Monash issues ‘world first’ university climate bond

Just months after Victoria’s state Labor government became the first government in Australia to issue its own green bonds, Victoria’s Monash University has become the first university in the world to issue a certified climate bond, raising more than $218 million to fund sustainable development in the tertiary education sector.

The green bond, which was issued in the US private placement market, was certified by the Climate Bond Initiative (CBI) and has a Green Bond accreditation from Moody’s Investor Services. It is structured to provide the market with investment options in US and Australian dollars over 15 years, 17.5 years or 20 years.

Sean Kidney, the CEO of the Climate Bonds Initiative said the move by Monash put it among “the international pacesetters” in green finance. “They are providing leadership by example for both domestic and international tertiary institutions and wider investment sectors,” he said.

The Clean Energy Finance Corporation, which revealed on Thursday it had made a $20 million cornerstone investment in the bond, said it created an important new asset class for the financing of clean energy projects in the university sector, and confirmed Monash University’s leadership role in this area.

In 2014, Monash became the first Australian tertiary institution to raise debt capital in the US private placement market, the proceeds of which were used to construct award-winning student residential buildings at the Clayton Campus.

The Climate Bond will allow Monash, over the next two years, to allocate capital to a portfolio of projects in line with the standards of the Global Climate Bond Initiative, as well as with its own pledged transition to net zero emissions.

Some of these projects include a major new building targeting 5 Star Green Star Certification at the Clayton campus; more than $6 million in solar panel installations; and a $3.5 million external LED lighting project.

David Pitt, Monash’s Chief Financial Officer said the bond issue, a collaborative effort between the University and the Commonwealth Bank of Australia, was very well received by the investor community reflecting, attracting in excess of $A900 million of investor bids.

The University’s president and vice chancellor, Professor Margaret Gardner, said the success of the initiative reflected Monash’s position as a global university.

“As a truly international university, Monash has a responsibility to provide strong and visionary leadership on sustainable development. We want our campus network to be exemplars of
environmental, social and economic best practice,” Professor Gardner said.

“Monash has a sustainability plan that will include a target date for net zero emissions to be announced next year,” she said.

For the CEFC, this marks their third climate bond investment this year, following earlier commitments to Westpac’s first climate bond, and to FlexiGroup’s Australian-first climate bond securitisation linked to solar PV and renewable energy assets.

CEFC debt markets lead Richard Lovell said the green bank was committed to work alongside organisations like Monash to help catalyse further investment options to support clean energy projects.

“Through our involvement in this climate bond, we are highlighting the potential of this new asset class as an important source of capital for Australian and offshore investors,” Lovell said on Thursday.

“The Australia climate bond market is growing rapidly, both in the scale of our capital raisings and the diversity of the underlying assets.

“Through this climate bond, Monash University is increasing and diversifying the pool of eligible assets for clean energy finance, as well as providing a powerful example to the university sector that we can expect to be followed in other markets.”

In its recent Market Report – Clean energy opportunities for universities – the CEFC estimated Australian universities were paying as much as $700 million in energy costs each year, producing annual emissions of more than one million tCO2-e.

CEFC University sector lead Melanie Madders said energy efficiency and greenhouse gas emissions were an increasing focus of university sustainability plans, with growing awareness that investments in clean energy technologies on campus can help reduce energy bills, decrease emissions and demonstrate leadership in research and innovation.

“University energy consumption is increasing because of rising student numbers and the high energy intensity of technologically-sophisticated laboratories and research facilities,” Madders said.

“If these trends continue, the university sector will continue to face growing energy costs and increasing emissions, which proven and cost-effective clean energy technologies can help reduce. There is a clear opportunity here for universities to take a leading role in tackling this pressing issue.”

Monash was advised by DTW Capital Solutions as financial arranger, CBA as lead banking institution and EY as climate bond assurance advisor.