18 June 2018
The CEFC has confirmed a $90 million cornerstone investment in an innovative finance offering to create ‘green’ investment opportunities for fixed income investors such as superannuation funds.
The new $200 million Low Carbon Shared Portfolio is backed by senior loans to seven wind and large-scale solar farms, all of which are financed by the National Australia Bank.
“The Low Carbon Shared Portfolio creates an opportunity for institutional investors to participate in the renewable energy sector even though they may not be able to enter into individual project financing transactions. This offering is unique in giving investors credit exposure to the underlying projects, a significant innovation in the market,” CEFC Debt Markets Lead Richard Lovell said.
“International superannuation and pension funds are recognising the long-term and consistent returns available from investing in large-scale renewable energy projects. We want to encourage the same approach from Australian superannuation funds. Given their size, superannuation funds can help underpin future clean energy investment, as well as capture the value of Australia’s growing renewable energy infrastructure to benefit their members.”
Mr Lovell added: “The Low Carbon Shared Portfolio creates a new investment model in the Australian market and is one we expect will become more common as demand for socially responsible investment opportunities increases. We are pleased to be involved at this foundation level to support the development of this new market.”
NAB Chief Customer Officer of Corporate and Institutional Banking, Mike Baird said the NAB Low Carbon Shared Portfolio provides ways for institutional investors to back major renewable energy projects alongside NAB, while releasing capital for NAB to continue to reinvest in the renewables sector.
“Our goal is to make a positive and lasting impact on the lives of our customers, people, shareholders, communities, and our environment,” Mr Baird said.
“We’re seeing tremendous growth in clean energy across our loan book, which is why we continue to innovate with offerings such as the NAB Low Carbon Shared Portfolio.”
The secured floating rate portfolio notes, issued by NAB Trust Services Limited, have an estimated weighted average tenor of 3.2 years and offer quarterly principal and interest distributions. NAB retains at least 25 per cent of each low carbon loan on its own balance sheet and continues to manage the loans for the shared portfolio. If NAB exits a particular loan, the shared portfolio will also divest.
NAB estimates that electricity created by the seven renewable energy projects avoids more than 2,500,000 tonnes of CO2 emissions every year, which is equal to the emissions created by over 350,000 Australian households.
The CEFC has provided support to 11 out of 14 Australian climate bonds in the domestic market since 2013, supporting the growth of this important channel to increase the flow of clean energy finance.
NOTE: In March 2019, the Climate Bonds Initiative recognised the Low Carbon Shared Portfolio with a Green Bond Pioneer Award for Product Innovation at the 4th Annual Green Bond Pioneer Awards.