NAB launches world’s first mixed green building bond

17th February 2018 by CMIA

The National Australia Bank has launched a $2 billion mortgage-backed bond that features a climate-conscious component, marking a world first in mixed bonds.

The residential mortgage-back securities (RMBS) – a bundling of mortgages that are sold as a package by a bank to investors – also includes Australia’s first ever Climate Bond Certified green component, comprising $300 million of NAB mortgages for low-carbon buildings which meet the Climate Bonds Standard Criteria.

Green bonds, also known as climate bonds, are a segment of financial instruments issued by companies looking to demonstrate their ethical and social responsibility credentials through their investments.

“Green bonds allow an issuer to demonstrate they are proactively preparing for the long-term challenges of global warming,” HSBC’s Greater China chief executive Helen Wong said.

“Over the long term, this could well create an advantage in terms of valuation and business prospects, attracting investors with growing demand for assets that align with environmental, social and governance (ESG) principles.”

NAB said its latest bond had attracted investment from socially responsible funds as well as mainstream investors, and was oversubscribed to nearly double its target.

“We are thinking outside the box when it comes to helping our customers back sustainable assets and act on environmental issues that are important to them, and to Australian communities,” said Mike Baird, the former NSW premier, who now works for NAB.

“It’s incumbent on us as a bank to play a part in addressing the bigger issues facing society, including Australia’s transition to a low carbon economy; this transaction is another small, but important, step in that journey,” he said.

The bond is also the world’s first RMBS containing a pool of both green and non-green securities and has been rated AAA by Moody’s Investors Services and Aaa by Fitch Ratings.

It comes as the global green bonds market passed the $US100 billion issuance benchmark for the first time last year.

The green bond market is forecast to grow rapidly in 2018, with HSBC predicting the sector could expand by up to 50 per cent year on year, although S&P Global has forecast a more restrained 30 per cent year on year on growth as tightening of US monetary policy hobbles the sector’s pace.

S&P Global Ratings credit analyst Noemie De La Gorce listed low carbon buildings, such as those in NAB’s bonds, as one of the major areas supported by investment.

“Low-carbon technologies in the energy, transport and buildings sectors are likely to remain the main beneficiaries of green investments, reflecting the importance of emissions reductions in these sectors in the fight against climate change,” Ms De La Gorce said.

HSBC head of global banking for Australia, Hamish Kelly, said there were a number of factors behind this fast-paced growth.

“We’re seeing innovation and diversification of bonds on the demand side, such as clean tech, or low-emissions,” Mr Kelly told Fairfax Media.

“We’re also seeing positive drivers on the supply side as more companies look to enter this market.”

Source: http://www.smh.com.au/business/banking-and-finance/nab-launches-world-s-first-mixed-green-building-bond-20180213-p4z06i.html