(08 February 2021 – Australia) Increasing priority on environmental, social and governance (ESG) on the heels of the COVID-19 pandemic is underpinning growth in Australian green bond issuance and generating greater sustainability-focused bond activity, according to experts at a recent Clean Energy Finance Corporation (CEFC) event.
Australia’s green bond market has experienced exponential growth since the World Bank issued its first A$300 million green Kangaroo in 2014. The country’s cumulative green bond issuance has expanded to A$15.6 billion, however COVID-19 put the brakes on much of the economy. While issuance of green bonds was hit by the COVID-19 crisis, the global market has reacted quite strongly. The market may also be buoyed by new sector guidelines that will expand the pool of green bond issuers.
The Australian market has seen rapid growth, with the biggest issuances to date coming from banks, state governments and corporates. Westpac is the largest financier to greenfield renewable energy projects in Australia and was part of the world’s first green loan to be certified under the international Climate Bonds Standard.
“During the early months of COVID-19 there was extreme volatility and dislocation and we saw that green bonds were more resilient because investors were typically more the 'buy and hold' type. Despite slow progress throughout much of the year, there has been a rapid turn around for Australia’s green bond market” stated Westpac Institutional Bank Head of Sustainable Finance, Michael Chen.
“A lot of finance teams pushed back green bonds and sustainable finance plans earlier in the year while they were getting their house in order and making sure they had adequate liquidity” Chen added.
“At a push, we think issuance this year may reach around US$250 billion, just under last year's record figure. It has also been bolstered by other types of debt formats, such as social bonds and sustainability bonds, which we've seen emerge along with the green format” commented Climate Bonds Initiative Head of Production and Content, Bridget Boulle.
“When I reflect on my conversations with issuers a few years back, their questions would be around pricing benefits and why they should put in the work for green bonds. In my meetings with issuers these days, the finance team walks in with a greater appreciation of the importance of the ESG issue” said Altius Asset Management Senior Portfolio Manager and Co-founder of Specialist Investment Manager, Gavin Goodhand.