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Green Loans Australia and New Zealand

Exploration of the green loan market, including best practice in labelling green loans

This report examines the labelled green corporate loan market in Australia and New Zealand. It explores the progress to date, best practice in labelling a green loan, and what should be done to channel loan markets for climate change investment. It also provides commentary on sustainability-linked loans and green consumer loans.

About this report

Green Loans Australia and New Zealand

October 2020

Green Loans Australia and New Zealand was developed by the Climate Bonds Initiative.

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Australia and New Zealand require significant investments in green infrastructure and assets to transition to a low carbon economy in line with their international commitments. Sustainable finance will play an important role in transitioning economies to a low carbon basis and promoting social, financial and economic resilience for a future in line with climate and environmental objectives.

about the industry

Green loan market drivers

  • Green loan markets are poised for growth in the coming decade as lenders and borrowers cooperate and leverage market development to support local economies to transition to become net zero and climate resilient.
  • Green consumer loan products have expanded in Australia and New Zealand in recent years as lenders have sought to provide differentiated products to meet consumer demand for climate supportive borrowings, some with preferential pricing. These have largely been self-labelled by lenders, in contrast to labelled corporate green loans that are typically done so by borrowers.
  • As climate risks translate into financial risks, companies, particularly those with a low level of integration, must start preparing and managing these risks in a structured manner to protect both revenues and reputation. Green loans and bonds are well understood, transparent instruments, that can help to fund this transition and catalyse this process.

report findings

Market potential

The green loan and sustainability-linked loan (SLL) market in Australia and New Zealand is poised for growth. Actions that can support and accelerate its development include:

  • Regulators tilting the playing field towards green loans by recognising that loans made to fund green assets are less exposed to climate risks, and therefore require less capital.
  • Tapping into strong institutional demand for green products to expand investor base. As both confidence and scale increases, so too will opportunities for direct investing by institutional investors.
  • Further development of corporate frameworks and ESG strategies will give companies the ability and frameworks to issue green loans and SLLs.
  • Education of the market actors at a rate that keeps up with the pace of this market.
  • A clarity of labelling along with a narrowing of language with a common understanding of these labels.
Last updated October 2020. Bonds/debt markets, Market reports
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