Global reinsurer Munich Re has issued a subordinated green bond for the first time in its history, with the volume issued totalling €1.25 billion (USD 1.46 billion).
The German reinsurance company says that the bond proceeds will be invested in renewable energies and the like, while the issuance also bolsters the firm’s capital base amid a hardening reinsurance marketplace.
Munich Re notes that this green bond issuance shows its commitment to leveraging capital markets to help achieve a climate-friendly transformation of the economy.
The reinsurer intends to use the funds raised to finance or refinance sustainable projects in accordance with its Green Bond Framework. Projects include investments of equity and debt in renewable energy, energy efficiency, clean transportation, green buildings, sustainable water and wastewater management, the eco-efficient and/or circular economy, and also the environmentally sustainable management of living natural resources and land.
The bond has a coupon of 1.25% and is scheduled to mature in 2041. According to Munich Re, its Green Bond Framework is aligned with the 2018 Green Bond Principles outlined by the International Capital Market Association.
Munich Re’s Chief Financial Officer (CFO), Christoph Jurecka, commented: “By launching this green bond, we are taking a pioneering role in sustainable finance and responding to the growing demand for climate-friendly investment options. We are also strengthening Munich Re’s capital base at a time when hardening reinsurance markets are offering numerous opportunities for profitable growth.”
The reinsurer explains that it has an eye towards growth opportunities that are coming to fruition in many reinsurance markets. Furthermore, subordinated bonds are an important capital management tool, says the firm, that among other things, provides Munich Re with the option of calling and redeeming outstanding subordinated bonds in both 2021 and 2022.
Munich Re has also reiterated its commitment to the targets of the Paris Agreement on climate change and notes that it aligns its own investments with the Agreement, including the integration of ESG criteria.
Currently, the company’s investments in renewable energies amount to around €1.6 billion, a figure that the firm expects to continually rise to up to €2.8 billion in coming years.
In February of this year, Munich Re announced that it had joined the Net-Zero Asset Owner Alliance, an international group of institutional investors that have committed to decarbonise their portfolios to net-zero emissions by 2050.