Yesterday the World Bank (International Bank for Reconstruction and Development, IBRD, rated Aaa/AAA) priced a $300 million 5-year fixed rate Kangaroo green bond, the first of its kind in the Australian domestic market.
World Bank Green Bonds support its lending to eligible development programs that are designed to address the challenges of climate change. This Australian dollar benchmark follows two World Bank benchmark-sized green bonds this year, issued in USD and EUR.
With yesterday’s issue, the World Bank has once again expanded the investor base for the green bond market. The World Bank has now issued a total of USD 5.6 billion equivalent in green bonds since its inaugural green bond in 2008.
Climate campaign group 350.org welcomed the introduction of the World Bank’s Green Bond to the Australian Market, two days after the release of the governance framework by Green Bond Principles.
“These two important events will help channel private investment into projects which will help the world transition to a low carbon economy,” chief executive Blair Palese said.
“The Green Bond Principles are the first guidelines to promote transparency, disclosure and integrity in the Green Bond market and are an important step to establish industry standards whilst the introduction of the World Bank’s Green Bond via Unisuper will allow Australians to participate in the rapidly growing Green Bond market.”
The bonds were placed with 15 investors, including Aberdeen Asset Management, AMP Capital, Australian Ethical Investment Ltd, Colonial First State Global Asset Management, Local Government Super, QBE Insurance Group Ltd and UniSuper.
The investors involved in the trade all have a specific interest in supporting climate-smart projects within their investment mandates, alongside their traditional investment considerations such as safety of investment and risk-adjusted returns. UniSuper provided the lead order for the transaction.
“UniSuper, one of Australia’s largest not-for-profit superannuation funds, has been working with the World Bank for several months as it has been refining its Socially Responsible investment options to include green bonds. UniSuper is pleased to cornerstone the World Bank’s first green bond issue into the Australian market. UniSuper welcomes the partnership with the World Bank and the underwriters’ support which has facilitated this inaugural Australian dollar green benchmark bond. This transaction demonstrates the World Bank’s leading role in further developing the green bond and SRI debt capital markets overall. UniSuper is committed to the sustainable finance effort and is proud to contribute to it through this transaction” said Talieh Williams, UniSuper’s Manager, Governance and Sustainable Investment.
The distribution by investor type was as follows: 42 per cent of the bonds were placed with asset managers, 35 per cent with superannuation funds, 20 per cent with insurance companies and 3 per cent with banks. The geographic distribution was as follows: 77 per cent of the bonds were placed with Australian investors, 10 per cent with investors in Japan, 2 per cent with investors in Asia and 11 per cent with US investors.
RBC Capital Markets and Westpac Institutional Bank are the joint-lead managers for this transaction.
“This inaugural green benchmark in the Australian market expands the green bond institutional investor base to Australia. It is a further step in building the green bond market that mobilizes private sector financing for climate-smart activities to help finance the transition to a low-carbon economy, while helping countries adapt to the effects of climate change and build resilience. This has been a true collaboration between UniSuper, the lead investor for this transaction, all the other investors and the underwriting banks – all working together to invest in a more sustainable future,” says Doris Herrera-Pol, Director and Global Head of Capital Markets at the World Bank.
