The Commonwealth Bank of Australia (CBA) recently played a role in supporting multinational property and infrastructure firm Lendlease’s second green bond issue in five months, as investors continue to increase their exposure to sustainability-linked projects.
The 10-year $300 million green bond issued late last month builds on Lendlease’s $500 million debut green bond issued in October last year. Both issuances were oversubscribed, demonstrating the strong appetite among investors for products that deliver positive environmental and social outcomes.
Supporting green developments
The funds raised will help Lendlease deliver green building projects that will lower carbon emissions, reduce the environmental impact of materials, and deliver health and well-being benefits. CBA acted as joint lead manager as well as green bond advisor on both transactions.
The successful issuance comes as investors continue to increase their holdings of financial instruments linked to environmental, social and governance (ESG) factors. Sustainable investment assets now account for US$17.1 trillion - or 1 in 3 dollars - of the total US assets under management, according to the Report on US Sustainable and Impact Investing Trends 2020 by the US SIF Foundation.
Looking ahead, in its Better Business Better World report, the Business & Sustainable Development Commission forecasts that sustainability can unlock at least $12 trillion in new market value globally by 2030.
Demand for sustainable finance a key factor
Both corporates and investors have sharpened their focus on ESG over the past 18 months. CBA says that Australian corporations recognise the opportunities to incorporate ESG factors in their business models as they transition to net zero, but they are also cognisant of the risks of staying on the sidelines.
"In the context of future challenges and opportunities, sustainability stands out as the most important, that’s what our clients are telling us," said Andrew Hinchliff, group executive Institutional Banking and Markets at CBA. "The opportunity can’t be overstated - transitioning to net zero presents huge investment and growth opportunities for business. Capital is already starting to differentiate between those who are moving and those who are lagging. Those who leave it too late risk being left behind, and could become stranded assets."
CBA has helped raise over AUD $1 billion in domestic sustainability linked loans and green loans to date. Back in October, when Lendlease issued its first green bond, investor demand was also cited as being very strong.
"Green bonds provide borrowers with access to a deeper pool of liquidity and investors with access to environmental, social and governance investment products that they are seeking, which ultimately can lead to better distribution and pricing," commented Anthony Hermann, executive general manager for Global Markets at CBA. "Corporate debt markets continue to demonstrate a constructive tone, with strong oversubscriptions supporting price tightening and upsizing of transactions."
The investor demand on both green bond transactions has helped issuers to increase their issuance volume.
"More than ever, investors are keen to have a good level of exposure to green-related products to support their environmental, social and governance commitments," added Hermann. "We know from recent discussions with investors that an increasing number have a good appetite for sustainability-linked bonds, with 39% even willing to pay a premium for this type of product."
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