New Zealand going big on green bonds
Willow Aliento | 22 August 2017
New Zealand energy gentailer Contact Energy recently launched the first Climate Bond- certified Green Borrowing Program in NZ in a move that promises to kick start a new arm to this fast evolving green finance sector.
Climate Bonds Initiative chief executive Sean Kidney said the NZ$1.8 billion of green finance includes one of CBI’s single largest certifications to date.
It is a significant global boost for best practice standards in green finance, Mr Kidney said.
“They are demonstrating the kind of corporate leadership on green finance we need to see replicated, both in Trans-Tasman capital markets and internationally, by more listed companies.”
Contact chief executive Dennis Barnes said the Green Borrowing Program will enable debt investors and lenders to access a broad range of certified green debt instruments.
These include all the company’s committed bank facilities, commercial paper and retail bonds. All of the company’s USPP and wholesale bonds maturing after 2018 are also certified.
Current lenders and investors in the various debt instruments now hold Certified Green Debt investments.
The first new transaction to be executed was a NZ$75 million bank facility with ANZ.
“Their debt investors and lenders now have exposure to a wide range of green certified debt instruments that fund low carbon activity and align to New Zealand’s commitments towards achieving the goals of the Paris Agreement. That’s a first, and we applaud them.”
Funds raised through the program will be used to finance existing and new renewable energy generation assets that meet both Green Bond Principles and the Climate Bonds Green Assets Standard.
Overall, Mr Barnes said 80 per cent of the energy it supplies its customers is generated from renewable sources.
“Businesses and capital markets both have an important role to play in the shift to a low carbon economy and our green borrowing Program links these two elements together,” Contact head of capital markets and tax, Louise Tong, said.
“Contact’s program plays an important role in developing opportunities for lenders and investors globally who are seeking certified green investments in New Zealand.”
It is not the first foray for ANZ into green bonds and renewable energy assets in NZ. Two of the assets in the pool funded by its $600 million certified climate bond issue were wind power stations in NZ.
The Contact launch is also not the only recent issuance in NZ.
The International Finance Corporation – part of the World Bank Group – launched a minimum NZ$100 million Green Kauri Bond on July 27, with a settlement date of 9 August.
It is believed the 10-year fixed rate bonds are not CBI-certified.
They are being issued under IFC’s Global Medium-Term Note program. IFC has issued Kauri bonds for over two decades, worth more than NZ$5 billion, in a range of tenors — attracting both domestic and international investors.
The mandated arranger of the deal was BNZ, and ANZ together with BNZ the mandated joint lead managers.
Mike Faville, BNZ head of debt capital markets, said “This bond is a critical step in opening up green and sustainable investing opportunities in NZ dollars, and we thank IFC for its continued commitment to the New Zealand market and its development.”
Mr Faville said fostering the green, social and sustainable capital market has been a focus of BNZ and NAB for a long time.
Seeing the first issue launched by an issuer of IFC’s standing and long commitment to green bonds makes it “even stronger way to seed the NZ market”.
“There is a growing awareness of environmental and social issues among local investors, and we hope this transaction helps pave the way for more issuers to move along this path.”
Funds raised from the bonds will be used to finance private sector investments in emerging markets across renewable energy, energy efficiency and other emissions-reductions projects. Inclusion criteria for eligible investments are independently verified by the Center for International Climate and Environmental Research-Oslo.
In FY 2016, new projects worldwide financed by IFC bond issues included renewable energy.
“This issuance demonstrates the continued and expanding role of capital markets in mobilizing international savings to help close the climate finance gap,” IFC director for treasury market operations Monish Mahurkar said.
“As of July 2017, IFC has issued approximately $6 billion in green bonds, including two benchmark $1 billion issuances — the largest in the market at that time.”