BNP Paribas today announced the successful issuance of a series of equity-linked green bonds totaling A$140million, subscribed by the Clean Energy Finance Corporation (CEFC), First State Super (soon to be renamed Aware Super) and QBE Insurance (QBE). The bonds are linked to the first forward-looking climate index in Australia, the Australian Climate Transition Index (ACT Index) and the proceeds will be used to invest in a portfolio of green projects.
The ACT Index uses five “dynamic” climate scenarios, which will continue to be adjusted to reflect future regulatory, technology and social environmental changes. It was jointly developed by BNP Paribas with ClimateWorks Australia, ISS ESG and The Centre for Quantitative Finance and Investment Strategies at Monash University. The index seeks to identify companies likely to perform well in a world undergoing a 2°C transition and to continue to play a part of the Australian economy in a 2°C future. This includes 100 Australian companies that will support the transition, adapt and thrive, or be least affected by the expected changes.
Pascal Fischer, Head of Global Markets for Asia Pacific at BNP Paribas said: “Having the long-term support of these three major Australian investors indicates a clear willingness and readiness for action among critical sectors in Australia. We are pleased to support climate transition efforts in Australia and bring our European expertise to the development of this innovative climate index.”
Anna Skarbek, CEO of ClimateWorks Australia said: “This project draws on our research and modelling of dynamic climate transition scenarios, developed for our recently published Decarbonisation Futures report. The index uses a forward-looking approach, recognising that it is the future transition pathways that matter most to stabilising climate change. We are pleased that this index now enables investors and Australian companies to align their strategies with evidence-based climate transitions.”
Ian Learmonth, CEO of the CEFC said: “The ACT Index is an exciting market leading development, mobilising the increasing scale of impact investment to benefit Australian companies leading the emissions transition. As the first forward-looking index in the Australian market, it gives investors the capacity to analyze the climate risk profile of their ASX portfolios. At the same time, it gives emissions-focused companies access to a greater pool of capital, a powerful incentive to accelerate decarbonisation efforts.”
Liza McDonald, Head of Responsible Investments at First State Super said: “Our research shows that climate change poses one of the most significant long-term risks to our portfolio; and our members’ long-term financial future. As Australia’s second-largest industry super fund, we have committed to taking real and meaningful action to respond to climate change and ensure we continue to deliver strong long-term returns for our members, while supporting our community to prepare for a low-carbon future. The ACT index is an exciting and innovative initiative that we believe will help to deliver the sort of change we need now to secure a more sustainable financial future.”
James Pearson, Head of Impact and Responsible Investments for QBE Insurance said: “As an international insurer, we well appreciate the material risk that climate change presents for our customers and our business and the importance of supporting the transition to a lower carbon economy. This investment fits well with our efforts to support that transition and we look forward to applying the index methodology for our own investment purposes, in the future.”
Marija Kramer, Head of ISS ESG said: “We are delighted to contribute to this innovative project by providing ISS ESG’s market-leading data and analysis, in the context of the dynamic climate transition scenarios, to determine the extent to which Australian companies are prepared to transition to a low carbon economy, and to the mitigation approach related to these transition risks and opportunities.”
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United Overseas Bank Limited (UOB) and BNP Paribas today announced they acted as Joint Green Structuring Advisers and Coordinators for a green club loan facility of US$200 million to Agricultural Bank of China Limited (ABC), Singapore Branch. This is the first green club loan facility established under ABC Singapore Branch’s Sustainable Financing Framework.
The loan proceeds will be used to finance green projects that adhere to the green financing principles, guidelines and standards referenced in the Sustainable Financing Framework, which BNP Paribas and UOB jointly developed for ABC Singapore Branch.
Ms Chaoni Huang, Head of Sustainable Capital Markets for Asia Pacific, BNP Paribas, said, “Chinese banks are recognising the importance of green finance to their own sustainable growth in this region. With the support of the People’s Bank of China and innovative policy frameworks in Singapore, forward-thinking institutions like Agricultural Bank of China Singapore Branch are developing frameworks to guide financing to sectors that can make a big difference to the fight against climate change. BNP Paribas is pleased to play a leading role in such a transaction, which demonstrates that sustainable finance is evolving fast in Asia.”
Ms Lim Lay Wah, UOB’s Global Head of Financial Institutions Group (Banks, Non-Bank Financial Institutions and Financial Sponsors) said, “UOB has been working with our clients and partners across industries to promote and to implement sustainable business practices for the benefit of various stakeholders. Our coordination and arrangement of the green club loan facility demonstrate UOB’s responsibility and commitment to drive collaborative efforts in the financial sector to ensure the long-term economic, social and environmental well-being of the community at large. Our support also reinforces our longstanding relationship with ABC, one of China’s leading banks.”
The US$200 million green loan to ABC Singapore Branch is the first tranche of a US$465 million club loan facility, of which BNP Paribas and UOB are also Mandated Lead Arrangers, together with five other banks. UOB also acted as the Agent in the transaction.
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A BNP Paribas survey of asset managers and owners incorporating ESG strategies finds that the majority of investors in the Asia Pacific region are aligning their ESG investment framework with the UN Sustainable Development Goals (SDGs). Data and technology costs remain barriers to ESG integration, but investors are optimistic, with over half predicting up to 75% of their funds will be allocated towards ESG by 2021.
The key findings of the ESG Global Survey 2019 include:
- Stronger commitment to ESG investment: While Asia Pacific respondents lag behind global counterparts in terms of asset allocation into ESG (15% vs 18% globally), they are more optimistic about allocation of funds in the future, with 55% of Asia Pacific respondents expecting to incorporate between 50% – 75% in ESG funds in two years’ time, compared to 49% globally.
- The outperformance factor: ‘Improved long-term returns’ was ranked as the top reason for ESG investment for Asia Pacific respondents, with almost two-thirds (57%) ranking this as a key reason compared to 52% globally. 70% of Asia Pacific respondents expect their ESG portfolios to outperform over the next five years, while 60% of global respondents do so.
- The great disclosure: While returns are top of mind for Asia Pacific respondents, more of them (62%) expect an increase in ESG disclosure requirement over the next 12 months compared to only 59% globally.
- New jobs in ESG investing: The growing prevalence of ESG investing has led to a number of new roles requiring relevant expertise. Asia Pacific asset owners and managers are more likely to hire new ESG talent from non-traditional backgrounds (38% vs 29% globally), train incumbent teams in ESG principles and best practice (46% vs 40%) and hire or increase numbers of external ESG consultants/ specialists (48% vs 34% globally).
- The UN SDGs are a new compass: More Asia Pacific respondents (76%) indicated that their organisation aligns investment framework mainly by setting SDG-related revenue targets for investee companies with the UN’s SDGs than globally (65%).
- Tactical impact: Globally, the highest number of respondents indicated that investing in companies based on their ESG profiles have had the greatest impact on their sustainable strategy (45%). In Asia Pacific, respondents seem to be more convinced by benchmarks, where 42% of respondents indicated that benchmarking funds against an ESG benchmark have had the greatest impact, compared to only 37% globally.
- Data and technology costs are barriers: As was the case in 2017, data remains the biggest barrier – ahead of costs, a lack of advanced analytical skills and greenwashing risks. One-quarter of respondents cite technology costs as a barrier to ESG integration (doubling from 16% in 2017).
Madhu Gayer, Investment Analytics & Sustainability Manager, BNP Paribas Securities Services, said: “While Asia’s optimism in terms of asset allocation to ESG may not come as a surprise as multiple Asian markets, not least China, have pushed for increased regulation surrounding ESG disclosures, challenges such as transforming disparate data sets into actionable insights and technology costs hinder progress.
“As a bank committed to building a sustainable future, we are pleased the BNP Paribas survey identifies these pain points where we can work together to solve”
About the survey:
BNP Paribas surveyed 347 institutional investors incorporating ESG strategies representing about USD 23 trillion in assets under management. Across Asia Pacific, 110 asset owners and managers were included from China, Hong Kong, Japan, India, Malaysia, Singapore, Australia and New Zealand.
To access the full report, please visit: https://securities.bnpparibas.com/global-esg-survey.html
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