Australia achieves rare 'greenium' with first green bond issue
The Australian government's first green bond was a success, with ESG focused investors willing to pay a premium relative to ordinary government bonds to secure a slice of the debt issue.
Australia on Tuesday joined a club of 30 national governments who have issued green bonds. At a little more than three times oversubscribed, the $7 billion 10-year Treasury bond issue was hailed as a success by the Australian Office of Financial Management (AOFM), which ran the transaction on behalf of Treasury.
AOFM CEO Anna Hughes estimated that the bond was priced at around a 2% premium to an identical non-green government bond, indicating that investors were prepared to pay more for ESG exposure. However, this “greenium” was less than the 5bps that some investors were expecting the bond to attract.
Hughes said the issue’s popularity was a huge vote of confidence in the government’s climate change mitigation and adaptation program. “We were very happy with the outcome. The amount of domestic investors coming to this deal was very encouraging - we had 15 new institutional investors who hadn’t participated in Australian government bonds,” she said.
The bonds were carefully allocated among various groups of investors, including domestic and international, ESG and general fixed income strategies, and long-term investors and so-called “fast money” which is likely to quickly turn the bonds over into the secondary market.
