Sustainable Finance Update February 2021
According to BNEF, 2020 was a record year for sustainable debt issuance with annual issuance reaching US$732.1 billion across both bond and loan formats, representing a 29% uplift on 2019 levels.
Sustainable finance market 2020 overview
- Green bond issuance volumes were down during the early phases of the COVID-19 pandemic in 2020, but soared through September and the fourth quarter when several sovereigns entered the market, according to a quarterly update by the International Capital Market Association (ICMA). Overall, 2020 green bond issuance was 13% up on 2019, reaching an annual record of US$305.3 billion.
- According to BNEF, issuance of social bonds surged sevenfold to US$147.7 billion while sustainability bond issuance volumes rose to US$68.7 billion, an 81% increase on 2019. The bulk of this jump in issuance was from government and supranational issuers raising additional funds for healthcare and other pandemic relief projects and expenditures.
- Sustainability-linked loans and green loans, on the other hand, both saw 15% reductions in issuance, down to US$119.5 billion and US$80.3 billion respectively.
Australian sustainable finance market 2020 overview
• A total of A$9.85 billion was raised in the Australian sustainable debt market in 2020, down from A$14.2 billion in 2019, according to data from KangaNews and Refinitiv.
• Green bonds comprised 39.8% of the 2020 Australian sustainable debt market issuance at A$3.8 billion.
• YTD issuance volumes as at 27 January 2021 were A$1.275 billion, led by a A$1.25 billion European Investment Bank green bond and a A$25 million International Finance Corporation social bond.
Selected recent deals
Canberra Metro enters Green Loan financing
- Canberra Metro has entered into a A$280 million green loan to finance the Canberra Light Rail Project.
- The project is the first green loan on a public-private partnership (PPP) transport project in Australia and targets net zero carbon emissions in both construction and operation.
- The green loan has been certified under the Climate Bonds Standard’s Low Carbon Transport sector criteria. NAB was a Mandated Lead Arranger on the deal.
TRIG secures £500m ESG-linked SONIA credit facility
- The Renewables Infrastructure Group (TRIG), a London-listed infrastructure fund, has secured a £500 million multicurrency syndicated ESG-linked, SONIA based credit facility for investment in renewable energy assets. NAB acted as lender on the deal.
- The facility margin and commitment fee are linked to performance against three sustainability KPIs including number of homes powered by clean energy from TRIG’s portfolio, number of community funds supported by TRIG and maintaining a low Lost Time Accident Frequency Rate.
Contact Energy signs second sustainability-linked loan
- New Zealand electricity provider Contact Energy has signed a four-year, NZ$75 million sustainability-linked loan.
- The company now has two sustainability-linked loans totalling NZ$125m, each tied to its ESG performance as measured by independent rating agency RobecoSAM.
Coriance wins Best Refinancing of the Year
- First Sentier’s Coriance has won Best Refinancing of the Year at the IJInvestor Awards 2020 for its €100m refinancing, incorporating a sustainability linked loan.
- NAB acted as Joint Lead Sustainability Arranger for the deal, which is linked to 3 KPIs including CO2 emissions per unit sold, frequency of accidents and share of renewable energy in production mix.
Odfjell SE issues first shipping sustainability-linked bond
- Shipping company Odfjell SE has issued a NOK 850 million sustainability-linked bond, the first of its kind in the international shipping industry.
- The bond has two sustainability KPIs linked to Odfjell’s long-term climate targets, including the status of Odfjell’s fleet transition plan and reducing carbon intensity of its controlled fleet by 50% by 2030, compared to 2008 levels.
Investor & Market news
Hesta invests in listed impact investment with Australian Unity
- HESTA has committed A$20 million in Australian Unity’s inaugural issuance of innovative listed Mutual Capital Instruments (MCIs).
- The A$100 million issuance seeks to assist retail investors to invest for social impact alongside large institutional investors.
Investors plan to double sustainable assets – BlackRock survey
- BlackRock undertook its first sustainable investment survey of clients in 2020 to better understand investors’ drivers and challenges to sustainable investing.
- The survey of 425 investors representing US$25 trillion in AUM found 54% consider sustainable investing to be fundamental to their investment process.
- Respondents plan to double sustainable AUM in the next five years; 53% said poor quality ESG data is a barrier to greater sustainable investment; and 88% said the environment is the priority ESG factor.
- In his annual letter to CEOs, BlackRock CEO Larry Fink called on companies to accelerate their transition plans for a net-zero economy.
Climate change poses risk to mortgage defaults
- CoreLogic has warned of the risks climate change poses to property prices as climate models are indicating an increased risk of cyclones in regions of southern Queensland.
New Natural Capital Investment Alliance
- Prince Charles has launched a new natural capital initiative at the One Planet Summit in Paris, the Natural Capital Investment Alliance, founded by HSBC Pollination Climate Asset Management, Lombard Odier and Mirova.
- The initiative aims to accelerate development of natural capital, and mobilise US$10 billion to invest by 2022, seeking ways to protect natural assets such as soil, water and biodiversity.
EU examines sustainability-related ratings, data and research
- The European Commission has released findings of an in-depth study on sustainability-related ratings, data and research highlighting three key biases including company size, geographical location and industry.
- The study issued a set of eight core recommendations for improvements in the sustainability data industry, addressing areas such as transparency, company engagement, conflicts of interest, and materiality.
Download a PDF version of this update: NAB Sustainable Finance Update February 2021
The information in this publication is general in nature and has been prepared by National Australia Bank Limited or one of its affiliates or subsidiaries (collectively, “NABL”). In Australia it is issued by National Australia Bank Limited. This report is compiled by the Corporate Finance Division of the NAB. This report is based on market trading activity and other public information which has been obtained from sources internal and external to NABL. Any opinions herein are based upon, sources believed to be reliable and no guarantees, representations or warranties are made as to its accuracy, completeness or suitability for any purpose. These opinions are subject to change without notice.
This is not independent investment research and is not produced by the NAB research desk. Whilst NAB is not subject to any legal prohibition on dealing ahead of the dissemination of this report, NAB takes reasonable steps to identify and manage conflicts of interest which may arise in the production of this report. NAB maintains an information barrier between the NAB’s Debt Markets origination business and markets sales and the public side of the NAB’s business.
Part of the compensation of the author may be tied to transactions in financial services offered by NAB and/or trading fees including fees, margins or other revenue received from transactions connected with a recommendation or view included in the information. The author also receives compensation based upon, among other factors, the overall profitability of the Corporate Finance Division of NAB.
This publication has been prepared for NAB clients who are wholesale clients and professional investors. It is for information purposes only. It is not for publication in the press or elsewhere. No part of this document may be distributed, published or reproduced without the prior permission of the NAB.
Any statements as to past performance are not representations as to future performance. All statements as to future matters are not guaranteed to be accurate. This publication does not purport to contain all matters relevant to any particular investment or financial instrument. Recipients should independently verify and check the accuracy, completeness, reliability and suitability of the information herein. Recipients should make their own assessment and obtain independent and specific advice from appropriate professionals or experts relevant to their circumstances.
This is not an offer or solicitation of securities or financial products. NAB does not intend to create legal relations on the basis of the information contained herein.
So far as the law and applicable rules and regulations allow, NAB disclaims any warranty or representation as to the accuracy, reliability completeness or currency of the information and statements in this document. NAB shall not be liable for any errors, omissions, defects or misrepresentations in the Information or for any loss or damage suffered by persons who use or rely on such Information (including by reason of negligence, negligent misstatement or otherwise). If any law prohibits the exclusion of such liability, the NAB limits its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable.
NAB may have proprietary positions in the products described in this document. NAB, its affiliates and employees may hold a position, deal or act as a price maker in the financial instruments of any issuer discussed within this document or act as an underwriter, placement agent, adviser or lender to such issuer. NAB and/or its affiliates may hold or transact derivative instruments, including options, warrants or rights with securities, or may act as a market maker in the securities and other financial products discussed herein and may sell such securities or financial products to or buy from customers on a principal basis.
The opinions in this document accurately reflects the personal views of the author about the securities, issuers and other subject matters discussed, and are based upon sources which the author reasonably believed to be reliable and accurate. The views of the author do not necessarily reflect the views of the NAB Group. This document is for distribution in Australia, New Zealand, Hong Kong, Singapore and Japan.
Hong Kong: In Hong Kong this document is for distribution only to “professional investors” within the meaning of Schedule 1 to the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (“SFO”) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. Issued by National Australia Bank Limited incorporated in Australia with limited liability, a licensed bank under the Banking Ordinance (Cap. 155, Laws of Hong Kong) and a registered institution under the SFO (central entity number: AAO169).
Japan: In Japan this document is for distribution only to “Qualified Institutional Investors” (as defined under Financial Instruments and Exchange Act) only. This material is provided for information purpose only and may be amended, superseded or replaced in its entirety by subsequent material. Although the information contained herein has been compiled or arrived at from sources believed to be reliable, no representation is made as to its accuracy or completeness. Neither National Australia Bank Limited (“NAB”) nor any of its affiliates shall be held responsible for any misunderstanding arising from this material. You may not copy, reproduce, distribute or incorporate into the other document all or any part of this material without our written consent.
Singapore: This document is distributed in Singapore to institutional investors (as defined under the Financial Advisers Regulations) only. If this document is distributed in Singapore, it is made available to you in Singapore by NAB, Singapore branch, through general information circulation only and does not take into account of your specific investment objectives, financial situation or particular needs. If you choose not to seek advice from a financial adviser, you should consider whether the product in question is suitable. Recipients of this material in Singapore should contact NAB, Singapore branch at 12 Marina View, #20-02 Asia Square Tower 2, Singapore 018961, Tel (65) 6419 6875 for any matter arising from, or in connection with, this material. The contents of the Materials have not been reviewed by any regulatory authority in Singapore. If you are in any doubt about any of the contents of the Materials, you should obtain independent advice.
New Zealand: This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication. To the extent that any information or recommendations in this publication constitute financial advice, they do not take into account any person’s particular financial situation or goals. Bank of New Zealand strongly recommends readers seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. Neither Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication. National Australia Bank Limited is not a registered bank in New Zealand.
Other Jurisdictions: The distribution of this document may be restricted by law in certain jurisdictions and persons into whose possession this document or other information referred to in it comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this document nor the information contained in this document is for publication, distribution or release, in whole or in part, directly or indirectly, in or into or from any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction.