Australia’s emergence as an example of international best practice has been bolstered by Commonwealth Bank of Australia (CBA) announcement of a AUD 650m Certified Climate Bond.
All four of Australia’s major banks have now issued Certified Climate Bonds, a status unmatched in any other advanced economy financial sector.
What’s it all about?
At AUD 650m (USD 496m), the new Commonwealth Bank Climate Bond is one of the largest to date from Australia. Proceeds will fund 12 clean energy and low-carbon projects in Australia including renewable energy generation through solar, wind, energy efficient buildings and low-carbon transport projects.
It will be reviewed regularly by the bank internally, and by Ernst & Young (EY) who will provide an independent review against the Climate Bonds Standard annually until the bond matures in February 2022.
Support from CEFC
The Clean Energy Finance Corporation (CEFC) has taken a cornerstone AUD 100m investment. This is a continuation of its role in supporting the establishment of the domestic market, having acted as a cornerstone investor for five of the 11 Australian climate bond issuances to date.
Green Bonds in Australia
Despite is relatively small sized market, Australia now has a diverse range of green bonds, with multiple issuance from the national four biggest banks, two state governments, a property developer, a leading tertiary institution and several certified green ABS.
More certified bonds are in the pipeline.
Climate Bonds Certified issuance:
- NAB Dec 2014 AUD 300m (Solar and wind)
- ANZ Bank May 2015 AUD 600m (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).
- Westpac Feb 2017 AUD 64M (JPY5.6bn) to Meiji Insurance in Japan (Low Carbon Buildings, Clean energy)
- FlexiGroup Feb 2017 AUD50M (Solar)
- NAB Feb 2017 EUR500M (Solar and Wind)
- Queensland Treasury Corp (T-Corp/Queensland Govt Feb 2017 AUD750M (Low carbon transport and clean energy)
- Commonwealth Bank of Australia March 2017 AUD 650m (Multisector)
Who’s saying what:
Simon Ling, CBA Managing Director Debt Markets:
“We are really pleased with the positive response from local and international investors.”
“Increasing investor awareness and sophistication will fuel demand for climate bonds, and based on the strong pipeline for renewable and low-carbon projects we expect to see this growth increase in the next five years in the Australian market. We are committed to leveraging our expertise and scale to support the growth of climate bonds, directly and for our clients.”
Sean Kidney, CEO Climate Bonds Initiative:
“The Commonwealth Bank climate bond marks a significant step for green finance globally, as institutional investors and pension funds will take note of one of the world’s largest banks entering the climate bond market with a best practice example of market standards and issuance.
“Active leadership from a major bank like Commonwealth Bank sends a strong signal that green bonds have an increasing role in funding new infrastructure, clean energy and helping nations finance their climate action plans.”
“Australia now has the distinction of being the only nation in the world where almost every green bond issued has been certified by the Climate Bonds Initiative. This reflects a strong adherence to international best practice from the domestic finance sector and is a positive example for other nations and markets.”
Local investors could do more
Australia is uniquely placed. We commented in December, when Monash University issued their Climate Bond, on the enormous potential advantages and regional directions that are open to the domestic finance sector to pursue in climate finance.
We’ve also urged local retirement funds and asset managers in the fast growing AUD 2.2tr retirement sector to be more active in seeking green products and opportunity, from both domestic and international sources.
If Australian Banks Can…
Australia is the 13th largest global economy, and its four largest banks by market size are amongst the biggest in the world, sitting well inside the top 100 rankings.
Similar action from the largest equivalent banks in G20 or Eurozone nations, progressively issuing green bonds, would accelerate the global market.
A lead role from the banking sector in helping countries deliver on Paris COP 21 Nationally Determined Contributions (NDC) commitments is consistent with many of the broad directions being advocated by Climate Bonds and others.
It’s also a role backed by an plethora of reports and findings at an international level, including the G20 Green Finance Synthesis Report and statements from Bank of England Governor Mark Carney, amongst many others.
The Last Word - Aussie banks can take a bow
Australia’s big four banks including the Commonwealth can take due credit.
Despite national political recalcitrance and vacillation on climate policy, over the last three years they’ve led the local market towards global best practice while making benchmark size issuances.
More of the Top 100 banks should be taking note. No one can say it's not being done.