CEFC makes cornerstone $100 million investment in first CBA climate bond

29 March 2017

The Clean Energy Finance Corporation (CEFC) today congratulated the Commonwealth Bank of Australia on the successful issuance of its first climate bond, a $650 million transaction linked to a broad portfolio of clean energy assets.

The CEFC was a cornerstone investor in the CBA bond, with a $100 million commitment.

CEFC Debt Markets lead Richard Lovell said: "We welcome the Commonwealth Bank's issuance of this climate bond, which sets another important benchmark in Australia's emerging green bond market. Clean energy assets are attracting increasing investor support, including from major institutions such as the Commonwealth Bank. This 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."

Commonwealth Bank Managing Director Debt Markets, Simon Ling, said: "We're pleased to have the CEFC as a cornerstone investor in our first climate bond, recognising the important role it plays in nurturing the growth of climate bonds to support the development of the clean energy sector in Australia."

"Increasing investor awareness will fuel demand for climate bonds, and based on the strong domestic and global pipeline for renewable and low-carbon projects, we expect to see the Australian market grow."

The CBA said proceeds from the issuance would fund 12 eligible Australian projects, including renewable energy generation through wind power, energy efficient buildings and low-carbon transport projects. The CBA Climate 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 is backed by more than $1 billion of domestic renewable and low-carbon projects that meet the Climate Bonds Initiative's (CBI) Climate Bond Standards. The CBA Climate Bond will be reviewed regularly internally by the bank, and by Ernst & Young (EY), which will provide independent review against the CBI standards annually until the bond matures in February 2022.

The CEFC has been active in driving the establishment of Australia's green bond market, as part of its role in helping expand and deepen the private sector clean energy investor market in Australia. The CEFC has acted as a cornerstone investor for five of the 11 Australian climate bond issuances to date.

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.

Mr Lovell added: "The Australian climate bond market is financing a broad range of clean energy projects, from LED traffic lights, to mini-hydroelectric power stations, low carbon buildings, new trains and rail infrastructure, and both small and large-scale renewable energy projects.

"The majority of the investors in the green bond market having specific green or Socially Responsible Investment mandates, providing an important investment option for this substantial pool of capital. We see the further maturity of this market as an important contributor to the continued transformation of clean energy finance in Australia."

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.