KfW offers liquid bonds to investors worldwide
As of 30 November 2020, KfW has sourced around EUR 115 billion this year to fund its promotional business and extend loans under the coronavirus aid programme. It raised EUR 65.7 billion of this sum by issuing 160 bonds in 14 different currencies in the international capital markets. KfW had already expanded its funding sources in the first half of the year as a response to the COVID-19 crisis. It received a total of around EUR 36 billion from the Economic Stabilisation Fund (Wirtschaftsstabilisierungsfonds – WSF) as of 30 November 2020. In addition, KfW participated in the targeted long-term refinancing operations (TLTRO) of the Eurosystem for the first time in June 2020, raising EUR 13.4 billion.
In its capital markets issuance activities KfW offered its investors highly liquid investment options in EUR and USD again this year. Among them were six new euro benchmark bonds with maturities ranging from 3 to 10 years and taps of outstanding euro benchmark bonds in a total of EUR 32.5 billion. In addition, KfW issued three USD benchmark bonds totalling USD 14 billion, two of which in the second half of the year. Although new issuers with large-volume bonds entered the market this year, order books for KfW bonds were also heavily oversubscribed. Supported by the ECB, capital markets have been very receptive.
“Our Green Bond issues were our special highlight in the second half of the year. At almost EUR 8 billion, they make up an important part of our funding since last July”, explained Tim Armbruster, treasurer of KfW Group, on the occasion of the annual capital market press briefing in Frankfurt. The impressive demand for the underlying promotional programmes (in particular “Energy-efficient Construction”) and the huge interest from investors enabled KfW to tap a EUR 3 billion Green Bond issued in July twice in autumn. With a new volume of EUR 6 billion, this bond is currently the largest outstanding green bond of a non-governmental issuer. Another highlight was the KfW USD Green Bond with a maturity of 10 years and a volume of USD 2 billion. The bond was very well received by international investors and contributed further to liquidity in the green USD market.
Overall, KfW issued 14 Green Bond transactions in 6 different currencies totalling the equivalent of EUR 8.34 billion to market this year.
More transparency for investors through Roadmap Sustainable Finance
The green bond market has continued to develop very well overall. Investors are no longer just taking a closer look at the green bond which they plan to invest in. Rather, they are increasingly moving the issuer into the focus of their analysis – and KfW believes with very good reason. “We are already well-positioned in terms of sustainability and transparency. However, we want to further improve our contribution to sustainability by implementing the further strategic development of business management in the framework of the ‘KfW-Roadmap Sustainable Finance’, which we presented to KfW’s Board of Supervisory Directors yesterday”, explained Dr Karl Ludwig Brockmann, KfW’s Group Officer Sustainability. This will allow KfW’s stakeholders, in particular investors, to get an even more comprehensive picture of KfW’s sustainability position. To this end, KfW will in particular adopt the following group-wide measures:
- Further strengthen ESG risk management and expand TCFD reporting on climate risks, which began in 2020.
- Improve its impact management by expanding expertise and structures in order to better capture, assess and report on the impacts of its financings – beyond SDG mapping.
- With the aid of recognised climate scenarios, it will identify and, from 2021, implement technology-based sector guidelines for particularly emissions-intensive economic sectors. These sector guidelines aim to make new KfW commitments Paris-compatible and thereby gradually reduce their greenhouse gas footprint in order to achieve a greenhouse gas-neutral loan portfolio by 2050.
Outlook on funding in the year 2021
KfW estimates the funding volume to be raised in the international capital markets in 2021 at EUR 70 to 80 billion; it has set a slightly wider range this time, as it will consider its option to participate again in the new TLTRO.
In order to accommodate investors’ preference for longer maturities, KfW intends to expand its euro benchmark programme by adding a 15-year maturity.
The use of further funds from the WSF will depend on the development of the KfW Special Programme, which has been extended until the end of June 2021.
Depending on how disbursements progress under the loan programmes that back its Green Bonds, KfW expects to issue Green Bonds in a volume of up to EUR 10 billion next year. KfW continues to pursue its strategy of supporting the development of the green bond market segment by offering liquid bonds and building a green yield curve for global investors. Additionally, KfW will continue to offer investors Green Bonds in foreign currencies.