Partner announcement by Australian bank made as new 2020 green targets are set. Part of wider AUD 25bn lending commitment to climate change solutions.
What’s it all about?
Westpac Banking Corporation (ASX: WBC) has joined the Climate Bonds Initiative Partners Program effective immediately and set ambitious targets to facilitate up to AUD3 billion in climate change solutions by 2020 including green bond issuance and arrangement.
The decision is part of the bank’s commitment to increase its target for lending to the sector from AUD6 billion to AUD10 billion by 2020 and AUD25 billion by 2030. **
Westpac issued its first bond Certified Climate Bond May 2016, raising AUD500 million to fund renewable energy and low carbon commercial property.
Since then, the bank has extended its target to facilitate up to AUD3 billion by 2020, through green bond issuance and arrangement, given the broader opportunity for the financial markets to support climate change solutions.
The AUD25 billion target is the strongest commitment to climate change solutions by an Australian financial institution to date!
Who’s saying what
Mark Goddard, Westpac Institutional Bank Head of DCM & Syndicate:
“We believe significant growth in the AUD climate bond market is inevitable. The Australian Government has agreed a target of reducing emissions to 26-28% below 2005 levels by 2030 - the bond market will play a role in this transition.”
“Partnering with Climate Bonds provides new opportunities for us to work together on global green bond standards, harmonisation and market based solutions to meet climate finance goals.”
Richard Salmon, Westpac Director Balance Sheet Funding:
“The investor base for AUD climate bond issuance continues to expand, including consistent interest from offshore buyers. While onshore, asset managers have set up dedicated ESG funds or set targets for green funds under management.”
Sean Kidney, Climate Bonds CEO:
The Australian Market:
“Westpac is responding to the opportunity as the Australian market continues to see a diverse range of Certified Climate Bonds emerge. “
“Since 2015 the AUD market has evolved rapidly. We’ve observed multiple climate bonds issued from the major banks, several state governments, a listed property developer, a leading tertiary institution and several award-winning green Asset Backed Securities (ABS).”
“This has allowed investors to support climate related investments without compromising on the credit risk of the issuer.”
“Local and international investor confidence in the use of funds intended to address climate change has been fundamental to both the domestic market’s credibility and its ability to reach sufficient scale.”
“While scale and volume of issuance is still only beginning in Australia, the market globally is really taking off."
"January to March 2017 has seen a surge in Certified Climate Bonds with 15 issued for the quarter to the value of USD 4.4bn, which is the best ever market performance to date. This result represents an increase of 275% on the USD 1.6bn of certified bonds issued in Q4 2016.”
The Regional Opportunity:
“China is emerging as a major issuer of green bonds and is set to become the single largest green market in the world."
"In turn this will influence investment directions in Australia.”
“A robust domestic green bond market, characterised by best practice, multiple participants, institutional investor confidence & mainstreaming of ESG commitments will be well placed in the years ahead to benefit from the coming expansion in climate and green based finance, not only in China but throughout Asia.”
The Last Word
As a top100 global bank, Westpac has a sustainability and climate record that encompasses foundation membership of UNEP-FI in 1992, to support for the Kyoto Protocol and IPCC findings, formation of the CDP and Australia’s carbon pricing reforms. Along the way they have accumulated a host of sustainability awards.
In Australia’s AUD 2.3tn pension fund sector, the bank has also been a longstanding backer of ESG and climate awareness activities.
The forward commitment to green bonds and additional lending for climate solutions is an extension of this record.
We need to see banks everywhere replicating this approach:
-setting lending targets,
-foreshadowing more green bonds,
-demonstrating leadership to potential corporate issuers and
-supporting nascent markets.
Can we have some more, please.
‘Till next time
Climate Bonds
PS: We’ve talked about Australia before; you can read more here and here.
Or just download our latest Newsletter with more on Certified Climate Bonds, Australia as a best practice market model and updates on standards development.
**Note: This target will be updated every three years as Westpac revises its Climate Change Action Plan to reflect changes in technology, policy, climate science and investment assumptions and as our approach evolves.
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