Australia emerging as best practice for green investment: report

Climate Bonds Initiative has launched the Green Infrastructure Investment Opportunities Australia & New Zealand (GIIO) report outlining a pipeline of infrastructure investments that can be funded via green finance.

Climate Bonds Initiative is an international organisation working to mobilize the bond market for climate change solutions.

The new report is accompanied by the release of the Australia and New Zealand Green Finance Briefing, an analysis of green investment in both nations to date.

The reports note that cumulative green bond issuance in Australia is AUD8.3bn and New Zealand NZD2.1bn for a combined total of AUD10.2bn in green bond issuance to date.

Issuance in Australia for the first half of 2018 was AUD2.6bn, up from AUD2.5bn for the corresponding period in 2017, a 5.3% increase.

Australia was the second largest cumulative source of issuance within the Asia Pacific region in H1 2018, second to China and twelfth in overall world rankings. In 2016 Australia recorded AUD1.1bn in green bonds, in 2017 AUD3.3bn.

New Zealand saw NZD200m issued in the first half of 2018.

Overall there are a total of eleven individual issuers from Australia, some of whom are multiple issuers, and two from New Zealand.

In what the report describes as a "challenging policy backdrop", Australia has emerged over the last four years as an example of world’s best practice in market development, with commitment from the major banks and a diversity of green bond issuances including from two state governments, property and tertiary sectors, and also high levels of certification. New Zealand’s first green issuance was in 2017.

Notwithstanding the positive directions, both nations are yet to effectively harness sufficient capital allocation to generate the volume of green infrastructure investment required to meet international mitigation and emissions commitments, whilst improving domestic climate adaptation and resilience.

Both the reports released today support the two countries’ respective transitions to a low-carbon economy, meeting the growing demand for green investment opportunities - including green bonds - and facilitating greater engagement between project owners and developers, and institutional investors including asset managers and superannuation funds.

The Green Infrastructure Investment Opportunities Australia & New Zealand report also explores low carbon infrastructure opportunities on a sector-by-sector basis and is a first of its kind for Australia & New Zealand, identifying over 400 projects and assets (360 and 62 respectively) that could be considered green and qualify for refinancing, additional financing, or new financing, in the near and medium term future.

Almost half the projects included in Infrastructure Australia’s Infrastructure Priority List 2018 meet international investor definitions of ‘green’ although they are not always labelled as such. Similarly, just over 40% of New Zealand projects in the Australia and New Zealand Infrastructure Pipeline (ANZIP) could be considered ‘green’.

Projects aligned with international definitions of green include low carbon transport, renewable energy, sustainable water and waste management, and low carbon buildings. The infrastructure investment opportunities are explored in the GIIO report are based on these four sectors.

The Climate Bonds Taxonomy was used to identify eligible green projects under these four sectors. To help define the scope and volume of projects the following filters were also applied:

  • For low carbon transport - mostly major projects valued above AUD100m (in Australia) and NZD100m (in New Zealand)

  • For renewable energy - only renewable energy generation facilities above 50MW

  • For sustainable water and waste management - mostly major projects valued above AUD50m (in Australia) and NZD50m (in New Zealand)

  • For low-carbon or green buildings - only Green Star (mostly 6-star rated) certified projects

The production of the Green Infrastructure Investment Opportunities Australia and New Zealand report has been jointly sponsored by ANZ, Commonwealth Bank of Australia, CEFC, Macquarie Group, NAB and Westpac.

The Green Infrastructure Investment Opportunities Australia & New Zealand report is available here.

The Australia and New Zealand Green Finance Briefing is available here.

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