The Australian market for socially responsible investments broadened on Monday with a very well received A$125m debut three-year Sustainability bond from Bank Australia that underlined the growing appetite for these products. The Victoria-based financial co-operative, rated Baa1/BBB (Moody’s/S&P), attracted demand from investors who had not previously participated in three-year FRN offerings from other Australian mutual banks.
First-time investors pushed the order book above A$250m which enabled the note to be enlarged from an indicative A$100m minimum issue size and to price inside 133bp area guidance at three-month BBSW plus 130bp. The bond, arranged by sole lead manager ANZ, will fund loans that meet three of the United Nations’ 17 sustainable development goals (SDGs), to reduce inequality, to build safe and sustainable cities and communities and to restore and sustain terrestrial ecosystems.
ACU was the first Australian dollar senior unsecured Green, Social or Sustainability bond to come with a slight premium to standard levels having benefited from the huge expansion in demand for responsible investments and a lack of suitable bond offerings. The recently released Responsible Investment Benchmark Report 2018 showed A$866bn is being managed as responsible investments, for a 55% share of all professionally managed assets in Australia, a 39% increase from A$622bn in 2016. Core responsible investments include positive screening for sustainability investing, community finance and corporate engagement, and negative screening away from tobacco, weapons, gambling, among other things.
Macquarie University, rated Aa2 (Moody’s), is set to follow ACU with an Asian and Australian roadshow for a Sustainability bond debut, having begun meetings on August 16 arranged by HSBC and NAB. In the state government sector New South Wales Treasury Corp plans to issue a debut Sustainability bond, expected in the second half of 2018, while other banks, universities and corporates are working towards inaugural offerings. Offshore, Australia and New Zealand Banking Group (A3/AA-/AA-) printed a €750m (US$868m) five-year sustainable Eurobond issue in February 2018 that created an alternative to the bank’s Green bond template.
Source Nasdaq