News
While Australia’s first green bond came from a high-grade issuer, bank and corporate borrowers were quick to get in on the action. But an initial rush to claim a series of market firsts has evolved into a much more complex network of supply drivers. The outcome to date is that labelled bonds are playing no more than a marginal role in the Australian credit market.
Transition is often spoken about in the context of a dollar sum – the estimated amount needed to finance the shift to a decarbonised economy – with little reference to the inevitable wider impact of such a massive investment task. The KangaNews Sustainable Finance Summit 2024 gathered a group of Australian economists to discuss the far-reaching but less discussed impacts of this type of spending.
Regulatory scrutiny has brought greenwashing risk to the front of mind for Australian asset managers, causing some to avoid environmental, social or governance claims altogether. While tighter standards are often touted as the solution for increased clarity, speakers at Responsible Investment Association Australasia’s annual conference described a world of complexity.
Clearer policy direction, the development and implementation of a local taxonomy and mandatory climate reporting, and the impending inevitability of energy transition seem set to turbo charge the Australian sustainable finance market. Speakers at the KangaNews Sustainable Debt Summit in Sydney on 19 March discussed the economic and market impact of this inflection point.
One of the main hopes when the first Australian green bond came to market was that demand would evolve to support – or even require – exponential growth in labelled issuance. While this has not come to pass, investor strategies for incorporating sustainability in fixed-income investing have evolved significantly. KangaNews speaks to a range of investors, from specialist funds to the largest mainstream asset managers, to get a perspective on a decade of development and the outlook.
Australia’s first green bond was spawned when UniSuper approached World Bank offering a cornerstone bid if the issuer mandated such a transaction in the local market. Managers from the superannuation fund share perspectives on what motivated it to spearhead the local labelled bond market and how its environmental, social and governance investment strategy has evolved since.
Green, social and sustainability bonds have become a consistent component of high-grade Australian dollar issuance. While labelled deals still deliver a relatively small proportion of aggregate supply, these issuers have led the evolution of the market and, in particular, the drive toward a holistic understanding of borrowers’ sustainability credentials.
KangaNews has been tracking the progress of Australian and New Zealand sustainability labelled debt instruments since the market began, including coverage of groundbreaking transactions and keeping extensive issuance data in the KangaNews deal database. A timeline of key developments and data points illustrates market progress over the years.
New Zealand’s labelled bond market kicked off later than other developed countries but has built a reputation for innovation, especially in the government sector. However, groundbreaking deal structures have yet to be accompanied by weight of issuance – especially in the credit space. Local market participants review the history and look ahead.
It has never been more important to keenly monitor – and act on – climate risk. Edwina Kwan, partner, and Jack McNally, solicitor, at King & Wood Mallesons in Sydney, explain why climate litigation is no longer an outside risk brought by activists; investors, shareholders and regulators are among those taking action. Meanwhile, litigants are increasingly creative in bringing climate change related claims while courts are increasingly willing to take them seriously.
Organisations are bracing for impact as the dual regulatory storm of mandatory climate reporting and greenwashing enforcement action looms. Emma Newnham, senior associate, Linda Le, solicitor, and Ha Dinh, solicitor, at King & Wood Mallesons in Sydney, provide an advanced snapshot of the findings of their upcoming report, Weathering the Regulatory Storm: ASX50 Climate Reporting and Governance in 2023.
