Appetite for Green Investment Grows
Appetite for Green Investment Grows
Contact Energy is getting a lot of attention for its pioneering green borrowing programme, certified by Climate Bonds Initiatives (CBI) and launched in mid-August. There are expectations this will lead to further similar issues in New Zealand as the appetite for socially responsible investing and meaningful action on climate change grows.
Green bonds are created to fund projects or assets that have positive environmental and/or climate benefits. Most green bonds that are issued worldwide are green “use of proceeds” or asset-linked bonds. This means investors that buy these green bonds can be confident their investment is linked to assets that will benefit the environment.
James Kilty, Contact’s Chief Generation and Development Officer says the certification reflects the low carbon nature of the company’s generation assets. “Over 80% of Contact’s electricity is produced from renewable sources and for us a responsible, innovative and sustainable approach to managing these precious resources is key.”
In the case of Contact Energy, its $1.8 billion programme allows debt investors and lenders to access a broad range of certified green debt instruments, including committed bank facilities, commercial paper and retail bonds issued by the company. The programme has been certified by the Climate Bonds Initiative (CBI), one of its largest certifications to date.
Louise Tong, Head of Capital Markets and Tax at Contact, said all future funds raised by Contact are intended to be included in the Green Borrowing Programme. In addition, there is potential for the company’s existing hydropower generation assets in Clyde and Roxburgh to be included in the programme in future.
“We’re part of a Technical Working Group associated with CBI that’s trying to determine what appropriate hydropower criteria should be. Once the criteria are determined, we’ll bring our hydropower assets into the programme. This would allow Contact to include the new debt issuance planned for next year in our Green Borrowing Programme.”
“As well as shining a light on Contact’s broader sustainability initiatives, the Green Borrowing Programme is an opportunity to attract a broader pool of “green” investors who appreciate the importance of low carbon energy in addressing the challenges presented by climate change” she said.
Contact is actively focusing on the role it can play to help New Zealand transition to a low carbon economy. James Kilty notes, “There’s also a great opportunity to do more to tackle climate change in NZ, particularly in the transport sector and energy-intensive manufacturing businesses where’s there’s an opportunity to convert to cleaner electricity, backed by renewable generation, and we’re keen to work with industry and customers to help bring about this change.”
Katharine Tapley, Head of Sustainable Finance at ANZ Bank who assisted Contact to establish its Green Borrowing Programme, said it has been a catalyst for sparking significant interest from other New Zealand corporates.
“Following the Contact programme being launched, we’ve had a lot of enquiries about the potential for other green bonds to be issued into the New Zealand market,” she said.
She noted that, while the green debt market in New Zealand is lagging Australia and Asia, there is opportunity given the focus on renewable energy, energy efficiency and sustainability more broadly.
Internationally, there has been enormous growth by investors and issuers in green bonds over the past year. At the end of the first quarter of 2017, green bonds issuance stood at $US21.76 billion, up nearly 42 percent from the same period last year. The Organization for Economic Co-operation and Development (OECD) estimates that the green bond market could increase by $US4.7 - $US5.6 trillion by 2035.
The benefits to issuing green bonds include:
1. Increased transparency about carbon reduction.
For Contact this means having assets that meet scientifically-based emissions criteria. Contact has committed to regular disclosure and reporting in relation to those criteria.
2. Funding for sustainability initiatives
Green bonds can provide capital for sustainability-related projects. In the case of Contact, this includes refinancing exiting assets, but a number of other New Zealand companies are considering green bonds to finance projects ranging from water efficiency initiatives through to green-rated buildings.
3. Demand from private investors
For investors, green bonds allow them to invest in environmentally-friendly products and services – this segment of investment funds is growing significantly, reflecting the increased focus on socially responsible investment.
4. Enhances company reputation
As Contact Energy is experiencing, when companies introduce green borrowing, they get a lot of attention. This allows companies to share their stories about the other reputational and financial benefits of sustainable business.
Short video on green investment and
the Green Borrowing Programme featuring members of the
Contact and ANZ team:
Further information and detailed documentation relating to the Green Borrowing Programme: https://contact.co.nz/greenborrowing