First University Climate Bond $A218m: Strong US demand: Monash leads tertiary sector: Could Australia go big on green finance and green bonds?


“The IGCC congratulates Monash on taking this world leading step. This is an important milestone for the global green bond market and an exciting development for Australia.”

“It shows the valuable role that tertiary institutions can play in attracting private sector capital into low carbon investment in the built environment. Investors globally, are hungry for quality low carbon investment options.”

Emma Herd, CEO Investor Group on Climate Change Australia


What’s all about?

Australia’s Monash University has announced it is the first tertiary institution to issue a Certified Climate Bond.  

Monash is the largest university in Australia and ranks in the top 1% of universities worldwide, with an annual operating revenue of more than $A2 billion and total assets valued at $A3.7 billion.

The A$218 million (USD163m) Climate Bond was certified under the Climate Bonds Standard by the Climate Bonds Standard Advisory Board in accordance with the Low Carbon Buildings Criteria & Solar Criteria of the Climate Bonds Standard.

The University structured the Certified Climate Bond to provide the market with investment options in USD and Australian dollars over 15 years, 17.5 years or 20 years. 

A requirement for issuing the bond was that capital raised must be spent on projects that achieve measurable sustainability outcomes. Proceeds will be allocated over the next two years to low carbon campus building developments, solar energy installations and LED lighting, all contributing towards the university’s goal of zero net emissions.


Strong demand from US investors

The University has headlined the strong demand in the US private placement market for green- labelled and Certified Climate Bonds.

Interest was high with over A$900m of investor bids for the issue, CFO David Pitt noted.

Despite the current political uncertainty is looks like quality offshore labelled green debt is attractive to US institutional investors.

Coinciding with the Monash University public statement, Australia’s Clean Energy Finance Corporation (CEFC) announced they had made a cornerstone $A20m commitment.

This is the CEFC's third Certified Climate Bond investment in Australia in 2016, following earlier commitments to Westpac Banks’ first Certified Climate Bond, and to FlexiGroup's Australian-first Certified Climate Bond securitisation linked to solar PV and renewable energy assets.


Who’s saying what?

Professor Margaret Gardner, President and Vice Chancellor of Monash University:

“As a truly international university, Monash has a responsibility to provide strong and visionary leadership on sustainable development. We want our campus network to be exemplars of environmental, social and economic best practice.”


CEFC Debt Markets lead Richard Lovell:

“The CEFC congratulates Monash University on this successful raising, which is a world first. Through our involvement in this climate bond, we are highlighting the potential of this new asset class as an important source of capital for Australian and offshore investors,” said on Thursday.

“The Australia climate bond market is growing rapidly, both in the scale of our capital raisings and the diversity of the underlying assets.”


Sean Kidney, CEO Climate Bonds Initiative:  

“Monash University has joined the international pacesetters in green finance with this Certified Climate Bond. They are providing leadership by example for both domestic and international tertiary institutions and wider investment sectors.”

“This Certified issuance from Monash represents international best practice in matching capital raising with climate and sustainability objectives.”


Are there other certified bonds from Australia?

Australia has issued a high proportion of Certified Climate Bonds, indicating a strong adherence to international best practice in green bond issuance. 

The full list includes:

  • NAB Dec 2014 A$300m (Solar and Wind)
  • ANZ Bank May 2015 $650m (Low Carbon Buildings Wind, Solar)
  • Flexigroup April 2016 $A50m (Solar)
  • Westpac Bank  May 2016, A$500m (Multisector)
  • Treasury Corporation of Victoria (TCV/Victorian Govt) July 2016, A$300m (Multisector)
  • Monash University Dec 2016 $A218m (Multisector)


Why this Certified Climate Bond counts

For Universities:

In its October 2016 Market Report – Clean energy opportunities for universities – the CEFC estimated Australian universities were paying as much as A$700 million in energy costs each year, producing annual emissions of more than one million tCO2-e.

The report found that buildings account for A$28bn, or 65 per cent, of the fixed assets of domestic universities. Improving the energy performance of these primary assets could significantly reduce operating costs.

As the CEFC notes: “Monash University is increasing and diversifying the pool of eligible assets for clean energy finance, as well as providing a powerful example to the university sector that we can expect to be followed in other markets.”

More universities following the Monash leadership in their borrowing programs would add welcome diversity to various markets.


For Australia:

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 Bond issuances, 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 $A40bn of eligible commercial property, another $A40bn in rail infrastructure and a combined $A40-45bn in large and small scale clean energy projects all suitable for green refinancing.  

This 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.

This Monash bond and the recent groundbreaking Treasury Corporation of Victoria bond are small but important examples of meeting this investor demand.


The Last Word

We’d hope to see even more green issuance in Australia, from the major banks, the commercial property sector, corporates and possibly other state based investment bodies. 

To encourage issuers, the large pension funds making their voices heard locally and internationally in seeking more labelled green product, would be another positive.

Continued growth in green finance would help build local capacity and solidify best practice as the market develops.

A strong green finance market in Australia may in time – in a subject close to Climate Bonds heart –become a greater source of green capital flow to Australia’s Asian neighbours, as they develop their NDCs into country climate plans and seek international investment to help meet their increasingly intertwined national development, clean energy, infrastructure and emissions goals.

It’s just a thought…..


‘Till next time

Climate Bonds Communications