term of the issue, which means that one-off reporting is sufficient, significantly reducing costs.

To ensure that the green bond proceeds are allocated to the selected projects, all projects are internally earmarked.

The ecological benefits and the quality of the selected projects are analysed and assessed by oekom research.

This second party opinion (SPO) confirms the consistently sustainable concept of each NRW.BANK green bond.

All SPOs are provided prior to the transaction and available on the bank's green bond portal (

Reporting - focus on impact

NRW.BANK has been assessing the environmental impacts of its green bonds since 2015. A competent partner to analyse the projects dealing with climate mitigation was found in the Wuppertal Institut, an environmentally focused think-tank located in North Rhine-Westphalia. Its impact analysis is prepared in accordance with the recommendations of the Harmonised Framework for Impact Reporting developed by the multilateral development banks (MDBs). This reporting is integrated within NRW.BANK's sustainability report, published annually in June.

The successful €500 million ($555 million), 10-year NRW.BANK Green Bond 2015 was issued in November 2015. The following project categories represented the corresponding asset pool.

While approximately €405 million of this bond went into climate mitigation projects, €95 million was invested in climate adaptation projects.

As all projects within the climate mitigation category refer to either renewable energy or energy efficiency, the MDB's Framework could be applied to the €405 million share of climate mitigation. According to calculations by the Wuppertal Institut, the earmarked projects avoid emissions equivalent to 270,000 tonnes of carbon dioxide (CO2) each year, leading to 2.7 million tonnes of CO2 equivalent avoided over the 10-year maturity of the bond.

Based on the total issuance volume of €500 million, the annual CO2 saving comes to 540 tonnes per €1 million:

To make this figure tangible, the size of a managed forest with the storage capacity of 2.7 million tonnes of CO2 equivalent was projected onto North-Rhine Westfalia. This shows that the area is equal to the size of the Düsseldorf administrative district west of the river Rhine.

The detailed impact report by the Wuppertal Institut can be found on NRW.BANK's green bond portal (

Adaptation as well as mitigation

Alongside the climate mitigation projects, €95 million of the Green Bond 2015 went into climate adaption projects undertaken by the 'Emschergenossenschaft' water management association.

NRW.BANK actively supports the 'ecological restoration' of the River Emscher through its activities as regional development bank. The project is the biggest single water management project in the European Union towards implementation of the European Water Framework Directive.

Since 1990, the river – formerly misused as a sewage canal – is being reconverted into the 'blue Emscher'. The river will be brought back to its natural state and renaturalised in the best possible manner. This conversion process does not only include the Emscher itself but also the renaturation of its tributary streams.

For instance, part of the proceeds from the Green Bond 2015 were used to fund measures undertaken as part of the renaturation of another river in North Rhine-Westphalia – the Lippe, which is also managed by the Emscher Cooperative. The Cooperative wants to achieve several objectives, including the introduction of a flood management system as well as greater biodiversity.

Thus, the measures funded through the Green Bond 2015 are instrumental in the sustainable ecological conversion of the Emscher and Lippe system into a near-natural riverscape which adds substantial value to the quality of life in the region. In addition, these measures are essential to the development of a new level of biodiversity which is rich in species thriving in urbanised environments.

At the last count, more than 400 animal and plant species have been shown to exist in the Emscher region, compared to approximately 150 in 1990. The surface waters in the Seseke area have been repopulated with fish within a very short time, enabling the foundation of a fishing cooperative. Funding from the green bond has substantially contributed to the positive effects on the surface waters in the Emscher and Lippe areas and has been instrumental in bringing about a sustained improvement in the environmental status and the quality of living in both river regions.

The ambitious Emscher project is to be completed over a period of 30 years. It has been and will continue to be a fixed part in NRW.BANKs green bond asset pools. The bank will support the Emscher project all the way to its completion, at which time a total of 430 kilometres of sewer will have been constructed and 341 kilometres of water stretches will have been renaturated.

More details can be found in NRW.BANK's sustainability report.

Looking ahead

NRW.BANK can already look back on three successful green bond transactions. Its euro-denominated green bonds enable investors to support the green transition in North Rhine-Westphalia. The past issuances illustrated great demand from a diversified investor base, with new investors in each order book. As a 'euro house', the bank's objective is to build a 'green EUR curve' to indicate pricing advantages compared to its regular benchmark curve.

A likely funding advantage indicated by the curve could ultimately be passed on to loans eligible for green bonds, thus fostering further green development in NRW. Additionally, to support the 'greening' of the market, green investors are favoured over others and investment banks with a reliable green focus are mandated to help support the bank in its decision.

To further develop the green concept and select material green projects, feedback is important, not only from the Green Bond Principles, but also from the second party opinion provider, the Wuppertal Institut and/or the investment bank. And, through a continuous dialogue with dedicated investors, the concept could and will further develop in the future.

The forthcoming NRW.BANK Green Bond 2016 will probably be issued this month and will again focus on climate mitigation projects which will take approximately 80% of the proceeds. The majority of projects within this theme will be renewables, especially onshore wind parks. The remaining 20% is made up by the Emscher project. The impact report will again be part of the bank's 2016 sustainability report.

Sustainability – a key objective

NRW.BANK is the state development bank of North Rhine-Westphalia. It supports its owner – the State of North Rhine-Westphalia – in fulfilling its tasks, especially in the fields of structural, economic, social and housing policy. For this purpose, it integrates the promotional programmes of the federal state, the federal government and the European Union and combines them with its own products.

Likewise, the State of North Rhine-Westphalia is the guarantor and sole owner of NRW.BANK. It has assumed permanent institutional and guarantor liability for the bank and has issued it with an explicit funding guarantee. Sustainable behaviour is a key objective of NRW.BANK's business policy and means the equal consideration of social, economic and environmental objectives and ethical matters. The bank's statutes (section 5, para. 1) and the Act on NRW.BANK (section 3, para. 1) oblige the bank to follow the principle of sustainability in the performance of its tasks, which underlines the importance of this topic for the development bank.

NRW.BANK continuously optimises its business activities with regard to sustainability, with the main emphasis placed on its core business segments. The bank strives to integrate sustainability in its promotional products, thereby supporting the move towards green energy and promoting environmental protection. This is a cross-sectoral theme for development banks which is relevant for both economic development and housing as well as infrastructure.

To establish a close link between its environmentally oriented promotional programmes and its own funding in the international capital market, NRW.BANK launched a special product, the 'NRW.BANK Green Bond', in 2013. While the proceeds from the bank's regular bonds are also used to support the social and economic aspects of its development business, the funds raised through the green bond programme are exclusively used to refinance previously identified ecological projects based in North Rhine-Westphalia originated in the current calendar year.