Welcome to the IFR Asia/LPC Australia ESG Debt roundtable. The event, held online on August 25, drew interest from around 300 market participants tuning in to the webcast. It brought together representatives from a borrower, a ratings agency, banks and non-bank lenders to discuss the trends and outlook for environmental, social and governance lending in Australia.
The country is joining the global boom in ESG financing. While still lagging major European markets that are at the forefront of this growth, instruments such as green and sustainability-linked loans have quickly gained broader appeal, with several high-profile deals achieving success.
A slew of borrowers from across industries and sectors in Australia have completed ESG financings. Earlier this month, AirTrunk converted its corporate loan of more than A$2.1bn into an SLL, marking the first such financing for a data centre operator in Asia Pacific. In August, supermarket chain Coles obtained bilateral SLLs totalling A$1.3bn, while developer Walker Corp signed green loans totalling A$2.39bn for two of its commercial properties.
The Royal Adelaide Hospital project raised the world’s largest combined green and social loan in the healthcare sector through a A$2.2bn borrowing in July, following close on the heels of Australian private hospital operator Ramsay Health Care, which wrapped up syndication of a A$1.5bn SLL in June.
According to Refinitiv LPC data, ESG loan volumes in Australia have surged to a record US$8.67bn in August, more than double the amount clocked for full year 2020. Of that, green loans made up US$3.15bn. ESG and green loan volumes in Australia made up about 27% and 29% of the respective volumes in Asia Pacific (ex-Japan).
Issuance of ESG bonds in Australia, comprising green, sustainability and social financings, stood at US$3bn as of the end of July. This made up a share of only about 3% in Asia Pacific (ex-Japan). All three categories – green, sustainability and social bonds – in Australia account for less than 10% of the regional tally.
Much of Australia Inc is hopping on to the ESG ‘bondwagon’ with a number of debut issuances in recent months. Supermarket chain Woolworths Group obtained a €550m SLB earlier this month, while a subsidiary of diversified property company Frasers Property Australia, represented by one of the panellists, priced a S$200m SLB. The company also landed a A$300m syndicated SLL in April.
Retail-to-chemicals conglomerate Wesfarmers issued the first SLB into the Australian medium-term note market in June, and engineering firm Worley tapped the European market in what was the first public SLB from an Australian company.
As a home to the world’s fourth largest pension market with A$2.9trn of retirement savings, Australia holds a lot of promise for ESG financings, which are poised for exponential growth in the coming years.
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