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FIGCovered Bonds

Green Covered Bonds

EUROWEEK: There has been a fair bit of talk about green covered bonds but from my perspective it doesn’t seem to have amounted to much.

Do you really think this is a market that has a viable long term future as a sub-sector of covered bonds, or would it be better suited to another asset class?

Burmeister, DeAWM: I wouldn’t want to prohibit any kind of financial innovation that makes our environment better but I’m not sure whether it fits in the covered bond structure per se because in my view this collateral is better allocated to project finance. There’s always a decent share of entrepreneurial risk if you were to invest, for example, in solar panels in the Sahara Desert or wind parks in the North Sea.

Eichert, CA-CIB: There’s talk of using covered bonds to refinance improvements on houses to make them more energy efficient and there are discussions around how covered bonds could be used to refinance wind parks and solar parks. But at this stage the concepts seem to be more about marketing ideas than making concrete proposals.

Juhasz, World Bank: Green covered bonds are an extremely interesting concept and I’m curious to see how a pool could be put together. We’ll definitely pay attention to this sector.

Prokes, BlackRock: For me this topic is more compatible with project finance and hence I don’t think I would have any reason to give any preferential pricing for a green covered bond over any other secured structure that is backed by assets that are not mortgages.

Denger, MEAG: I would look at green covered bonds if everything was fine from a legal perspective.

Cortazar, BBVA: If they were offered we would of course analyse the structure, assets, legal framework and so on and then assess where we thought the spread should be.

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