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Catherine Bremner, ANZ and the view on climate bonds

Catherine Bremner

Catherine Bremner has moved up the ladder at ANZ to global head of sustainable finance solutions.

This means that among other things, Bremner is now in charge of the new rockstar phenomenon of the property world, climate bonds and green bonds.

ANZ earlier this year launched a huge $600 million raising green bond that was oversubscribed and according to Bremner, just a hint of where this emerging market will head.

Bremner’s other responsibilities include “provision of finance for sustainable projects, covering renewables, clean energy, electric vehicles and battery storage” and “structured finance options that cover project finance, export credits, green bonds, loan syndication, leasing, carbon and renewable credits”.

That’s the take from Bremner’s LinkedIn profile. In real life, it’s much more exciting. Think of it as holding a big chunk of the purse strings to the new (more sustainable) world, in the same way perhaps that Queen Isabella and King Ferdinand funded Christopher Columbus when he set off for the unknown.

What Bremner is really in charge of is funding our future and how it develops its response to climate change and the driving need for greater sustainability. Not a bad job to have waiting for you on your return from maternity leave, as Bremner has experienced.

But then Bremner has an impeccable pedigree that sets her up nicely for the responsibility.

She was previously global head of environmental sustainability and director of low carbon solutions for the bank. She’s held senior positions in agencies such as the CSIRO, where she was a board member of the advisory panel on energy; at Low Carbon Australia, where she was chief operating officer; and at The Carbon Trust, where she was head of international development and before that head of product delivery and corporate development.

The new role is bursting with opportunities to leverage that background.

“The role sits across our institutional bank and really working to find opportunities in these innovative technologies, distributed energy, green bonds and the like,” she says.

Amidst this, however, it’s her role with climate bonds that Bremner was keen to focus on during a recent interview at the bank’s relatively new headquarters at 242 Pitt Street in Sydney.

The first green bond was a great success, she says.

“We were just delighted with the uptake. What we were trying to do with that was demonstrate the case for green bonds and we were oversubscribed. But what I was really pleased about was that the bond had buildings in it.”

This included the bank’s 242 Pitt Street/161 Castlereagh Street headquarters, developed by Grocon. It earned a 6 Star Green Star and five star NABERS rating.

“When we moved from Martin Place we got a 60 per cent reduction in emissions, so we were delighted with that.”

This means it’s among the top 15 per cent in terms of GHG performance in the marketplace.

Other buildings included in the bond were Walker Corporation’s Tower 4 at Collins Square Melbourne and Tower 1 and 2 at Brookfield Place in Perth. The remaining projects were mainly wind farms.

So what were the gains, the learnings and the ambitions generated by the bond?

First was the pointer to the depth of appetite in the market for the instrument, evidenced by its oversubscription. Investors included super funds, in particular the ESG arms of super funds, and even church groups, Bremner says.

Next – and this must have been satisfying – is that 25 per cent of the investors were new to the ANZ customer pool, so you could see the bonds as a great marketing exercise as well.

Important to the bonds and part and parcel of being in the market is to ensure the bonds have the right level of certification, provided in this case by EY.

Investors are keen to see the reporting done on a regular basis, she says.

“Under the [Climate Bonds] standard it’s an annual requirement but we’re keen to do it on a quarterly basis.”

Bremner says the property sector has had a strong showing and it’s where the bank would really like to stoke up the fires of activity.

“We have interest from the REITS [real estate investment trusts] and from some of the government organisations that might have renewables or super efficient buildings in their books.

“We’ve also had quite a lot of interest from development banks, and organisations such as IFC [International Finance Corporation], German government-owned Kfw and the World Bank.”

All are “quite interested in issuing Australian dollar or New Zealand dollar green bonds”, Bremner says.

The role for ANZ would be to arrange those bonds “in terms of what’s classified as green, and going through whole debt and capital markets”.

The market chat is that there is another issuance due soon but Bremner won’t be drawn on its source – whether its the ANZ, or its competitors in this space so far, NAB or Westpac.

Another heartening corollary to the investor interest, she says, is the “really good interest” from NABERS and the Green Building Council on Australia, which are keen to provide the ratings that can help climate and green assurance to issuers, and also to generally promote green bonds.

“So that’s wonderful – to see their interest because they can provide the assurance and the information, which is key to ensuring you’re actually supporting something that’s green.”

So how will the funding from these bonds be used?

That’s a whole new and exciting area of development.

Sean Kidney, who is the chief executive and co-founder of the Climate Bonds Initiative, said during an interview early this year that climate and green bonds were mainly used to re-finance projects (such as Stockland’s green bond which was used to refinance its green shopping centre portfolio), rather than come in at the riskier front end of developmental or start up phase.

But Bremner seems to indicate this is changing. Two of the buildings, at Collins Square and Brookfield Place, for instance, were new builds.

Bremner thinks one opportunity is to collaborate with development banks to share the development risk for projects that might have great credentials but might otherwise struggle to get off the ground.

Bremner says the bank would like to see longer tenor bonds (longer term).

“Typically in Australia it’s three to five years. But we’ve seen the emergence in the US of 15 year tenors and a water bond of 100 years in DC, in New York State.”

The ANZ issuance is for five years.

Where will the price head?

What hasn’t emerged yet is a price differential. And for all those who think that a green or climate bond might be priced lower because it’s less risky in so many ways (climate, sustainability), Bremner says the opposite is likely to occur, driven by greater demand.

“So you’d see price differential outside the curve, so whatever ANZ would price it as, there would be a difference in the context of the green bond.”

The rationale is that you’re appealing to an audience that’s drawn to the ESG space.

So people would pay more for green bond?

“Potentially, but I think it would take a long time.”

Still to come is further evolution in the standards.

“There’s quite a lot of work to be still done. The universe of green bonds is so large and it’s been such a short time [in development] that the standards are still emerging.

Most welcome soon would be a standard on forests and transport.

Another good point is the level of transparency provided by “well respected” ratings such as Green Star and NABERS, which is “key”, she says.

“It’s really good to be able to rely on this kind of publicly available information.”

The future in green bonds

All of these elements, Bremner says, could potentially come together to support giants such as GE or “the Philips of the world” provide a new powerful engine of growth in projects designed to ameliorate climate change or deal with its impacts, in major water, distributed energy or waste.

The way Bremner is going, that’s looking like more of a reality every day.

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