From Vision to Reality: How RBI Supported Volksbank Wien’s Green Bond Journey

In 2023 Volksbank Wien AG (VBW) issued its first green bond, marking a significant milestone in its sustainability journey. The underlying sustainability bond framework was created with the support of RBI as green bond adviser and has been updated in January 2024 to ensure that rapidly evolving ESG standards and market expectations are met. Christoph Pramhofer and Petra Wickert, Capital Markets at VBW, alongside Vera Economou, Katsiaryna Souvandjiev and Evamaria Hammerschmid, Sustainable Finance at RBI, provide an in-depth look at the development, implementation and update of the framework and why having an experienced partner from the very beginning is crucial for successfully issuing green bonds.

How did the partnership between RBI and Volksbank Wien start?

Christoph Pramhofer (VBW): 

Sustainability and regionality have been part of the Volksbanks’ business model for more than 170 years. Our cooperative identity and sustainability values are distinguishing features of VOLKSBANK WIEN AG. 

Volksbank Wien has been engaging with sustainable finance early on. Issuing sustainable bonds was key to financing or refinancing green and socially sustainable loans in the capital market. As part of our broader sustainability strategy, we thus established our first Sustainability Bond Framework in January 2022.

Given the necessity for a solid framework for such bonds, we sought external expertise. RBI’s longstanding experience in sustainable finance and local market knowledge made them our choice for a sustainability bond framework advisor.

Vera Economou (RBI): Our partnership with Volksbank Wien dates back decades. Over time, we have collaborated on various products, including debt capital markets.

Can you explain Volksbank Wien’s sustainability bond journey and how the sustainability bond framework was developed and implemented?

Petra Wickert (VBW): Our Sustainability Bond Frameworkallows us to issue green, social and sustainability bonds aligned with the Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines administered by the International Capital Market Association (ICMA). 

A significant milestone in our sustainability journey was the issuance of our first Green Bond in March 2023. The transaction, a benchmark-size EUR 500 million Senior Preferred Bond, was very well received by the investors. It was marketed after a day of investor calls to update potential buyers on the sustainability bond framework, achieving a spread at MS+135bps due to high demand.

To ensure that our framework is consistently aligned with evolving market best practices, we established an updated version in January 2024 and hereby also included new eligible activities into the framework.

The latest milestone was the publication of our first green bond investor report where the allocation of the green bond proceeds and the positive environmental impact achieved is disclosed. 

Christoph Pramhofer (VBW): We intended to build our Framework with external input right from the start. Thus, we worked together with RBI to develop the basic structure right from the beginning.

We relied on their experience to set up our internal processes related to sustainable bond management, data collection, and reporting. Regular calls were conducted to discuss for example the definition of eligibility criteria and the measurement of environmental and social impacts.

Evamaria Hammerschmid (RBI): One important part of a sustainability bond framework is to get an external review of the document. This second party opinion (SPO) verifies that an issuer’s green bond framework complies with the industry standards and market best practice. The support in this process included obtaining offers from leading SPO providers and offering guidance and advice in responding to their inquiries, ensuring a positive SPO.

What were the challenges of the project? Were there any particular hurdles, and how did the partnership overcome them?

Petra Wickert (VBW): Capturing additional ESG data requires changes in central processes of the bank. Varying and not fully defined regulatory standards on sustainability make it difficult to establish a universally accepted definition for sustainable financings.

Katsiaryna Souvandjiev (RBI): Finding the appropriate working format was a challenge, especially during the Covid-19 period when online communication was not yet fully established. Overcoming these challenges was necessary before we could meet in person months later.

What advice would you give to other companies planning similar projects?

Petra Wickert (VBW): Support from an external partner is highly beneficial and should be considered. The commitment of top management and all involved is crucial for such comprehensive projects. The standards in Sustainable Finance evolve rapidly, making regular updates to the framework essential to meet market expectations.

Why do you think it is important to offer sustainable financing like green bonds?

Christoph Pramhofer (VBW): Issuing green, social, and/or sustainable bonds is a central element of our sustainability strategy. Through our capital market activities, we aim to reinforce our commitment to ESG and meet investor demand for sustainable bonds. The impact report allows us to measure and report the positive effects of our sustainable financings. It also underlines our commitment to sustainability, which is deeply embedded in our DNA, in the capital market.

Vera Economou (RBI): Sustainability is integral to RBI’s strategy. It’s driven by regulatory requirements, supervisory expectations, and growing demand from investors, customers, and society. Supporting sustainable projects fosters valuable knowledge transfer, and allows us to improve our expertise continually.

Evamaria Hammerschmid (RBI): We can share best practices and lessons learned from our own issuances.Additionally, we learn from these projects a lot due to the challenges that typically arise, and the questions asked by our customers, allowing for continual improvement of our expertise. 

Would you recommend working with RBI to others? 

Petra Wickert (VBW): We were very satisfied with RBI as our sustainable bond advisor. Together, we developed a solid framework that fits well with our business model. The trustful and intensive collaboration was also a key reason why we chose RBI again for updating our framework.