With three new certified bonds just announced, Australia is cementing its reputation of green bonds best practice. FlexiGroup’s ABS, Queensland’s sub-sovereign and Westpac’s off-shore placement all gained our attention
FlexiGroup Greenium on 2nd Certified Solar Securisation
FlexiGroup has followed up its award winning 2016 Certified ABS for rooftop solar with a second green securitisation. Nasdaq is reporting some keen pricing on the AUD 50m green notes within an AUD 265m (USD 204m) offer that went to market on Tuesday, replicating the ‘greenium’ (green premium) first observed in the 2016 sale.
On both occasions the Clean Energy Finance Corporation is a cornerstone investor.
The 2016 Flexigroup ABS was a world first certified green ABS Climate Bonds Certified green securitisation and also Australia’s first securitisation to include a green tranche, with AUD 50m of A2G notes backed by loans for residential rooftop solar power systems.
Sunshine State Sub Sovereign from QTC - Climate Bonds Certified
Queensland’s Treasury Corporation (QTC) has announced pre-issuance Climate Bonds Certification on eligible assets that align with the Climate Bonds Solar and Low Carbon Transport Standards respectiveley. Pre-issuance certification enables QTC to issue an independently verified green bond to domestic and international investors.
Solar energy, light rail and new bicycle networks are amongst the projects to be funded. QTC has a wide pool of green assets and has signalled its intention to undertake further certified bond issuance.
Queensland is the second Australian sub-sovereign to offer Certified Climate Bonds to the market following Victoria’s ground-breaking issuance in July 2016.
Westpac Sells JPY 5.6bn (AUD 64.8m) of Climate Certified green bonds into Japan
Responsible Investor is reporting a private sale some JPY 5.6bn (EUR 46.5m / AUD 64.8m) of Climate Certified green bonds to Japan based Meiji Yasuda Life Insurance.
In declaring the purchase Meiji advise they have a policy to invest 150 billion yen in domestic and 250 billion yen overseas, totalling 400 billion to purchase green bonds and other related ESG bonds and expect a target of 400 billion yen at the end of this fiscal year.
Westpac has previously issued a whopping AUD 500m Climate Certified bond in May 2016, the third of Australia’s ‘Big 4’ banks to issue certified bonds.
The Last Word
We’ll be following up on these three stories in our next full Market Blog due out before the end of February.
Meantime, it’s worth revisiting a series of points we made when Monash University issued their world leading certified green bond just before Xmas.
Australia has issued a high proportion of Certified Climate Bonds, indicating a strong adherence to international best practice in green bond investment governance.
The three announcements from last week reinforce that trend.
Previous certified issuance includes:
- NAB Dec 2014 AUD 300m (Solar and wind)
- ANZ Bank May 2015 AUD 650m (Low Carbon Buildings Wind, Solar)
- Flexigroup April 2016 AUD 50m (Solar)
- Westpac Bank May 2016, AUD 500m (Multisector)
- Treasury Corporation of Victoria (TCV/Victorian Govt) July 2016 AUD 300m (Multisector)
- Monash University Dec 2016 AUD 218m (Multisector).
Australia has also been the source of a slew of green bond firsts despite its relatively small size in the international market.
The advantages it enjoys in contemplating growing a global green finance presence need repeating:
- Australia is the world’s 13th largest economy, with a stable financial sector, large retirement funds and a global presence in infrastructure and alternative investments.
- The national savings pool is fast growing, due to mandatory retirement contributions and now ranks as the third largest in the world according to the latest OECD Pension Funds in Figures report.
- Three of the ‘Big 4’ major banks, NAB, ANZ & Westpac have already issued Certified Climate Bonds, with NAB being the first mover, way back in Dec 2014.
- This March 2016 conference presentation by ANZ Bank sustainability experts, calculates significant domestic opportunities with AUD 40bn of eligible commercial property, another AUD 40bn in rail infrastructure and a combined AUD 40-45bn in large and small scale clean energy projects all suitable for green refinancing.
- A September 2016 FinanceAsia Roundtable: Going Green with Bonds with Westpac, the CEFC and major local asset managers, reflects investors looking for the domestic market to grow, quality green debt to become available and a preference for certification and verification.
We hope to see more green issuance in Australia, from the major banks, the commercial property sector, corporates and with the states of Queensland and Victoria having stepped up, possibly other state based investment bodies.
To encourage issuers; large pension funds making their voices heard locally and internationally in seeking more labelled green product, would be another positive.
With Australia’s financial regulator APRA now advising the nations’ banking, insurance and asset managers that climate change is a material risk, building on the best practice foundations in green finance that have been laid to date would seem a forward looking part of prudent action.
'Till next time,
Climate Bonds Initiative
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