A company of LBBW
Annual report 2019
Creating impetus
“Only by working together will tomorrow be better”
In terms of climate change, the real estate sector is one of the biggest levers; at the same time, the sector is particularly affected by it. For Berlin Hyp, actively shaping the green transformation of the real estate and financial industry is therefore both a matter of social responsibility and business interest.
Forty per cent. That is how much CO2 emissions – that come directly from existing building stock –must be reduced in Germany, compared to the base year 1990.
And this is only the first step: another 20 years later, the building stock in Germany is to be “largely climate-neutral”. This is formalised in the climate protection concept of the Federal Government. It is intended to safeguard that Germany makes its contribution to limiting global warming to less than 2 degrees compared with the pre-industrial age.
The real estate sector is particularly responsible for climate protection. Compared to other sectors, only the transport sector needs to make an even greater contribution. For this, one of the key reasons is that the building stock is a particularly large lever when it comes to the reduction of CO2. In Germany, emissions from heating systems by itself amount to around one seventh of all emissions of this climate-damaging gas. The share of the real estate sector rises to over a third if additional factors are added, such as emissions from electricity consumed in buildings or those resulting from the production of building materials.
“The responsibility is on all of us. We can all do much more,” said Gero Bergmann, Chief Market Officer of Berlin Hyp, at a discussion event in October. To this end, the Bank brought together investors, asset managers and representatives of environmental protection organisations to discuss what the industry needs to contribute to climate protection and what measures need to be taken to achieve this.
Indeed, the issue of climate change has several dimensions for the real estate industry. Real estate is not just a significant source of CO2 emissions. Real estate also plays a central role in adapting to the already unavoidable global warming. Last, but not least, real estate is particularly affected by the consequences of global warming. For example, extreme weather such as storms or heavy rainfall are becoming more frequent and often cause major damage to buildings.
This is why Berlin Hyp takes climate-related aspects into account in its core business. On the asset side, i.e. in financing, the Bank has been promoting projects with a positive impact on climate change for several years now by offering an interest rate advantage to borrowers. In general, the Bank is working on gearing its portfolio more strongly towards climate-friendly projects. At present, “green financing” accounts for a good 20 % of the total loans portfolio. The Bank thus achieved the objective it had set itself early on. Together with renowned external experts, a new, ambitious climate objective is currently being developed.
On the liabilities side, Berlin Hyp is a pioneer in “green issuing”. With the issue of its eighth green bond in October 2019, which was placed within a very short period of time and significantly oversubscribed, Berlin Hyp’s total volume of issues in this segment raised to € 4.0 billion.
In 2015, Berlin Hyp launched the first “Green Pfandbrief” in Germany; in the following years, this product was gradually developed and the brand name “Green Pfandbrief” was established on the capital markets. In order to further promote this segment, the Bank transferred its rights to this brand to the industry association vdp in 2019, thus making the brand name available to other Pfandbrief issuers. This right is tied to mandatory “Green Pfandbriefe” minimum standards. These standards shall safeguard that “green” actually means “green”. Being a pioneer, Berlin Hyp has played an intensive role in developing these standards.
When it comes to risk management, climate-relevant criteria are also becoming increasingly important. This applies to banks and investors alike. Both must be able to reliably assess how climate change will affect the performance of the properties in their portfolios and what particular risks may be involved.
In order to offer investors a better basis for this, in 2018/2019 Berlin Hyp was the first German institute to get involved in the Real Estate Portfolio Assessment (REPA) project of Carbon Delta AG, now MSCI. MSCI’s Swiss-based Climate Risk Center has developed a model that can be used to analyse how extreme weathers or additional climate-related regulations affect the performance of real estate investments. The model is based on the “Climate Value-at-Risk” system developed by the Climate Risk Center* in cooperation with the Potsdam Institute for Climate Impact Research, which can now be used to carry out analyses for more than 10,000 listed companies. The Climate Risk Center was created from the environmental Fintech Carbon Delta AG, which was acquired by MSCI in October 2019.
Dialogue and cooperation with its customers and partners are fundamental to everything Berlin Hyp does to transform the Bank and its business towards more sustainability and climate protection. “Only by working together can we assume responsibility”, says Gero Bergmann.
“In recent years, Berlin Hyp has made a significant contribution to establishing “Green Pfandbrief” as a strong brand on the capital market. The transfer of the trademark rights to vdp was the go-ahead for the development of Green Pfandbrief minimum standards at association level. These minimum standards offer current and future issuers as well as investors an important guidance; in this way, we also foster the Green Pfandbrief market with a further boost.”
Jens Tolckmitt,
Chief manager of the association of german Pfandbrief banks (vdp).
Key Developments
- Transfer of the brand rights “Green Pfandbrief” to the Association of German Pfandbrief Banks (vdp)
- Update of impact reporting methodology
- Development of minimum standards for Green Pfandbriefe on national level (vdp)
September 2019:
Most Impressive Green/ SRI Covered Bond Issuer
September 2019:
Most Impressive Bank Green/SRI Bond Issuer
September 2019:
Best Green/ SRI Issuer for Impact Reporting
June 2019:
Best Asset-based bond
- Further strengthening of eligibility criteria in Berlin Hyp’s Green Bond Framework
- Participation in EeMAP pilot scheme
September 2018:
Best Green/ SRI Issuer for Impact Reporting
September 2018:
Most Impressive Green/SRI Covered Bond Issuer
- Strategic objective: 20% of the loan portfolio to be green by 2020
- Largest Green Bond issuer in the financial institution-segment
September 2017:
Most Impressive Green/SRI Covered Bond Issuer
September 2017:
Most Impressive Bank Green/SRI Bond Issuer
September 2017:
Best Green/ SRI Issuer for Impact Reporting
- Sales promotion: pricing incentives for loans for Green Bulidings
- Publication of first annual reporting
- Development of a Green Bond Program
- Issuance of Berlin Hyp’s first green Senior Unsecured
February 2016:
First Green Covered Bond
May 2016:
Pioneer
May 2016:
Pioneer Asset-based bond of the year
- Issuance of the first Green Pfandbrief
- Establishing a Green Building Commission
- Introduction of standardized processes
September 2015:
Best Debut Deal