Pfandbrief banks establish minimum standards for Green Pfandbriefe

  • “Green Pfandbrief” trademark will further boost a young segment
  • Banks commit to ensuring a high degree of transparency and disclosing their contribution to climate protection
  • Germany already one of Europe’s leading markets for green covered bonds

Pfandbrief issuers under the umbrella of the Association of German Pfandbrief Banks (vdp) are introducing minimum standards for the issuance of “Green Pfandbriefe”. These are Mortgage Pfandbriefe secured by climate-friendly properties or real estate loans.

Jens Tolckmitt, Chief Executive Officer of the Association of German Pfandbrief Banks, says:

“We see great potential for Green Pfandbriefe. The new minimum standards will provide a further boost to this still young market segment, as they provide useful guidance for Pfandbrief banks and reassure investors that Green Pfandbriefe actually meet the stringent requirements placed on them."

The new standards take account of the initiatives being formulated at European level for the introduction of a taxonomy for sustainable economic activities and an “EU Green Bond Standard”. They include requirements for the energy efficiency of financed buildings and oblige Pfandbrief banks to maintain a high degree of transparency. Sustainable investors can therefore rest assured that all Green Pfandbriefe meet high sustainability demands.

By issuing Green Pfandbriefe, the Pfandbrief banks aim to play their part in protecting the climate, limiting global warming to 2 degrees centigrade and, in particular, achieving the carbon savings envisaged for the building sector. According to the German government’s climate protection plan, the building sector in Germany is expected to reduce carbon emissions to around 70 million tonnes in 2030 and become CO2 neutral by 2050.

Sustainable Pfandbriefe with a total value of just under EUR 5 billion are currently in circulation. The Pfandbrief banks have therefore established one of Europe’s leading markets for green covered bonds. To go on developing this market efficiently, the Pfandbrief banks will in future be able to use the “Green Pfandbrief” trademark, the rights to which the Association acquired from Berlin Hyp this year.

High degree of transparency

As transparency plays an increasingly important role for sustainable investors in particular, the Pfandbrief banks undertake to disclose detailed information about their Green Pfandbriefe. This particularly includes information on the qualifying assets in the cover pool, the issuer’s “Green Bond Framework” and the external opinion prepared by a qualified independent party.

At the same time, the minimum standards include an obligation to draw up and publish an annual impact report. This will ensure that investors not only know how banks use the proceeds of the issue, but also what contribution their investments actually make to climate protection.

In order to achieve the long-term goals, the minimum standards for Green Pfandbriefe are regularly reviewed and continually updated. This is done through an association committee in which all the Pfandbrief banks already active in this segment participate.

The standards are also linked to the “Energy Efficient Mortgage Initiative” of the European Mortgage Federation/ ECBC. The aim of this initiative is to establish green real estate financing in Europe and improve the existing data situation. In this context, an analysis will also be carried out to see to what extent green real estate financing has a lower probability of default or loss given default than conventional financing. Here, the vdp acts as a “national hub”, coordinating German efforts under the initiative.