October 30, 2020

Sustainable finance update: October 2020

Green, social, sustainability and sustainability-linked bond market nearly doubles in Q3 2020.

Market overview

  • According to Environmental Finance, total issuance of green, social, sustainability and sustainability-linked (GSSS) bonds almost doubled in Q3 2020 to US$148.7bn, up from US$79.7bn issued during Q3 2019.
  • For the first nine months of 2020, total GSSS bond issuance stood at US$360.9bn, higher than the US$326bn issued throughout the whole of 2019.
  • In the first nine months of 2020, 30 GSSS bonds valued at over US$2bn were issued, compared to 15 in the whole of 2019.

Sustainable debt annual issuance (US$bn)

  • Green bonds were subdued through the first half of the year, recovering through Q3 with more than a quarter of the year’s green bonds launched in September.
  • Social bond issuance in the third quarter surged to US$24.8bn compared to just US$2.2bn the year before.
  • Sustainability Linked Bonds (SLBs) continue to build momentum, with six completed to date.*

Source: BloombergNEF Sustainable Debt Tool

Sustainability-linked and green loans

According to Bloomberg New Energy Finance (BNEF) data, both Green and Sustainability-linked loans fell in volume in Q3 compared to the same period in 2019. Green loans fell to US$10.4bn compared to US$24.9bn, sustainability-linked loans fell to US$16.4bn compared to US$23.21bn.

Strong ESG ETF Inflows

  • According to the Institute of International Finance’s Sustainable Finance Monitor October 2020, in the first nine months of 2020, net inflows to ESG dedicated ETFs were almost US$163bn, compared to US$22bn for the same period in 2019.
  • September saw US$29bn pour into ESG-dedicated bond and equity ETFs, second only to the $35bn record set in July.

ESG ETF inflows (US$bn)

Selected recent deals

Lendlease inaugural green bond

Lendlease Group via its financing subsidiary Lendlease Finance Ltd, priced its inaugural green bond on 20 October (NAB as JLM). The proceeds from the seven-year, $500m issuance will be earmarked against green buildings across its global portfolio of 22 urbanisation projects.

NSW TCorp Green Bond

NSW Treasury Corporation priced a A$1.3bn Green Bond on 20 October (NAB as JLM). It is the third time the issuer has come to the GSSS market, following inaugural green and sustainability bond issuances in November 2018 and November 2019, respectively.

FlexiGroup green ABS

On 22 October, FlexiGroup Limited priced its 6th asset-backed securities transaction to include Climate Bond Certified green notes (NAB as JLM), and has now issued over A$470m of green notes across all ratings levels from AAA to BB since 2016.

Brighte debut green bond issue

Brighte priced an Australian first, 100% green asset backed securities issue on 22 October (NAB as sole Arranger). The Climate Bond certified A$190 million transaction is Brighte’s debut green bond issuance and the 43rd green, social or sustainability themed bond NAB has brought to market since 2014.

Shinhan Bank COVID-19 social bond

Shinhan Bank priced a A$400m COVID-19 Alleviation Social Bond (NAB as JLM) on 22 September, split between A$250m floating-rate and A$150m fixed-rate tranches.

This deal is Australia’s first COVID-19 labelled social bond with proceeds allocated to employment generation and access to essential services.

 Auckland Council 30-year green bond

Auckland Council issued a NZ$500m 30-year green bond (BNZ as JLM) on 16 September, its third green bond issuance and New Zealand’s longest ever green bond.

 Mercury Energy debut green bond

Mercury Energy’s debut NZ$200m green bond closed on 4 September (BNZ as JLM) with proceeds primarily earmarked to finance construction of the Turitea wind farm.

New sustainability linked bond issuers

  • Suzano’s US$750m, 10 year, sustainability linked bond was the first issued under the ICMA sustainability linked bond principles. It has a single carbon intensity target.
  • Novartis issued a €85bn, 8-year sustainability linked bond incorporating two social targets.
  • French luxury label Chanel raised a €600m (5 year – €300m, 10 year – €300m) sustainability linked bond. The deal is linked to environmental targets including cutting emissions within the firm and in its supply chain.
  • Real estate developer Hulic has issued Japan’s first sustainability-linked bond, pricing a ¥10bn (US$95m) 10-year note on 9 October. The note is linked to two sustainability performance targets: achieving RE100 by 2025 and completing the construction of Japan’s first 12-storey fire-resistant wooden commercial facility by 2025.

 New Sovereign GSSS bond issuers

  • Germany closed its inaugural €6.5bn, 10-year green bond on 3 September, attracting demand of over €33bn and pricing 1bp tighter than the existing conventional bond according to Bloomberg. It was offered alongside a €24.5bn vanilla bond with a feature allowing investors to swap the green bonds for the vanilla bond.
  • Other recent inaugural sovereign GSSS bond issuances came from Luxembourg, Sweden, Hungary, Ireland, Mexico and Egypt.

European Commission Social and Green Bonds

  • The EC has issued €17bn of social bonds under its SURE program. Demand for the two-part social benchmark exceeded €233bn, the biggest order book ever seen.
  • The EC has also announced that it will sell €225bn of green bonds to fund its Next Generation EU recovery plan.

Investor & market news

Western Australian Renewables Hub approved

The WA Government has approved the first stage of the proposed Asian Renewable Energy bubble, a large-scale renewable energy project near Port Hedland.

Stage one will be 10GW of wind and 5GW of solar generation, with the total project expected to be 26GW.

Bank of England encourages company disclosures on climates risks

The Bank of England is encouraging climate disclosures to help markets price in risks from climate change. This is the latest push to harmonise standards globally, so investors can track and compare how companies are transitioning to a lower-carbon economy.

New climate league for Australia

Sixteen institutional investors have founded a new Climate League, aiming to cut 2030 emissions to 45% below 2005 levels. Investors involved include IFM, CBUS, Aware Super and QIC.

NZ SuperFund targets net-zero emissions by 2050

NZ SuperFund (NZSF) has produced a Climate Change Report noting the NZSF met its 2020 emission reduction targets a year early and has set the following more ambitious targets for 2025: to reduce the fund’s carbon emissions intensity by 40% & to reduce the fund’s fossil fuel holdings by 80%.

International investors commit to reducing emissions

The UN-convened Net-Zero Asset Owner Alliance, a group of 30 investors with over US$5 trillion in assets under management, has committed to reducing carbon emissions in their portfolio to net-zero by 2050.

European Central Bank to include Sustainability-Linked Bonds as eligible collateral

The ECB will accept sustainability-linked bonds with step-up coupons as eligible collateral from 2021 as part of its asset-purchase programme, removing one of the biggest hurdles stifling the product that could even lead to sustainability linked bonds rivalling green bonds when it comes to issuance volume.

Investors urge corporates to set science-based targets

137 investors managing US$20 trillion in assets are urging 1,800 high emitting companies to set science-based targets in a push to reach net zero by 2050.

Investor Group on Climate Change (IGCC) 2020 survey

A Net Zero Investment survey conducted by the IGCC found that Australian and New Zealand investors were increasingly applying dedicated strategies and targets to portfolio-wide and specific asset classes over and above responsible investment offerings.

The survey involved 38 participants from superannuation funds, asset managers and sovereign wealth funds.


Download a PDF version of this update: NAB Sustainable Finance update: October 2020


*YTD 2020 represents issuance from Jan 2020 to Sept 2020.


Important notice

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.

The AUD in November 2023

The AUD in November 2023

1 December 2023

The AUD in November AUD/USD returned to ‘normal’ levels of monthly volatility in November.

The AUD in November 2023