Germany’s development bank, the Kreditanstalt für Wiederaufbau (KfW), is to issue its first green bond, targeting up to €1bn that would be invested in renewable energy projects.
The capital raised from the inaugural, euro-denominated issuance is to be kept in a separate account, focusing on solar and wind power projects, with their carbon impact independently assessed, the bank said.
Horst Seissinger, head of capital markets at the German institution, told IPE the euro issuance would be only the beginning, targeting a market accustomed to the idea of green investing.
“The other large and traditional market is the one in the US – it’s something we have in mind for the second part of the year,” he said.
His colleague Petra Wehlert, head of new issues, said KfW’s involvement in the green market would “get that topic out of the niche into broader capital markets”.
“It’s a simplification of the topic, giving capital market participants a product and to use it to broaden the discussion about the concept,” she said.
The bond will base its duration around the average loan term of the KfW’s pre-existing ‘Renewable Energies – Standard’ programme, which last year stood at 8.6 years.
Solveig Pape-Hamich, head of investment strategies and sustainability at the bank, was keen to emphasise that it could be viewed as more than a simple green bond by some investors, as it would be assessing the carbon reduction achieved by investment activity independently.
“We sell it as a green bond, but, at the same time, it is a good product for the so-called impact investors to invest in, since we can offer them an impact measurement.”
KfW said it estimated the green bond market would be worth $40bn (€29.4bn) by the end of 2014.
Sessinger added that he would not rule out the bank moving beyond green bond investment and could “look at other themes that are of interest to investors”.