Institutional investors increase demand for "green" finance

Commonwealth Bank of Australia (CBA) this week helped Australian business and government raise A$1.8 billion in the corporate debt markets through the successful issuance of two green bonds.

Green bonds are a financial instrument used by large companies and governments to raise finance for their own projects that meet specific green criteria.

CBA was this week a joint lead manager and green advisor for the green bonds issued by Lendlease and a joint lead manager for the green bonds issued by NSW Treasury Corporation, the investment and financial management partner of the New South Wales public sector.

Lendlease issued their first ever green bond (and Australia’s largest non-financial corporate green bond), successfully raising A$500 million. Meanwhile NSW Treasury Corporation issued the largest green bond this year to date in the Australian market for A$1.3 billion.

CBA’s Executive General Manager for Global Markets, Anthony Hermann said investor demand was very strong on both transactions.

“Green bonds provide borrowers with access to a deeper pool of liquidity and investors with access to Environmental, Social and Governance investment products that they are seeking, which ultimately can lead to better distribution and pricing. Corporate debt markets continue to demonstrate a constructive tone, with strong oversubscriptions supporting price tightening and upsizing of transactions.”

The investor demand on both green bond transactions helped both issuers to increase their issuance volume.

“More than ever, investors are keen to have a good level of exposure to green-related products to support their Environmental, Social and Governance commitments. We know from recent discussions with investors that an increasing number have a good appetite for sustainability-linked bonds, with 39 per cent even willing to pay a premium for this type of product.”

Lendlease and NSW Treasury Corporation green bonds issued this week are just two examples of sustainable finance transactions that Commonwealth Bank has been actively involved in this year.

In March, CBA supported Wesfarmers with a sustainability-linked loan that was linked to achieving better social outcomes, through a commitment to increase Indigenous employment opportunities, and enhanced environmental outcomes, through reduced carbon emission intensity. Last month, this loan was recognised internationally by the UK-based 2020 Environmental Finance IMPACT Awards. The sustainability-linked loan took home the Impact project/investment of the year: Social inclusion/community development award.

At the time, CBA’s Group Executive Institutional Banking and Markets, Andrew Hinchliff said: “Commonwealth Bank regularly partners with large corporate and government clients to innovate and tailor individual transactions, helping to transition to a new, low-carbon global economy."