December 17, 2018

Macquarie Uni sustainability bond

Macquarie saw demand for long tenors and appetite for socially responsible investments.

Australia’s tertiary sector continues to experience student-driven campus expansion, and to finance such upgrades, Macquarie University recently aligned its financing plans with debt investor demand for socially responsible investments in a record breaking A$ bond transaction.

Over the past 50 years, Macquarie University has grown to be a progressive and widely influential tertiary institution. Ranked in the top 1% of universities in the world, it has over 40,000 students from more than 120 countries, making it one of Australia’s largest tertiary institutions. It notably also pioneered the use of debt capital markets as a funding tool among its tertiary peers back in 2010.

Campus growth aligned to UN Sustainable Development Goals

Beyond educational advancement and research successes, the University has long recognised the stewardship position it holds in the community. More than A$1 billion has been invested in recent years in the Macquarie Park Innovation District where campus development has been aligned developed with sustainability principles recognised under the United Nations (UN) Sustainable Development Goals (SDGs).

It was timely then that in planning its future campus growth, the University Council sought to ensure that financing be aligned with its sustainability strategy. Having decided that the A$ bond market was the best fit for matching its objectives, it sought to match factors with growth in sustainable debt investment mandates and partnered with NAB capital markets to assist.

Macquarie University subsequently formalised a sustainability financing framework to identify how it intends to enter into transactions where proceeds are earmarked for projects that deliver positive environmental and social outcomes. For the financing at hand, it identified SDG-connected commitments related to green buildings, energy efficiency, pollution control, water and land use management, and various socioeconomic advancement initiatives.

Macquarie’s 25-year sustainability tranche a world first

With its sustainability framework and funding plans aligned, Macquarie returned to the domestic A$ market in Q3 2018, recognising investor demand for university bonds, long tenors and appetite for socially responsible investments. The strength of Macquarie’s credit reflected in its strong Aa2 credit rating and sustainability overlay ensured an overwhelming investor response.

In the final analysis, a $250 million dual tranche transaction was printed consisting of $200 million issued with a 10-year maturity and $50 million in a 25-year tenor, the latter being a world first.

All in all, Macquarie’s dual tranche sustainability transaction represents a milestone outcome, while leading the way by example. With such strong global growth in the mandates of fixed income investors for socially responsible investments, NAB expects to see continued growth in this space for many years to come.

This article was first published in 2019 Outlook Creating Opportunities. Read more articles from the magazine.

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