After a record-breaking year in 2014, which saw issuances triple, lawyers are anticipating an even bigger year for climate bonds in 2015.
Climate bonds (or green bonds) are bonds where the proceeds are ear-marked for environmental or social purposes.
“Investors who invest in that bond can know that not only has an independent verifier come in and looked at the projects, but that because they have the certification from the Climate Bonds Initiative, that the bond meets a separate set of independent objective standards in terms of what makes it green,” said Anne-Marie Neagle, partner at King & Wood Mallesons who helped to facilitate Australia’s first green bond transaction in 2014.
Neagle and her team advised the National Australia Bank Limited (NAB) on the first Australian transaction to be certified by the Climate Bonds Initiative. NAB will use the $300 million to fund a portfolio of 17 wind and solar energy farms.
Neagle expects that this growth will continue in 2015.
“If you look at the curve from 2013 to 2014 in terms of green and climate bonds, I think that curve is going to continue because as you see an institution like the National Australia Bank, which is incredibly reputable as a financial institution in Australia, making a first move like this will swell the interest in other Australian institutions to investigate these sorts of things. Certainly we have heard a lot of noise and interest in these sort of projects since that deal.”
In her view, the growth is due to an increased interest in environmental issues and an increased access to finance.
“I think that corporate social responsibility is a big issue, as is a diversified investment base. Climate change issues are front of mind for institutions for all sorts of reasons but also I think the bond markets themselves and access to finance is opening up,” she said.
Other headline-making transactions that contributed to the whopping year for climate bonds include Toyota’s $1.75bn bond program which was used exclusively to finance hybrid cars like the Prius, making it the first climate bond in the auto finance industry.