Institutional investors can now buy into a $200 million pool of loans to renewable projects, in what is being touted as a new, game-changing clean energy investment model in the Australian market.
NAB’s Low Carbon Shared Portfolio provides fund managers access to eight loans that fund seven wind and large-scale solar farms, which have been unavailable to invest in through the public debt market.
The Clean Energy Finance Corporation has provided a $90 million cornerstone investment into the portfolio, with insurance company IAG also investing.
“The Low Carbon Shared Portfolio creates an opportunity for institutional investors to participate in the renewable energy sector even though they may not be able to enter into individual project financing transactions,” CEFCdebt markets lead Richard Lovell said.
“This offering is unique in giving investors credit exposure to the underlying projects, a significant innovation in the market.”
Mr Lovell said international super and pension funds were recognising the consistent and long-tern returns available from large-scale renewables investment.
“We want to encourage the same approach from Australian superannuation funds,” he said.
“Given their size, superannuation funds can help underpin future clean energy investment, as well as capture the value of Australia’s growing renewable energy infrastructure to benefit their members.”
He expects the the new investment model to be replicated as demand for socially responsible investment opportunities increase.
Mike Baird, NAB’s chief customer officer of corporate and institutional banking, said the bank was responding to customer demand to be part of the low-carbon transition.
“We’re responding by providing ways for institutional investors to back major renewable energy projects alongside NAB, while releasing capital for NAB to continue to reinvest in the renewables sector,” he said.
“Our goal is to make a positive and lasting impact on the lives of our customers, people, shareholders, communities, and our environment.
“We’re seeing tremendous growth in clean energy across our loan book, which is why we continue to innovate with offerings such as the NAB Low Carbon Shared Portfolio.”
IAG chief financial officer Nick Hawkins said the insurer wanted to help with the response to climate change.
“As Australia’s largest general insurer, we’re acutely aware of the effect that climate change is having and will have on communities, like more frequent and more intense storms, bushfires and weather events, and see opportunities like this as an important step forward,” he said.
The loans in the Low Carbon Shared Portfolio are all in Australian dollars, and have a remaining tenor of at least 15 months. The loan portfolio has an expected weighted average life of 3.2 years. NAB will retain at least 25 per cent of each low carbon loan on its own balance sheet and will manage the loans for the shared portfolio. If NAB exits a particular loan, the shared portfolio will also divest.
The secured, floating rate, amortising Portfolio Notes are the first Australian Climate Bond-certified project bonds. Investors in the notes will receive principal and income from the Trust’s loans on an amortising, pass-through basis.
NAB said the renewable farms avoided 2.5 million tonnes of CO2 a year.