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KfW's capital market activities in 2016/2017: continuity and quality through turbulent times
Frankfurt am Main (ots) -
- Responsible issuer of liquid bonds with global market positioning - Strong commitment to qualitative development of green bond market - Anchor investor in the European securitisation market for SME financing - Funding volume planned for 2017: EUR 75 billion
The upcoming year will be characterised by major political events that will have a significant impact on capital markets and are expected to cause high volatility. The sharp increase in capital market interest rates after the US presidential elections last November shows how much the markets are dominated by political developments. Moreover, the monetary policies of the US Federal Reserve and the European Central Bank will exert a strong influence on capital markets.
In the upcoming year, KfW intends to issue bonds in a volume of approx. EUR 75 billion in the international capital markets. Despite the many political uncertainties, KfW feels well positioned to raise these funds. "We're confident that thanks to our proven product range and our high flexibility we will be able to secure the best possible funding for our promotional business, even in times of high volatility and rising interest rates," explains Dr Günther Bräunig, member of the Executive Board of KfW in charge of capital markets, at the annual press briefing on KfW's capital market activities in Frankfurt. In 2017, the major share of funding will again be based on large-volume benchmark bonds in the core currencies euro and US dollar.
KfW issued more than 200 bonds this year, raising around EUR 72 billion. As in the previous year, the US dollar continues to be the most important currency and accounts for 48%, followed by the euro (36%) and the British pound, which reached the highest volume in several years with currency-translated just under EUR 6 billion (8%), in spite of the Brexit decision. International investors highly appreciate KfW bonds; this is confirmed by the fact that bonds were issued in 15 different currencies ranging from the Australian dollar and the Singapore dollar to the Japanese yen. With 11 benchmarks and 3 taps of benchmarks, the German promotional bank this year again managed to uphold its reputation as a significant issuer of highly liquid bonds.
Strong commitment to green bond market
KfW's capital market experts also focus particularly on the development of the still young green bond market, which is characterised again by strong dyna¬mics in 2016. In addition to solid quantitative growth (new issue volume 2016: approx. EUR 65 billion; 2015: approx. EUR 32 billion), the market is also becoming increasingly diversified with regard to issuers and products. A rapidly growing number of participants such as rating agencies and auditing firms actively support the establishment of this market segment, which is another positive sign for its development.
Finally, 2016 also saw important political signals, for example at the G20 Summit in Hangzhou: the significance of green finance and green bonds was commended in the final communiqué of the G20 Summit. In addition, several countries have announced lately that they intend to issue government bonds in the green bond format in 2017.
Since its entry into the green bond market in 2014, KfW has become one of the largest issuers with 10 bonds and 1 tap in 5 currencies and an overall volume of EUR 9.17 billion. With its liquid green bonds, KfW contributes to the internationalisation of this market, while adding socially responsible investors to its own investor base. In 2017, KfW will continue to issue green bonds on a regular basis to address additional international investors and expand its green bond curves in the core currencies.
KfW is one of few institutes worldwide which is not only issuing green bonds but has also been building up its own green bond portfolio on behalf of the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety since 2015. This portfolio currently amounts to around EUR 580 million and covers mainly the areas of renewable energies and energy efficiency. In 2016, KfW invested around EUR 300 million in this portfolio, including an investment in the first green ABS issue in Europe to finance energy-efficient buildings.
In 2017, KfW plans additional green bond investments of around EUR 300 million. The target volume of this portfolio is EUR 1 billion.
The Green Bond Principles have become a true market standard for issuers and investors alike. They recommend best practices and transparency standards for green bonds with regard to project selection, management of proceeds, reporting and external validation. Since September 2015, KfW has been a member of the Executive Committee of Green Bond Principles (ExCom), which is responsible for the further development of the Principles. "We will continue our commitment to the green bond segment as issuer, investor and ExCom member in 2017. Germany's G20 presidency will provide us with the opportunity to continue our dialogue about the responsibility of the capital market not only with market participants but increasingly with the political sphere as well," says Bräunig.
Anchor investor in European securitisation market
KfW has been proving its sustained commitment in the securitisation market for many years. In 2016 the institution has already invested EUR 800 million in European SME securitisation, around half of which in transactions with German background. Another transaction is currently being prepared, taking the total volume this year to the target level of EUR 1 billion.
KfW's expectations with regard to the European securitisation initiative ENSI, which KfW established together with national promotional banks and the European Investment Fund (EIF), have been met. "2016 saw a successful start of our cooperation. We have already jointly invested in six different transactions and thus supported the European SME sector. And we want to further intensify the European cooperation in 2017," Bräunig explains. KfW also expects the European Fund for Strategic Investments (EFSI) to provide funds in support of SME securitisation transactions in the coming year.
The promotional bank plans to commit EUR 1.3 billion in 2017 in this market segment, including up to EUR 500 million for transactions from European countries outside of Germany.
Detailed figures and more information are available under:
- Hand-out of Press Briefing: http://ots.de/QphfN
- KfW Investor Relations: http://ots.de/5IEyf
- KfW Sustainable Investment: http://ots.de/8s9ju