Australia’s first corporate green bond released by Stockland

Australian property developer Stockland has released the nation’s first green bond from a company, with the launch last week of a €300 million ($A431 million) green bond, with proceeds to be invested in green building projects.

The issuance, launched last Thursday, comes around six months after Melbourne-based investment fund UniSuper became the cornerstone investor in the World Bank’s first green bond issue into the Australian market, snapping up one-third of the $300 million five-year, fixed rate Australian dollar denominated debt securities, designed to mobilise private sector funding for environmentally and socially responsible projects.

The use of green bonds to help mobilise the global green economy is becoming more and more popular around the world. According to Mark Burrows,  the executive vice chairman and MD Asia Pacific at investment bank Credit Suisse, this is partly because they are a familiar product to the investment community.

“Green Bonds capitalise on a growing appetite for ‘purpose-driven’ finance and can help reduce the risk and complexity of greener investing,” Burrows told the Forests Asia Summit in Jakarta in May.

“They make product selection simple and standardised for investors and they outsource the social and environmental due diligence to credible third parties. They have the potential to create a virtuous cycle,” he said.

“Uncovering the large-scale investor appetite we are seeing in the market will help to drive governments to develop green growth frameworks in the knowledge that cheap private sector capital is eager and available.”

Sydney-based Stockland, one of Australia’s largest property developers, says its green bonds will fund investment in the development and redevelopment of retail, commercial, residential and retirement living projects to a minimum 4 Star Green Star rating from the GBCA.

According to research, buildings with 4 Star Green Star ratings produce, on average, 40 per cent fewer greenhouse gas emissions than standard practice for new construction; 60 per cent fewer emissions than existing stock; consume 40 per cent less energy than average new buildings; consume 43 per cent less potable water than average new buildings; and recycle 85 per cent of construction and demolition waste.

Currently, Stockland has the highest number of Green Star-rated shopping centres in Australia, and recently completed the first Green Star-rated retirement living village, Affinity in Perth.

The company’s largest-ever residential community project, Caloundra South on the Sunshine Coast, is registered to achieve a Green Star Communities rating.

Stockland’s managing director and CEO, Mark Steinert, has said that the green bond will enable the company to further invest in leading-edge sustainable projects.

Market analysts Climate Bonds note that Stockland has committed to public annual reporting on the issuance – in line with best practice – but express concern that this will not provide information on the energy or emissions improvements associated with the bond over time.

“Green Star has had a tremendous impact on commercial office development in Australia and has increased the awareness of green buildings precisely because it was designed to measure design and construction and nothing more,” said Ché Wall, lead author of methodology for the Climate Bonds Low Carbon Green Property standards and co-founder of the Green Building Council of Australia.

“Investors from outside the green buildings sector are driving the demand for green bonds, and tend not to understand the strengths and weaknesses of different approaches to measurement. This is complicated further when an Australian bond is issued in European markets, where different measures are used in the sector,” Wall said.