CEFC invests AU$25 million in first Australian residential housing green bond
The Clean Energy Finance Corporation, which is playing a key role in developing Australia’s green bond market, has made an AU$25 million cornerstone investment in the first ever green tranche of an Australian residential mortgage-backed bond.
Established as a statutory authority by the Australian Government under the Clean Energy Finance Corporation Act 2012, the Clean Energy Finance Corporation (CEFC) is a specialist clean energy financier that invests in projects with the “strongest potential” for decarbonisation, including low carbon electricity, such as solar, wind, battery storage and bioenergy; ambitious energy efficiency such as property, infrastructure, manufacturing and agribusiness; and electrification and fuel switching such as vehicles and biofuels
In a statement, CEFC CEO Ian Learmonth confirmed the CEFC’s investment in the NAB Class A1-G Notes, which have been certified by the Climate Bonds Initiative (CBI) as meeting its Low Carbon Buildings criteria. The Class A1-G Notes were part of the larger AU$2 billion Residential Mortgage-Backed Securitisation, National RMBS Trust 2018-1.
This transaction is a big leap forward for the Australian green bond market. NAB’s green bond offering has attracted interest from local and global investors, demonstrating the strong investor appetite for green securitisations. Securitisation is a key tool for the packaging of loans, including residential mortgage financing and we expect other securitisers in Australia to be watching the NAB transaction closely.Learmonth said.
According to the Australian Sustainable Built Environment Council, the residential property sector accounts for nearly 12 percent of Australia’s emissions,
We expect the success of this NAB transaction to spark further development in green residential home loan products. We have already seen the emergence of the securitisation of green consumer loans in Australia, which has resulted in increased availability of green consumer lending products. In the long run, we anticipate further innovation in consumer lending products that will drive better energy efficiency outcomes for Australian households, said Richard Lovell, CEFC Debt Markets lead.
The CBI Low Carbon Buildings criteria require residential buildings to meet a net zero carbon emissions trajectory, aligned with the goals of the Paris Agreement to limit global warming to no more than two degrees above pre-industrial levels.
The CBI has reviewed Australian building codes and energy rating schemes to determine which are in line with these trajectories. Buildings approved under those codes and energy rating schemes can automatically be deemed compliant with the Low Carbon Buildings criteria and eligible for CBI certification, providing confidence for investors about the sustainability of the underlying assets.
Lovell said that the latest securitisation “extended NAB’s pioneering approach” to the green bond market in developing additional investment options for investors wanting to back sustainability and emissions reduction.
In 2016, NAB arranged the first Australian securitisation to include a green tranche, with a FlexiGroup securitisation backed by solar PV and renewable energy consumer receivables. The CEFC made an AU$20 million investment in that transaction.
NAB was also the first Australian issuer of an Australian dollar-denominated certified climate bond in December 2014 with an AU$300 million securitisation. The CEFC made an AU$75 million cornerstone investment in that bond.
The CEFC has been a cornerstone investor in nine of the 15 climate bonds issued in Australia since 2013, supporting the growth of this important new channel to increase the flow of clean energy finance.