Australia has commanded a premium for its first sovereign green bond, as investors are drawn by the nation’s credible framework and plan to issue more debt.
The nation attracted more than three times the A$7bil (US$4.7bil) worth of debt maturing in June 2034 at the final clearing price, as indicated by the Australian Office of Financial Management. The average yield is 4.295%, about 1.5 basis points below the nation’s benchmark May 2034 bond, suggesting investors were willing to pay a premium to hold green debt.
Demand for the issuance was likely driven by Australia’s ambitions and the increasing importance of environmental, social, and governance considerations on the investor side. The issuance comes as governments and corporates flock to sustainable finance markets this year in a bid for cheaper funding costs, making substantial premiums some pay to hold green debt rare.
Australia plans to issue more green debt with different maturities in the future, utilizing the proceeds for accelerating the nation’s energy transition. The green bond framework excludes nuclear power and aligns with international norms, making it credible and impactful, according to a second-party opinion from Systainalytics.
While Australia has emissions reduction policies and national targets deemed insufficient by Climate Action Tracker, the issuance represents a step in the right direction according to industry experts. Australia remains among the highest per-capita carbon emitters globally and aims to meet its net-zero target with the development of new natural gas fields.
The initiative is crucial in showcasing Australia’s commitment to sustainable finance, with investors showing strong interest in supporting the nation’s green efforts. The successful issuance of Australia’s first green bond demonstrates the growing trend towards environmentally conscious investing on a global scale.
