Westpac joins the Climate Bonds Initiative as part of its AUD25 billion lending commitment to climate change solutions
01 June, 2017
Westpac Banking Corporation has joined the Climate Bonds Initiative Partners Program effective immediately and set ambitious targets to facilitate up to AUD3 billion in climate change solutions by 2020 including green bond issuance and arrangement. This is part of the bank’s commitment to increase its target for lending to the sector from AUD6 billion to AUD10 billion by 2020 and AUD25 billion by 2030.
Westpac Institutional Bank Head of DCM & Syndicate, Mark Goddard announced the new partnership and said the AUD25 billion target is the strongest commitment to climate change solutions by an Australian financial institution to date.
“We believe significant growth in the AUD climate bond market is inevitable.” Mr Goddard said, “The Australian Government has agreed a target of reducing emissions to 26-28% below 2005 levels by 2030 - the bond market will play a role in this transition.
“At the same time Australia’s institutional investors are some of the strongest advocates for action to address climate change.
“Partnering with Climate Bonds provides new opportunities for us to work together on global green bond standards, harmonisation and market based solutions to meet climate finance goals.”
Richard Salmon, Westpac’s Director Balance Sheet Funding said: “The investor base for AUD climate bond issuance continues to expand, including consistent interest from offshore buyers. While onshore, asset managers have set up dedicated ESG funds or set targets for green funds under management.”
Westpac issued its first Climate Bond in May 2016, raising AUD500 million to fund renewable energy and low carbon commercial property. Since then, the bank has extended its target to facilitate up to AUD3 billion by 2020, through green bond issuance and arrangement, given the broader opportunity for the financial markets to support climate change solutions.
According to Climate Bonds Chief Executive Officer Sean Kidney, Westpac is responding to the opportunity as the Australian market continues to see a diverse range of Certified Climate Bonds emerge.
“Since 2015 the AUD market has evolved rapidly. We’ve observed multiple climate bonds issued from the major banks, several state governments, a listed property developer, a leading tertiary institution and several award-winning green Asset Backed Securities (ABS),” Mr Kidney said.
“We have seen the Australian market for climate and green bonds evolve firstly with the banks and semi government issuers. This has allowed investors to support climate related investments without compromising on the credit risk of the issuer.
“Local and international investor confidence in the use of funds intended to address climate change has been fundamental to both the domestic market’s credibility and its ability to reach sufficient scale.
“While scale and volume of issuance is still only beginning in Australia, the market globally is really taking off. January to March 2017 has seen a surge in Certified Climate Bonds with 15 issued for the quarter to the value of USD4.4bn, which is the best ever market performance to date. This result represents an increase of 275% on the USD1.6bn of certified bonds issued in Q4 2016.
“China is emerging as a major issuer of green bonds and is set to become the single largest green market in the world. In turn this will influence investment directions in Australia.
“A robust domestic green bond market, characterised by best practice, multiple participants, institutional investor confidence & mainstreaming of ESG commitments will be well placed in the years ahead to benefit from the coming expansion in climate and green based finance, not only in China but throughout Asia,” he said.
 This target will be updated every three years as Westpac revises its Climate Change Action Plan to reflect changes in technology, policy, climate science and investment assumptions and as our approach evolves.