Commonwealth Bank of Australia priced its first climate bond, raising $650 million to fund a range of renewable and low-carbon projects around the country.
Proceeds from the issuance will fund 12 projects, including renewable energy generation through solar, wind and hydro power, energy efficient buildings and low-carbon transport projects.
The CBA Climate Bond is the first direct issuance by Commonwealth Bank of a certified climate bond.
The bond has been certified by the Climate Bonds Initiative (CBI), a not-for-profit organisation which aims to promote large-scale investment to deliver a global low-carbon economy.
The bond will be reviewed regularly by the bank and by Ernst & Young, who will provide independent review against the CBI standards annually until the bond matures in February 2022.
Commonwealth Bank managing director of debt markets Simon Ling said sustained investor demand for green bonds and assets would continue to fuel growth in the sector.
“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,” Ling said.
This is the third climate or green bond Commonwealth Bank has issued, following roles as joint lead manager on the first Australian green asset-backed securitisation for FlexiGroup, and as sole arranger and lead manager on the world’s first climate bond from a tertiary institution for Monash University’s $218m USPP climate bond.
These three issuances also all received support from the Clean Energy Finance Corporation.
Climate Bonds Initiative CEO Sean Kidney said: “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.”
The Clean Energy Finance Corporation was a cornerstone investor in the CBA bond, with a $100 million commitment.
CEFC debt markets lead Richard Lovell said: “Clean energy assets are attracting increasing investor support, which is critical for the continued development of the clean energy sector, as it continues to prove its ability to deliver positive returns for investors at the same time as contributing to a reduction in Australia’s overall carbon emissions.”
The Australian climate bond market has now grown to more than $4 billion, bringing with it more than 100 institutional investors. The CEFC has invested some $325 million into the green bond market, making it one of the largest single investors in this growing sector.
The five-year transaction, offered in fixed and floating rate tranches, provided investors with a return of 92 basis points above the relevant reference rates at the time of pricing.
Other CEFC backed climate bonds include:
- March 2017 – A $20 million cornerstone commitment to FlexiGroup’s $50 million tranche of Class A2-G notes. The climate-certified bonds have an underlying asset base of residential rooftop solar and priced at a yield 0.03 per cent lower than the remainder of the $265 million issue which lacked Climate Bonds Initiative certification.
- December 2016 – A $20 million cornerstone investment the world’s first university-issued certified climate bond. Monash University’s $218 million climate bond finances sustainability and clean energy projects in the university sector.
- May 2016 – A $90 million cornerstone investment in Westpac’s first Climate Bond issuance. The $500 million bonds finance an Australian-based clean energy portfolio including low carbon commercial buildings.
- April 2016 – A $20 million cornerstone commitment to FlexiGroup’s first $50 million certified green tranche. The FlexiGroup green tranche was the first of its type in the Australian market, linked to solar PV and renewable energy assets. It received a relatively better price than the comparable uncertified tranche.
- December 2014 – A $75 million cornerstone investment in NAB’s first Climate Bond issuance. The $300 million of climate bonds are senior unsecured NAB corporate bonds for financing a portfolio of renewable energy assets and facilities in Victoria, South Australia, Tasmania, Western Australia, NSW and the ACT.