ESG and Sustainable Covered Bonds

The EU framework for the definition and labelling of environmental (green) loans, mortgages and covered bonds is based on the EU taxonomy. Important aspects include information on the energy performance of buildings, the use of buildings’ energy performance certificates in pre- contractual information, and the increasing of competences and knowledge related to green mortgages.

A sustainable covered bond involves a formal commitment by the issuer (bank) to use an amount
equivalent to the covered bond proceeds to (re)finance loans according to clearly defined environmental (green) or social (sustainable) criteria, or a combination of the two. The labelling of covered bonds as ‘sustainable’ must be certified by an external reviewer.

The underlying cover assets are typically loans to finance buildings with very low to zero energy intensity or to renovate old buildings in order to achieve significant energy savings. The issuer (bank) seeks to replace sustainable cover assets that mature or are repaid before the maturity of the bond by (re)financing new eligible sustainable assets.