Westpac joins green bond market with $500 million issuance

A second member of Australia’s Big Four banks has entered the green bond market, with the issue of a $500 million Westpac Climate Bond aimed at financing a $1 billion Australian-based clean energy portfolio, including low-carbon commercial buildings.

Westpac said on Thursday the issuance had been certified by the Climate Bonds Initiative, and had already elicited a strong response from investors, including the Clean Energy Finance Corporation, which has committed $90 million as a cornerstone investor.

CEFC CEO Oliver Yates said he hoped the green bank’s investment would work to catalyse further investment in climate bonds and generate continued momentum in growing a green investment class in the Australian capital markets.

“We see growing the domestic climate bond market as a way to unlock new investment in the clean energy sector, by attracting additional private sector finance,” Yates said.

“We are continuing to work collaboratively with co-financiers and project proponents to seek ways to secure financing solutions to help Australia improve the energy efficiency of its cities … and to make the underlying investments required to meet the Renewable Energy Target.”

According to Bloomberg New Energy Finance, between $12.4 billion and $12.5 billion of investment in large-scale renewables will be required in Australia to 2020 in order to meet the RET.

Westpac Group Head of Sustainability, Siobhan Toohill, said the bank’s first Climate Bond issuance added to the growing number of products and services if offered to help address environmental challenges – to date it has lent and invested a total of $6.3 billion to the clean tech and environmental services sector.

Westpac’s launch into the green bond market follows on from NAB, which in December 2014 became Australia’s first lender to to issue a certified climate bond of $150 million, to fund a portfolio of 17 wind and solar projects.

Strong investor demand led to the bond doubling from the minimum deal size of $150 million to $300 million within hours, as we reported here.

And the market continues to impress. Globally, nearly $US42 billion of labelled green bonds were issued in 2015, up from $US37 billion in 2014. At the Paris climate talks, investors representing more than $US10 trillion signed a statement welcoming the growth of the climate bonds market as a mechanism to finance solutions to climate change while meeting fixed income yield and risk requirements.

In Australia, however, Yates notes that the market for certified climate bonds which include energy efficient buildings is still in its infancy.

“Our commitment to the Westpac Climate Bond reflects our strong focus on supporting investments which improve our cities and the built environment,” Yates said.

“We need all new buildings to adopt the latest efficiency features. If these buildings can obtain preferred financial status globally by accessing climate bond investors it will help change the way we build,” he said.