The Commonwealth of Australia has issued its inaugural billion green bond at A$7 billion ($4.66 billion), working with the Australian Office of Financial Management (AOFM). The 10-year bond will mature in June 2034 and investors came in from Australia, Asia, Europe and North America.
The bond was over-subscribed with more than A$22 billion in bid from 105 investor institutions, according to a statement from Chris Bowen, Australia’s minister for climate change and energy, and Tanya Plibersek, Australia’s minister for the environment and water.
The joint lead managers (JLMs) on the issue were Commonwealth Bank of Australia, Deutsche Bank, National Australia Bank, UBS (Australia branch) and Westpac.
Ben Porter, director debt capital markets, Deutsche Bank, told FinanceAsia: “The majority of the issuance was placed with fund managers, whilst we also saw material interest from hedge funds and banks.”
Porter, who is based in Sydeney, added: “There was broad interest geographically, with strong domestic support from Australia supplemented by demand from the UK, Europe and Asia. Green labelled bonds are a key focus in Europe and the UK, in particular, which helped to draw investor interest from these regions.”
Landmark deal
This landmark issuance is a milestone in Australia’s drive towards increasing investments in sustainable finance, as it moves towards net zero in 2050, and reflects the growing demand for environmentally responsible investment opportunities.
The Australian government committed to introducing a green bond program to drive Australia’s net zero transformation and support environmental objectives. The environmental ministers said that “money raised from the bond will back projects that will help make Australia an indispensable part of the global economy and bring new jobs to communities all around the country.”
The bond will go towards projects including hydrogen hubs, community batteries, clean transport and programmes to conserve biodiversity. The government stated the main aim is to improve the country’s climate change mitigation, climate change adaptation, and improve environmental outcomes. For example, 80 renewable hydrogen projects have already been announced, with a A$127 billion pipeline of investment under Australia’s National Hydrogen Strategy.
Australia has been hit by a series of significant floods in recent years which have been directly linked to climate change. Ever growing natural catastrophes have seen the central government and state governments increasing their resilience budgets, while insurers and reinsurers have been warning that some areas might no longer be able to be insured.
As the planet warms there is no time for the Australian government to waste in stepping up its efforts in a country which has a large reliance on the fossil fuels of coal, oil and gas.
Investor roadshow
The deal was secured after an April 2024 investor roadshow which included stops in Sydney, Melbourne, London, Singapore and Japan, in addition to virtual meetings, some of which were in May.
Deutsche Bank’s Porter explained the significance of the deal and how as a bank it helped the government: “Being the Commonwealth of Australia’s inaugural green bond, this was an interesting deal on many fronts, with various factors to consider. One of our priorities in undertaking a lengthy investor roadshow was to ensure that Australia’s sustainability strategy was broadly and clearly communicated to investors globally.”
He continued: “Selecting the right window for the transaction, navigating key national events like the Australian budget announcement and other data releases, was another key element in the strategy to ensure maximum focus and interest.”
In a further sign of development in the bond market down under, in 2025 the Australian government is looking to make exchange-traded green treasury bonds available.
Asia Pacific as a whole is becoming a more developed market for green bonds. Earlier this year in Febraury, the Hong Kong government announced the successful issuance of a HK$6 billion ($768 million) digital green bond. For more analysis click here.
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