(6 June 2024 – Australia) The Australian Office of Financial Management (AOFM) has issued the first sovereign Green Treasury Bond.
The issue by syndication of the 4.25 percent A$7 billion ACGB sovereign green bonds will mature on 21 June 2034 with settlement to occur on 14 June. The debut of Treasury’s inaugural green bond was met with strong demand from fixed income investors, amassing more than A$22 billion in bids at the final clearing price from 105 investor institutions across Australia, Asia, Europe and North America.
CBA, NAB, Deutsche Bank, UBS and Westpac served as joint-lead managers for the issue. The issuance of the Treasury bonds follows a number of existing green bonds issued by Australian states, such as Victoria in July 2016, and more recently, WA in June 2023. Debt capital markets will be very interested in the type and location of investors given that this is the first green issue however Westpac queries what, if any, will the ACGB “greenium” be?
“While there is some evidence of a “greenium” in other markets, it will likely take some time before we can be confident about what it is in the Australian sovereign space” the Westpac Financial Markets Strategy team headed by Martin Whetton commented.
“The demand for the bond confirms Australia is a go‑to destination for international green capital. This is why encouraging and facilitating more private sector investment into the move to net zero is such a key part of the Albanese Labor Government’s Future Made in Australia plan and last month’s Budget” said Federal Treasurer Jim Chalmers.
“The green bond gives investors from around the world the opportunity to back government supported projects in Australia which are crucial to climate change mitigation, climate change adaptation and improved environmental outcomes. The money raised from the green bond will go towards projects like green hydrogen hubs, biodiversity conservation, and clean transport” Chalmers added.
FT’s Patrick Temple-West reports that in an era of higher scrutiny for sustainable investing products, green bonds are proving to be the tried-and-tested sustainability choice for fixed income investors as more esoteric offerings falter. Global green bond issuance has remained steady, the total in the first four months of this year was US$232 billion, equal to the issuance in the same period in 2023, according to a report from Morgan Stanley. Sustainability-linked bond issuance was down 51 percent in the first four months, compared with 2023, to just $12.5 billion.