The concept of sustainable real estate
The German Federal Ministry for Economic Affairs and Energy has calculated that 40 per cent of aggregate energy consumption is used in buildings. Besides private households, this concerns – above all – businesses that need energy for heating and lighting. In 2014, commerce, retailers and service providers consumed a total of 361 terawatt-hours for these purposes – around 14 per cent of Germany's aggregate energy consumption. Rising energy costs are making 'green' buildings ever more popular.
One of the characteristics of 'green' buildings is a high level of resource efficiency: they use less energy and water compared to traditional buildings. Moreover, green buildings are designed to reduce damage to the environment.
Hence, they not only save costs, allowing businesses to markedly reduce their expenses for floor space, they also provide a pleasant atmosphere, and thus the best conditions for a healthy workplace.
Sustainable real estate is also attractive to investors, who increasingly require compliance with ecological and social criteria, over and above purely financial indicators. It is for this reason that issuers of German covered bonds and other bonds are increasingly expected to contribute to a positive development of the economy and the environment.
Climate-friendly technology and conservation of resources: 'green' buildings use less energy and water than traditional properties.
BERLIN
Green investment
A different take on ecological added value: Berlin Hyp's “Green Pfandbrief” is far from an ordinary product. The issue proceeds are exclusively used for real estate financing that fulfils clearly-defined sustainability standards.
To adopt a longer-term view, acting responsibly in ecological terms – these are key requirements for sustainable commerce. In this respect, issuers of German covered bonds already comply with both criteria, by definition: German covered bonds are used to refinance particularly stable and long-term loans. They thus offer the best foundation to take the concept one step further, and to make an additional contribution to environmental protection.
This is exactly the claim of Berlin Hyp: as a member institution of the Savings Banks Finance Group, the mortgage bank is committed to sustainable action. This means that in addition to economic considerations, ecological and social aspects are also taken into account, for example. Berlin Hyp lives up to this claim in its core business of commercial real estate finance, amongst other things. The bank has observed a rise in loan demand for 'green' real estate for some years now: buildings constructed in accordance with sustainability standards and distinguished by above-average energy efficiency. What has been missing – until now – was a funding tool to match these loans.
The issue proceeds of every Green Pfandbrief are used exclusively for financing sustainable real estate projects.
Committed to sustainable real estate lending: Bodo Winkler is Head of Investor Relations at Berlin Hyp.
Berlin Hyp has filled this gap: since April 2015, institutional investors have had the opportunity for green and sustainable investments. “As a mortgage covered bond, the Green Pfandbrief fulfils all legal requirements”, affirms Bodo Winkler, Head of Investor Relations at Berlin Hyp. At the same time, the covered bond complies with the Green Bond Principles promulgated by the International Capital Market Association (ICMA). There are clearly-defined requirements concerning the appropriation of the issue proceeds. The bank's operating reporting system is particularly transparent. Moreover, an independent sustainability rating agency has confirmed the bond's ecological added value: oekom research AG has issued a positive overall assessment of the Green Pfandbrief. According to oekom, it complies with Green Bond Principles; the agency assigned a “good” classification to the bond's sustainability quality, and rated the issuer's sustainability performance as “best in class”.
The market was also convinced by Berlin Hyp's commitment to sustainability: at close to €2 billion, the order book for the €500 million, seven-year Green Pfandbrief with a 0.125 per cent coupon was heavily oversubscribed within a short period of time. The issue proceeds have been used for the funding of existing commercial real estate financing, for buildings constructed in line with sustainability standards. Furthermore, the Bank has undertaken to use its best efforts to invest an amount equivalent to the issue proceeds in new 'green' financing during the term of its Green Pfandbrief.
Green building: behind the glass facade of the Vodafone Campus in Dusseldorf you will find a truly energy-efficient building – and a garden with 80 trees.
The Green Pfandbrief is collateralised by strictly applying sustainability criteria. To this end, Berlin Hyp's cover assets pool will comprise loans extended for the purchase, construction or renovation of green buildings (certified as such by third parties) throughout the term of the Green Pfandbrief. “Pursuant to the German Covered Bond Act, we are not permitted to establish a separate, additional cover assets pool”, Winkler explains. Hence, loans collateralised by green buildings have been flagged within the bank's IT systems: “This allows us to prepare separate reports for this part of covered bond cover at any time”, Winkler says.
Berlin Hyp has done its calculations close to one year after placing the Green Pfandbrief: the bank wanted to know how much in the way of damaging carbon dioxide emissions were saved through the refinanced loans. The result: depending on which basis for calculation is used, for every million euros of Green Pfandbrief nominal value, a minimum of 6.9 tonnes of CO2 are being saved each year. For Berlin Hyp, the launch of its Green Pfandbrief was the starting point of a comprehensive Green Bond programme. The Bank has more than doubled its portfolio of green loans since then, and launched the first green senior unsecured bond in the autumn of 2016. This makes Berlin Hyp the first issuer to have placed green bonds in more than one asset class.
