Green Covered Bonds

The document explains how green covered bonds, which utilize a dual recourse structure and dedicated asset pools, can provide banks with cheaper, long-term funding for low carbon projects. It highlights early examples like BerlinHyp's green Pfandbrief and the Bank of China's dual recourse bond, while arguing that standardizing green asset definitions and expanding legal frameworks to include renewable energy leases would scale the market.

• Covered bonds are highly-regulated securities that offer lower funding costs than unsecured debt due to a dual recourse structure, providing investors a claim over both a dedicated 'cover' pool of assets and the issuer.
• The first green covered bond was issued in Germany in 2016, and BerlinHyp issued a EUR 500m green Pfandbrief in May 2015 with a 7-year tenor and 0.125% coupon, which was 4 times oversubscribed and attracted 15 new investors.
• In November 2016, the Bank of China issued a USD 500m 'dual recourse' green bond, which is not technically a covered bond due to a lack of dedicated legislation, but uses a cover pool of Chinese climate-aligned bonds.
• Green covered bonds can increase financing to low carbon sectors by providing banks with cheaper, longer-dated funds and allowing institutional investors to increase exposure to low carbon assets through a high-security instrument.
• To scale the market, the public sector should support green definitions and expand legislation to include low carbon assets like wind and solar energy leases, provided they meet strict legal criteria.

APA

Climate Bonds Initiative (2017). Green Covered Bonds. https://www.climatebonds.net/files/drupal-files/files/March17_CBI_Briefing_Covered_Bonds.pdf

Chicago

Climate Bonds Initiative. Green Covered Bonds. 2017. https://www.climatebonds.net/files/drupal-files/files/March17_CBI_Briefing_Covered_Bonds.pdf.

Wikipedia

{{cite report |author=Climate Bonds Initiative |title=Green Covered Bonds |date=February 2017 |url=https://www.climatebonds.net/files/drupal-files/files/March17_CBI_Briefing_Covered_Bonds.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatebondsinitiative2017green, author = {{Climate Bonds Initiative}}, title = {{Green Covered Bonds}}, institution = {Climate Bonds Initiative}, year = {2017}, month = feb, url = {https://www.climatebonds.net/files/drupal-files/files/March17_CBI_Briefing_Covered_Bonds.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }