The Emscher river, flowing through the heavily populated Ruhr area, was long used as an open sewer system. This had a devastating effect on the landscape. The fluvial biodiversity seriously decreased, with many species disappearing completely. The river turned into a manmade system of open sewers and canals. The Emscher also lost its natural ability to retain rainwater, causing regular flooding. The proceeds of a green bond issued by North-Rhine Westphalia (Germany) state bank NRW.BANK are used for the renaturation of the Emscher. The 30-year project (1990-2020), in accordance with the EU Water Framework Directive 2000/60/EC, is the largest of its kind in the EU. Several milestones have been reached since the project began; flora and fauna have returned, and newly created retention basins have prevented renewed flooding.

The renaturation of the Emscher is a positive driver for structural change, bringing important natural and recreational areas to a region that was once characterised by mining and heavy industry. Internationally, this project has provided a blueprint for similar projects in Asia, Africa, Latin America and the USA.

Triodos Euro Bond Impact Fund invests in the NRW.BANK Green Bond #2-2019. Aside from the renaturation of the Emscher (16% of the total bond proceeds), other financed projects fall into different categories, such as energy efficiency, onshore wind and solar, and clean transportation. The energy projects financed by this bond result in avoided greenhouse gas emissions of 1.3 million tonnes of CO₂ equivalents over its 10-year term. Germany’s Climate Action Plan has targeted savings of 226 million tonnes of CO₂ equivalents, and the savings achieved by projects in the asset pool represent about 0.6% of the total German emission target for this period.

The impact bond targets several SDGs with the projects it finances:

Sustainability focus

As the state development bank and central development platform of North Rhine- Westphalia, NRW.BANK supports its owner and guarantor, the state of North-Rhine Westphalia, in the fulfilment of its public duties and in the efficient implementation of development and promotion programmes in North Rhine-Westphalia. In accordance with its sustainability strategy, NRW.BANK specifically promotes projects and programmes designed to improve the economic and environmental living conditions, social development as well as environmental and climate protection in North Rhine-Westphalia.

To finance these types of projects, NRW.BANK has established a strong green bond framework. Projects eligible to be (re)financed through this framework have a focus on climate mitigation and climate adaptation. Climate mitigation projects aim to support the 2°C target set by the Paris Agreement by avoiding/reducing CO₂ emissions. Climate adaption projects deal with the existing impact of climate change, such as increasing resilience against heavy rainfall. All projects financed are classified as dark or medium green according to the CICERO Shades of Green.

Earmarked for impact

The basic principle behind impact bonds is to allocate money to new projects that bring social and/or green benefits. This means that the balance sheet of the issuers also becomes more sustainable. This 'greening' is referred to as the additionality of the bonds. Proceeds from the NRW.BANK bonds are used to refinance the ‘greenest’ projects from the year before their issue. This explicit maximum look-back period of one year is positive because it ensures proceeds are not allocated to older, existing projects; a practice we consider ‘greenwashing’. Refinancing recent projects preserves additionality and gives investors the opportunity to assess projects that are included immediately.

The NRW.BANK framework contains a wide range of eligible project categories: renewable energy; clean transportation; residential and public green buildings; aquatic biodiversity preservation and climate change adaptation; sustainable water management; energy efficiency; pollution prevention and control; sustainable management of land use and living natural resources; and circular economy adapted products and processes. Climate adaptation projects are usually not offered by green bond frameworks of financial institutions and are therefore particularly interesting.