Bumper harvest of ‘green’ bonds

More Australian companies are tipped to offer green bonds to investors after the first half of 2019 saw a surge in issuance globally.

The proceeds raised from the issuance of a green bond are mostly “earmarked” for projects intended to benefit the environment. Picture: AFP

More Australian companies are tipped to offer green bonds to investors after the first half of 2019 saw a surge in issuance globally, including the largest issue in a quarter of $47.2 billion, according to a new study by an adviser to the world’s largest pension funds.

A report by the London-based global asset consultant bfinance found the number of actively managed green bond funds has nearly doubled since January 2017, and there is now a growing number of passive funds or ETFs.

The proceeds raised from the issuance of a green bond are mostly “earmarked” for projects intended to benefit the environment.

It comes as investors around the world are stepping up pressure on companies to better incorporate environmental, social and governance (ESG) concerns into corporate strategy. Last week QIC’s Shopping Centre Fund issued a $300 million Climate Bonds-certified green bond, which it claimed was a world first for the retail property sector.

The green bond was five times oversubscribed and attracted new investors with green and ESG investment mandates to the fund from across Asia and Australia.

In Australia the big four banks have all issued green bonds after National Australia Bank was the pioneer in the space in 2014, with a $150 million issuance aimed at funding a suite of wind and solar energy projects.

Since then federal, state and local governments have followed.

In June Woolworths became the first retailer to issue about $400m in green bonds to fund initiatives such as installing solar panels and LED lighting in supermarkets.

The move made Woolworths the first supermarket retailer in the world to issue green bonds certified by the Climate Bonds Initiative, a London-based organisation mobilising the bond market to fund climate change solutions.

“Notwithstanding a persistent bias towards utilities and energy, there is now more issuance coming from healthcare, consumer staples, materials and technology,’’ the bfinance study found.

There was $US47.2bn ($69.5bn) of “labelled” green bonds issued in the first quarter of 2019, representing 2.5 per cent of global bond issuance versus 1.7 per cent in the first quarter of 2018.

A total $US167.6bn worth of green bonds were issued globally in 2018 and there are now 32 viable actively managed green bond funds with combined assets of $US6.4bn, up from 17 in January 2017.

Pension funds such as Dutch giant APG Asset Management have publicly called on American corporates to issue more green bonds.

In June the International Finance Corporation (IFC), a member of the World Bank Group, and HSBC Global Asset Management launched the first green bond fund to support climate-smart investments in developing countries.

IFC made a $US100m anchor investment towards the bond, while HSBC will contribute up to $US75m.

Billionaire packaging magnate Anthony Pratt’s US business Pratt Industries has secured more than $500m worth of debt via 30-year “green bonds” in the US during the past two decades to drive its growth.

Pratt’s newest mill at Wapakoneta near Ohio is being financed by a $US210m tax-exempt municipal revenue bond issued by the Ohio Air Quality Development Authority, which allows Pratt to access capital without having public shareholders.