FlexiGroup introduces Australia’s first green bonds

A landmark issue of green Asset Backed Securities, a type of bond, has been made by Australian based credit finance group FlexiGroup, raising $50 million to refinance residential rooftop solar systems in the first issue of their type in Australia.

The issue – also described as the world’s first “Climate Bond certified securitised Green Bond” –  was well received by investors, who priced it five basis points better than a non-green certified component that was offered at the same time as part of a $260 million raising.

“This is exciting … a pricing benefit for green bonds right in front of our eyes!” said Sean Kidney, the Australian founder and CEO of the Climate Bonds Initiative.

“Australia is blessed with abundant sunshine and high penetration of rooftop solar systems. Despite some recent clean energy policy uncertainty, the fundamentals are strong for continued growth in solar.”

“Flexigroup’s green ABS deal indicates a pricing benefit arising from the green label – this is exciting news for the market and potential issuers out there … and could well be a sign of things to come for green solar bonds.”

The Clean Energy Finance Corporation invested $20 million in the transaction, which CEO Oliver Yates described as a “significant milestone” in the development of the Australian green bond market and an important demonstration of its potential.

“This is quite unique,” Yates told RenewEconomy. “Banks will now be looking for a “green story” to satisfy investment demand and better pricing, and this will encourage more offerings.

“Institutional investors who have reduced their exposure to the fossil fuel sector are looking for new investment avenues linked to clean energy.

“Green bonds can provide solid returns for investors wanting to contribute to positive climate change solutions. Other issuers can attract green investment support by also identifying and separating investment opportunities related to clean energy assets.”

© 2016 Solar Choice Pty Ltd

Giles Parkinson