European markets have been a rare recent bright spot in green bond issuance, with European issues increasing Q/Q by 51% in the second quarter, after a 19% Y/Y pullback in Q1, while global issuance year-to-date is down nearly 45% to $70 billion in the first half pf the year.
In addition to a recovery in green bond issuance, European markets are now experiencing a proliferation in varieties of green bond securities. The most recent example is an announcement by Dutch bank de Volksbank of a subordinated Tier 2 green bond issue, making it the first European bank to do so.
De Volksbank’s announcement comes shortly after Spanish Bank BBVA demonstrated demand for green bonds across the risk spectrum, with the first-ever issuance of a green contingent convertible (CoCo) bond by a financial institution, worth €1 billion earlier this month.
De Volksbank successfully issued €500 million of subordinated Tier 2 green bonds, carrying a term of 10.25 years and a coupon of 1.75%. With similar results to BBVA’s recent issue, de Volksbank’s offering was more than 3x oversubscribed, with demand reaching more than €1.75 billion. The bank also reported very strong ESG-investor participation, with 73% of the transaction allocated to these investors.
De Volksbank stated that it wants to make a relevant and positive contribution to society, with a focus on sustainability and financial resilience. By issuing subordinated Tier 2 green bonds, de Volksbank is adding a new element to its value chain. An amount equal to the net proceeds of the green bonds will be allocated to an Eligible Green Loan Portfolio of new and existing loans that contribute to the bank’s climate neutral balance sheet through reduced or avoided emissions. This is consistent with the bank’s aim for a 45% climate-neutral balance sheet by 2020, rising to 100% by 2030.