A $50 million climate bond issued by financial services group FlexiGroup has attracted strong investor participation, even with a yield 0.03 per cent lower than a similar class bond without green certification.
The Clean Energy Finance Corporation, which made a $20 million cornerstone commitment, said this showed there was strong investor appetite for clean energy investment opportunities.
“FlexiGroup achieved tighter pricing on this climate bond, which shows investors were prepared to pay a ‘green premium’,” CEFC debt markets lead Richard Lovell said.
“This is a strong market signal which will assist in accelerating the development of a more varied and flexible green bond market in Australia.”
The Class A2-G bond, certified by the Climate Bonds Initiative, has an underlying asset base of residential rooftop solar, and is only the second climate-certified issue of a bond backed by securitised assets in Australia
“The success of this issuance provides a clear indication of the merits of this green asset class and should help nudge capital markets further towards investment in clean energy,” Mr Lovell said.
The CEFC said the market for green bonds was going through a boom, with the Climate Bonds Initiative estimating that worldwide issuance of green bonds rose to $US81 billion in 2016, up from $US1.2 billion five years earlier.
According to the Climate Bonds Initiatives 2016 market roundup, green bond issuance in 2016 was almost double that of 2015, with large growth in Chinese investment. The number of countries, bond types, issuer ties, ratings and use of proceeds are also diversifying.
“Green bonds have been a shining light, in what was otherwise a year of pretty bad news for climate,” the market roundup statement said.
Bloomberg New Energy Finance has too reported a sharp uptick in green bond issuance, which it puts down to three factors: sustainable investing mandates, climate risk mitigation strategies and returns offered.
“There is clearly a global trend toward investment in green bonds,” Mr Lovell said. “Our investment support for the FlexiGroup climate bond is part of our strategy to ensure that Australia’s clean energy sector can tap into this burgeoning source of capital, and that investors with a socially responsible mandate have the opportunity to participate.”