Green lights for green financing

The need for green infrastructure, including low-carbon and less polluting assets to reduce greenhouse emissions, is growing.

In Australia, infrastructure-related emissions account for over half of the country’s total greenhouse gas emissions while in New Zealand, energy and transport contribute just over 30 per cent of its total greenhouse gas emissions.

“Institutional investors need to back new green offerings and work more actively across the finance sector and with policy makers to turn the plethora of opportunities identified in the GIIO report into long-term national pipeline of investable, low carbon infrastructure projects,” says Sean Kidney, Climate Bonds Initiative’s Chief Executive Officer.

Compare the pair

Australia and New Zealand have contrasting climate policy regimes.

Little progress has been made in Australia since the government signed the Paris Agreement in 2015 while New Zealand has committed to being carbon neutral by 2050 and is looking at mechanisms to phase out fossil fuels.

However despite the challenging policy regime in Australia, domestic major banks, sub-sovereigns and corporate issuers have led the way in the green bond market.

Green bond issuance in Australia has to date reached A$8.3 billion. The country was the second largest green bond market in the Asia Pacific region in the first half of 2018 and 12^th globally with A$2.6 billion of issuance, up 5.3 per cent from the corresponding period in 2017.

Proceeds have typically been used to finance renewable projects but increasingly transport projects are attracting green bond funding.

Australian green bond market issuance 2014-2018

 “The Australian and New Zealand green bond markets are representative of global best practice,” says Christina Tonkin, Managing Director, Loans & Specialised Finance, ANZ.

“The scale of green infrastructure investments expected to be made in Australia, coupled with strong investor demand, make the prospects for growth in green bonds bright.”

The Australian green bond market is underpinned by commitment from the major banks, a diversity of issuers and high levels of certification.

The country’s deep A$2.6 trillion pool of superannuation funds offer a ready set of investors for green bonds as more fund managers are looking for ESG-based investment opportunities.

“Institutional investors need to back new green offerings and work more actively across the finance sector and with policy makers to turn the plethora of opportunities identified in the GIIO report into long term national pipelines of investable, low carbon infrastructure projects,” according to the CBI’s Kidney.

Proceeds are financing energy, transport, buildings 

New Zealand is a relatively recent entrant to the green bond market with Contact Energy as its first issuer in 2017.

The company launched a world first NZ$1.8 billion multi-debt Green Borrowing Programme to fund its geothermal power generation assets. More recently the City of Auckland issued a NZ$200 million green bond in June to finance electric trains and related infrastructure.

Sharon Klyne is a bluenotes contributor

The Green Infrastructure Investment Opportunities Australia & New Zealand report is sponsored by ANZ, Commonwealth Bank of Australia, Clean Energy Finance Corp, Macquarie Group, National Australia Bank and Westpac.