The innovative bond is the first bank-issued bond in Australia to be certified in compliance with the Climate Bonds International Standards and Certification Scheme, an international benchmark that assists investors to prioritise investments that finance climate change solutions.
Climate Bonds, also known as Green Bonds, were designed to help stimulate and coordinate public and private sector activity to combat climate change. The bonds raise funds from fixed interest investors to support investment in low-carbon and environmental projects (see note 1).
“Australia is in a prime position to expand investment in the renewable energy sector. Australian Ethical is already a significant investor in renewable energy and energy efficiency but there is a real need for more public and private investment in these sectors,” says Australian Ethical’s Managing Director Phil Vernon. “We see the development of a healthy Green Bond markets as critical to further catalysing that investment.”
The NAB Climate Bond proceeds will be ring-fenced for financing renewable energy assets throughout Australia. At present the portfolio includes 14 operational facilities and three wind farms and solar energy facilities that are under construction.
The renewable energy assets financed by the Climate Bond are expected to have installed capacity of over 1.5 gigawatts of energy. That equates to an estimated 3.9 million tonnes of avoided greenhouse gas emissions, and enough power to service 730,000 Australian households for a year.
The global Green Bond market has been growing rapidly since its launch in 2008. The World Bank has raised over USD 7 billion equivalent in Green Bonds through 77 transactions and 17 currencies. The first Green Bonds to be introduced to the Australian domestic market were issued by the World Bank in April 2014. Australian Ethical is also invested in this bond issue alongside 14 other investors.
“Green Bonds are a fantastic option for ethical investors. They offer the same returns as other bonds but give investors like us the opportunity to direct capital to climate change solutions,” says Mr Vernon.
“Investors can be confident in both the financial and environmental credentials of the NAB Climate Bond. Its ethical credentials have been rigorously assessed against Australian Ethical’s Charter, and it is certified in compliance with the international Climate Bonds International Standards.”
The Climate Bond International Standards and Certification Scheme was launched in November 2011 by the Climate Bonds Initiative and addresses eligible investments, trace ability of funds and types of bonds eligible for certification.
The Clean Energy Finance Corporation (CEFC) has also committed to provide a cornerstone investment of up to $75 million in the inaugural issue of National Australia Bank’s Climate Bond issuance.
Notes
1. The terms ‘Climate Bonds’ and ‘Green Bond’ are often used interchangeably. Climate Bonds are used to finance or refinance projects needed to address climate. A Green Bond is where proceeds are allocated to environmental projects. Green Bonds in theory can be used for environmental projects with positive outcomes not directly related to climate change. For example in Europe, proceeds from RaboBank’s green retail bonds have gone to organic farm loans and sustainable building projects.
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