28 March 2017
The Clean Energy Finance Corporation's (CEFC's) support for a new climate bond has attracted strong investor participation, signalling growing investor appetite for clean energy assets.
The new climate bond has been issued by FlexiGroup with an underlying asset base of residential rooftop solar. The CEFC made a cornerstone commitment of $20 million to the $50 million tranche, which was certified by the global Climate Bonds Initiative (CBI).
The $50 million climate Class A2-G Note was priced at a yield 0.03% lower than the similar Class A2 Note, which was identical except for the lack of CBI certification, again indicating strong investor demand for clean energy investment opportunities.
CEFC Debt Markets lead, Richard Lovell: "FlexiGroup achieved tighter pricing on this climate bond, which shows investors were prepared to pay a 'green premium'. 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 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. The CEFC's participation is consistent with the CEFC's role in helping to transform clean energy investment markets. It also demonstrates how companies can unlock extra sources of funding by seeking market support for the securitisation of their green assets."
The bond is backed by consumer receivables originated through FlexiGroup's wholly-owned subsidiary Certegy Ezi-Pay Pty Ltd, which has financed more than 120,000 solar PV rooftop installations.
The CEFC invests with co-financiers to develop new sources of capital for the clean energy sector, including equity funds, aggregation facilities and other financial solutions. Securitised bonds such as climate bonds have the potential to channel capital into a wide range of clean energy solutions, including large and small-scale solar, wind and bioenergy, as well as energy efficiency measures in property, vehicles, infrastructure and manufacturing.
This is only the second climate-certified issue of a bond backed by securitised assets in Australia. In April 2016, FlexiGroup issued a $50 million tranche, which also included a $20 million cornerstone investment by the CEFC. The April 2016 bond was also priced with a yield below the corresponding non-certified tranche.
The Climate Bonds Initiative estimates that the world-wide issuance of green bonds rose to $US81 billion in 2016, from $US1.2 billion five years earlier, with 2016 alone accounting for 45 per cent of the green bonds issued in the past decade.
Bloomberg New Energy Finance has also reported surging issuance levels across all climate bond asset classes, driven by growing investor demand for green notes. BNEF found three distinct reasons for investors to target these assets, which led to a doubling in issuance in 2016: sustainable investing mandates, climate risk mitigation strategies, and investment focused purely on returns offered by the asset.
"There is clearly a global trend toward investment in green bonds. 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," Mr Lovell said.
FlexiGroup is a diversified financial services group providing leasing, vendor finance programs, no interest ever, interest free and Visa cards, mobile broadband, lay-by and other payment solutions to consumers and businesses. Through its network of more than 12,000 merchant, vendor and retail partners FlexiGroup has extensive access to four key markets: business to consumer, business to business, retail to consumers and small business customers, and online.