Annual Report 2018

Green Bonds Sustainability creates a competitive edge

DZ BANK recently launched a green bond with an issue volume of €250 million. Treasurer Heiko de Wall explains why sustainability means future viability and describes the competitive advantages that come with it.

Mr. de Wall, people have been talking about sustainability for a long time now. Why is it more than just a passing trend in the financial sector?

Heiko de Wall: It is something that is part of our cooperative DNA. Moreover, society is becoming increasingly interested in sustainability, and demand for investment products in this segment has been growing for years. Decisions made in the banking sector have a significant impact on developments in other industries. Sustainability is now firmly embedded in banks’ core business and will remain an important subject going forward.

DZ BANK recently issued its first green bond. What exactly is a green bond?

de Wall: When investors buy a bond, they are lending money to its issuer. In the case of green bonds, this money is used to fund sustainable projects, particularly those aimed at combating climate change.

And what is the advantage for investors?

de Wall: With a green bond, investors know exactly what they are buying. They know what the bank is looking to achieve, or what projects it wants to fund. Sustainability-oriented investors need suitable investment options that enable them to achieve their objectives and adhere to their rules. A green bond can be used as part of an overarching sustainability strategy. And by the way, investors opting for green bonds do not miss out when it comes to yields.

Heiko de Wall, Head of Department in the Treasury division at DZ BANK, and his team were responsible for the issue of DZ BANK’s first green bond.

What prompted DZ BANK to issue the green bond?

de Wall: We want to boost our environmental credentials on the funding side of our business, i.e. make sustainability an integral element of both our lending and our funding operations. We are thus adding the final links to DZ BANK’s sustainability value chain. Furthermore, we are attracting additional, sustainability-oriented investors.

What else characterizes DZ BANK’s green bond?

de Wall: It was important to us that every aspect of our first green bond was of the highest quality. Firstly, this means that the bond is invested in high-quality investments, namely onshore wind power projects in Germany. The wind farms and turbines in these projects, for example, are built to the exacting standards laid down in German construction and environmental law. Secondly, we attach a high priority to sound governance processes, accurate reporting, and reliability in terms of how the money is spent. And this effort has paid off: Rating agency S&P has given the bond a rating of E1, which is the top score in the green evaluation category.

Can investors track the projects’ progress?

de Wall: DZ BANK set itself the goal of providing transparency for all investors regarding the green bond, from when it is issued until the day it matures. That is why we publish a green bond investor report each year that contains information on allocation and the impact of the investment, such as how much energy is generated per year by the funded wind farms.

Do banks often issue their own green bonds, or is this quite unusual?

de Wall: Many banks facilitate sustainability-oriented investments that support environmental and/or social causes as part of their lending business. But a bank that issues a green bond of its own is going a step further, because it is sending a clear signal and showing a firm commitment to sustainability.

What makes green investment products credible?

de Wall: When they comply with international standards, are assessed by external rating agencies, and disclose their investment criteria in a transparent and straightforward manner. DZ BANK’s green bond, for example, follows the Green Bond Principles of the International Capital Markets Association (ICMA).

Does offering green investment products create a competitive edge?

de Wall: Definitely. Sustainability criteria are now a determining factor in the business decisions of many of our customers. When selecting a bank consortium for a sustainability-related issue, large-scale issuers that are already active in this segment look at whether the partners have credible and robust environmental credentials. And we are positioning ourselves accordingly.