In a global first, Monash University has raised A$218 million through a climate bond issued in the US private placement market to fund sustainable development projects across its campus network.
Climate bonds or green bonds are created to fund projects that will tackle climate change solutions. The Climate Bond will allow Monash to allocate capital raised to a portfolio of projects that are in line with the standards of the Global Climate Bond Initiative as well as with its own pledged transition to net zero emissions.
This comes just months after Victoria’s state government became the first government in Australia to issue its own green bonds raising A$300 million in a triple-A rated bond certified by Climate Bond Initiative that was snapped up by 17 investors.
It is the second time Monash has used the US debt markets to fund its capital works, having raised $150m in 2014 which was then invested into building accommodation for another 1000 students at its Clayton Campus, the first by an Australian university. The rent on that accommodation pays the interest and principal on those bonds.
Some of the development projects to benefit from the climate bond funding include a major new building targeting 5 Star Green Star Certification at the Clayton campus; reconstruction of the Caulfield campus library estimated at $43.4 million, more than $6 million in solar panel installations; and a $3.5 million external LED lighting project.
The President and Vice-Chancellor of Monash University, Professor Margaret Gardner said Monash’s investment in sustainable development had been prioritized in the University’s new environmental, social and governance policy statement and reflects Monash’s position as a global university.
“As a truly international university, Monash has a responsibility to provide strong and visionary leadership on sustainable development. We want our campus network to be exemplars of environmental, social and economic best practice,” Professor Gardner said.
In its recent market report Clean Energy Opportunities for Universities the Clean Energy Finance Corporation (CEFC) estimated Australian universities are paying as much as $700 million in energy costs each year, producing annual emissions of more than one million tCO2-e.
Energy efficiency and greenhouse gas emissions are an increasing focus of university sustainability plans, with growing awareness that investments in clean energy technologies on campus can help reduce energy bills, decrease emissions and demonstrate leadership in research and innovation.
There has been growing acceptance of the issuance of green bonds in Australia, providing funding for environmentally sustainable projects while still offering economic returns to investors.
According to the CEFC, the Australian green bond market has grown from zero in 2013 to $600 million in issuances in 2014 and $1.2 billion in 2015, bringing with it more than 100 institutional investors.
CEFC, which revealed it had made a $20 million cornerstone investment in the bond, said it created an important new asset class for the financing of clean energy projects in the university sector, and confirmed Monash University’s leadership role in this area.
For the CEFC, this marks their third climate bond investment this year, following earlier commitments to Westpac’s first climate bond, and to FlexiGroup’s Australian-first climate bond securitisation linked to solar PV and renewable energy assets.
Westpac’s launch into the green bond market follows on from NAB, which in December 2014 became Australia’s first lender to to issue a certified climate bond of $150 million, to fund a portfolio of 17 wind and solar projects.
In October, Impact Investing Australia launched the groundbreaking Benchmarking Impact: Australian Impact Investment Activity and Performance Report 2016 report. It revealed that green bonds issued by major Australian banks dominated an increase in dollar value of investments in FY15.
Richard Lovell, debt markets lead at CEFC, said that financial institutions like CEFC, were committed to work alongside organisations like Monash to help catalyse further investment options to support clean energy projects.
“Through our involvement in this climate bond, we are highlighting the potential of this new asset class as an important source of capital for Australian and offshore investors,” Lovell said.