Erste Group has achieved another milestone in its long-standing activities in the ESG sphere by successfully issuing its first-ever sustainability bond on the capital markets. The proceeds of the heavily oversubscribed 500 mn euros senior preferred benchmark bond will be allocated to eligible green and social projects as set out in Erste Group’s recently published Sustainable Finance Framework.
“In the future, economic success will only be possible if it is coupled with social and ecological responsibility. We view it as our social duty to contribute to bringing about sustainable change in our region. Our first-ever sustainability bond marks an important step, as it allows us to finance further green and social projects.” – Bernd Spalt, CEO of Erste Group
Erste Group’s inaugural sustainability bond met with high market demand. More than two times subscribed at the final re-offer spread of 35bps over mid-swap, the 500 million euro issuance of senior preferred notes with a maturity of seven years carries an annual fixed coupon of 0.125%. The bond was placed with over 80 national and international institutional investors, 52% of which could be identified as dedicated ESG investors. This underlines the increasing interest in and demand for green and social finance instruments on capital markets.
Crédit Agricole CIB, Deutsche Bank, Erste Group, ING (Sole Sustainability Structuring Advisor) and LBBW served as bookrunners on the transaction.
Additional financing to bolster Erste’s ESG projects
The successful issuance of Erste Group’s first-ever sustainability bond provides additional firepower for the banking group to pursue its ESG strategy. The proceeds from the issuance will be used to finance eligible projects that have been identified within the Erste Group’s Sustainable Finance Framework (SFF). At this time, these include commercial real estate projects in Romania that have been certified as green and subsidized housing projects in Austria that are both green and social. In addition to establishing the use of proceeds and selecting individual projects, Erste Group’s SFF also manages the allocation of the funds raised and ensures for standardized reporting.
In a Second Party Opinion, the leading global sustainability rating agency ISS ESG has verified Erste Group’s SFF. Moreover, Erste Group’s formal concept of green, social and sustainability bonds is in line with the ICMA Sustainability Bond Guidelines and Social Bond and Green Bond Principles in terms of how proceeds are used, the process for evaluating and selecting projects, as well as for managing proceeds and reporting. Erste Group’s green projects are also aligned with the EU Taxonomy Draft Delegated Act published in April 2021, while the overall sustainability quality for the social project categories has been rated “good”.
Erste: A pioneer in ethical investing and social banking in CEE
Erste’s purpose to advance its region and society by promoting prosperity was set out in the savings bank’s founding charter more than 200 years ago. For more than two centuries, Erste has pursued an inclusion-driven strategy to create and secure prosperity for all. Recent milestones in Erste Group’s long-running sustainability journey include the foundation of “Die Zweite Sparkasse” in 2006, the publication of the banking group’s Code of Conduct in 2015 and the launch of Social Banking activities in all of its CEE banking markets in 2016. Other recent initiatives include the integration of sustainability into the investment process in most of Erste Asset Management’s mutual funds, as well as Erste Group’s recently announced decision to exit from coal financing by 2030.
An overview of Erste Group’s sustainability-related strategies, its policies (including its Code of Conduct, Responsible Financing Policy, and Diversity and Inclusion Policy), its goals with regard to diversity and environment, as well as its ESG-related ratings and memberships is available in the Sustainability section of the firm’s website.