5 questions for Markus Schmidt, Head of Treasury, Sparkasse Hannover

For us, sustainability means future viability. In the almost 200 years that we have been around, we have always supported the people and the economy of this region. The business model of savings banks is about strengthening the financial self-sufficiency of citizens and promoting local economic development. We have thus been geared towards sustainability virtually since our very beginnings.

It is fitting that in 2013 we were the first German savings bank to sign the German Sustainability Code. For many years, we have been taking ESG aspects into account, for example, in our business operations, our own investments and in our customer products.

It is a consistent further development of our sustainability activities. Moreover, we already have experience as a Pfandbrief issuer: Sparkasse Hannover is regularly present in the market with several larger bearer as well as numerous registered Pfandbriefe. Pfandbriefe represent a strategically important source of funding for us in addition to retail deposit business.

With the Green Pfandbrief, we can, on the one hand, make our contribution to the promotion of green investments and, on the other hand, set up our market access on the funding side in a future-oriented manner. We are convinced that green bonds will become the standard and we want to be prepared for this.

It took about four months from the internal kick-off with all the departments involved until the deal. That is quite fast for such a rather complex project. Fortunately, the strategic benefit convinced and motivated us all. The basis for the successful debut and most important milestones were the development of our “Green Bond Framework”, the dialogue with the “Second Party Opinion” provider as well as the development of procedures for the identification and flagging of suitable cover assets. The latter must now be permanently integrated into our business process in the aftermath of the issue and put into practice.

In the Pfandbrief sector, the “greenium” – i.e. the premium over non-green issues – is currently rather low. However, as the market share of green bonds continues to grow, the gap is likely to widen. We therefore expect that we will be able to keep our refinancing favourable with the Green Pfandbrief. Another clear advantage is that with the Green Pfandbrief we are now also interesting for investors specifically looking for green investments. We are thus broadening our investor base.

The vdp standards were of course very important and helpful for us as a Pfandbrief issuer and vdp member. While ICMA’s “Green Bond Principles” have established themselves as the market standard for green bonds, the vdp standards provide concrete information on what investors can expect specifically from the “Green Pfandbrief”. At the same time, they provide issuers with guidance regarding the eligibility of cover assets.

For this reason, both the requirements of the “Green Bond Principles” and the vdp standards have been incorporated into our framework for green issues.

But the vdp standards are also of great importance for the German Pfandbrief market as a whole. With this new quality feature, the vdp underlines its claim to continue to position the Pfandbrief as a premium product internationally and to clearly distinguish it from issues in other jurisdictions. At the same time, the vdp standards prevent further fragmentation in green issues. We see this as very positive for the entire German banking market.