What’s it all about?
Australian based FlexiGroup Ltd has issued a landmark green Asset Backed Securitisation (ABS) deal of AUD 50m (USD 39m) with proceeds allocated to refinancing of residential rooftop solar PV systems.
The green ABS is certified against the Climate Bonds Standard, providing investors with assurance of the deal’s green credentials.
Verification against the Climate Bonds Standard was done by Norwegian-based DNV GL. NAB acted as the arranger and bond structuring agent.
From a credit perspective, the ABS issuance is backed by a wider collateral pool of AUD 260m of consumer receivables. This structure of green ABS backed by non-green assets but with proceeds allocated to green assets is similar to that used by Toyota in 2015 for their US green auto ABS deals.
A pricing differential?
What’s really exciting is that the certified green notes closed 5bps lower than non-green notes issued at the same time by FlexiGroup and backed by the same wider pool of consumer receivables.
A pricing benefit for green bonds right in front of our eyes?
Is this important?
A demonstration of pricing benefit for green is new: It has been difficult to observe evidence of pricing benefits for green because issuers typically don’t issue comparable non-green bonds at exactly the same time.
We now have an example of green and non-green bonds from the same issuer, issued at the same time and with the same credit characteristics. This tranche of FlexiGroup deals provides us with comparable deals and evidence of significant pricing benefits - 5bps pricing benefits is not to be scoffed at.
What else is new?
First Australian green ABS: Other green ABS have been issued previously, this is a first in the Australian market.
First Global Climate Bonds Certified ABS: This ABS will refinance residential rooftop solar PV, in line with the solar criteria of the Climate Bonds Standard.
Who’s saying what?
Steve Lambert, NAB Executive General Manager, Capital Financing,
“NAB is naturally excited to leverage and extend its position as Australia’s leading debt financier of renewable energy and its securitisation capability by now arranging what is both a world first Climate Bond certified securitised Green Bond, and Australia’s first securitised Green Bond.”
“NAB recognises that environmental challenges such as climate change, resource scarcity and natural capital loss and degradation are challenges that affect our economy and society.’
“This landmark transaction offers yet another option for investors and the emerging impact investment market in Australia.”
Sean Kidney, CEO Climate Bonds Initiative:
“Australia already has one of the highest rates of rooftop solar density and a diverse ABS market. There is enormous potential for this this green ABS to be the first of many.”
“By gaining Climate Bonds Certification, FlexiGroup has assured investors of the the green credentials of this bond and set a best practice example for future domestic issuers.”
Who is FlexiGroup?
FlexiGroup is an Australian and NZ consumer and SME leasing company and issuer of ABS backed by portfolios of consumer receivables. Flexigroup has its own origination platform for this transaction via the wholly owned subsidiary Certegy Ezi-Pay.
The Last Word
Australia is blessed with abundant sunshine and high penetration of rooftop solar systems. Despite some recent clean energy policy uncertainty, the fundamentals are strong for continued growth in solar.
Flexigroup’s green ABS deal indicates a pricing benefit arising from the green label – this is exciting news for the market and potential issuers out there.
The deal from FlexiGroup could well be a sign of things to come for green solar bonds.
Disclaimer: The information contained in this media release does not constitute investment advice and the Climate Bonds Initiative is not an investment adviser. Links to external websites are for information purposes only. The Climate Bonds Initiative is not advising on the merits or otherwise of any bond or other type of investment. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind for investments any individual or organisation makes, nor for investments made by third parties on behalf of an individual or organisation.
