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Australia sees $7bn flow to inaugural green bonds

By Rhea Nath
3 minute read

The debut of Treasury’s green bond was met with a warm reception from fixed income investors, receiving over $22 billion in bids.

The Australian Office of Financial Management (AOFM) has announced the launch of Treasury’s debut green bond, which saw an issue size of $7 billion in face value terms.

The oversubscribed debut saw bids total $22.89 billion at the final clearing price from 105 investor institutions across Australia, Asia, Europe and North America.

It is expected to settle on Friday, 14 June 2024.

The green bond, maturing in June 2034, will pay a coupon of 4.25 per cent.

Initial price guidance for the issue is a spread of -5 to -1 basis points to the implied bid yield for the primary 10-year Treasury Bond futures contract.

As previously announced by the AOFM, Commonwealth Bank of Australia, NAB, Deutsche Bank, UBS AG Australia Branch, and Westpac served as joint-lead managers for the issue.

NAB and UBS AG Australia Branch acted as joint structuring advisers for the establishment of the program.

The AOFM also indicated an issuance of this bond by tender will be considered after 30 June 2024.

The issuance follows a four-week roadshow in April that saw one-on-one meetings with investors, both in-person and virtual, across two teams travelling across Australia (Sydney, Melbourne, and Brisbane) and overseas to Singapore, Japan, the UK (London), and Europe (Paris, Frankfurt, Switzerland, and Milan).

Additionally, there were two weeks set aside for virtual meetings, to be offered to investors in North America and other locations, and to cover investors missed in the in-person meetings.

An interdepartmental green bond committee will endorse the eligible green expenditures to be financed by the bonds, Treasury confirmed, although not all of the government’s spending on programs with climate change and environmental objectives will be financed by these green bonds.

In a statement, Treasurer Jim Chalmers said the demand for the bond "confirms Australia is a go‑to destination for international green capital."

"This is why encouraging and facilitating more private sector investment into the move to net zero is such a key part of the Albanese Labor Government’s Future Made in Australia plan and last month’s Budget," he said.

"The green bond gives investors from around the world the opportunity to back government supported projects in Australia which are crucial to climate change mitigation, climate change adaptation and improved environmental outcomes."

Chalmers elaborated the money raised from the green bond will go towards projects like green hydrogen hubs, biodiversity conservation, and clean transport.

The issuance of the Treasury bonds follows a number of existing green bonds issued by Australian states, such as Victoria in July 2016, and more recently, Western Australia in June 2023.