The money is on the move

1 Central Park, NSW, Frasers Broadway 5 star Green Star - Multi Unit Residential As Built v1

27 May 2021

A word from Davina Rooney, CEO, Green Building Council of Australia

There may not have been much funding for green building projects in the recent federal budget. But to gain momentum, the money markets must move. And move they most certainly have.

The green bonds market passed the magic $US1 trillion milestone last year – a fact that even surprised green bonds champion Sean Kidney.

The CEO of Climate Bonds Initiative joined us for TRANSFORM in March, telling our audience that appetite for green bonds has grown exponentially and “this is not what we expected”.

But the investor has spoken and is increasingly peering at their portfolios through an ESG – environmental, social and governance – lens.

In his most recent annual letter to the world’s business leaders, Larry Fink, CEO of the world’s largest money manager BlackRock, noted that “climate risk is investment risk”. But it is no longer enough to avoid climate risks. Investors want climate winners on their books and, as Sean Kidney says in this issue of Green Building Voice, sustainability makes investors sticky.

Investor appetite is just one of the drivers for green finance. Governments around the world have been stepping up their support for green projects through regulation and fiscal spending – and this has intensified since COVID-19. According to Global Recovery Observatory, governments have allocated a massive US$409 billion – 20 per cent of recovery spending – has been allocated to projects that will build back better.

Where once building a green portfolio was a challenge – Larry Fink has called it a “painstaking process” – a proliferation of green products and advances in technology and data make it much easier for investors to lean into sustainability, and for companies to acquire green loans.

We’ve seen a slew of recent announcements that are signs of the times. Ingenia, currently a partner in our Early Access Program for Green Star Homes, acquired $75 million from the Clean Energy Finance Corporation in February to boost its carbon reduction and energy initiatives.

In March, Lendlease completed the second of two oversubscribed green bonds in just five months that have raised $800 million. Lendlease is now the largest non-bank ASX listed issuer of green bonds to date, and will use the proceeds to deliver green building projects – like Darling Quarter featured in this issue of Green Building Voice – and to support ambitious net zero commitments.

And then in April, Frasers Property Limited secured its fifteenth green loan. An impressive 45 per cent of the company’s Australian facilities are now backed by sustainability-linked loans, with the pricing tied to Frasers Property’s performance against its net zero sustainability target.

These are just a handful of very recent examples that show the market is moving in a clear direction – and our members are at the front of the pack.

Despite the disruption of COVID-19, the climate challenge is not going away. The OECD estimates that almost US$7 trillion a year will be needed by 2030 alone to tackle climate change, and the World Economic Forum says a stubborn $2.5 trillion-a-year financing gap stands in the way of us meeting the UN’s Sustainable Development Goals.

But a wave of capital about to wash up on Australia’s shores – and the work of GBCA members has never been more critical so our industry and Green Star are ready to ride the waves.