CHEN When COVID-19 hit Australian shores in March, we thought the sustainable finance market may slow down considerably. Little did we know it would be anything but. Climate change has only grown as an issue. Week after week, investors have come out to announce how their funds are to be aligned with the Paris goal of net-zero emissions by 2050.

But what is interesting about the COVID-19 period is the growing interest in the social aspect of ESG, which has previously been a poor cousin of green and governance concerns. As a sustainability practitioner, it is good to see social issues gaining prevalence.

We have seen a net inflow to the asset class where there has been a net outflow in other asset classes, which speaks to investors’ appetite for ESG product. There is resilience in GSS [green, social and sustainability] bonds as they have traded well in disrupted markets.

VAGG ESG has certainly been topical in the equity market for a number of years. As a company that is connected to coal, we were not the eye of the COVID-19 storm but we are certainly the eye of the ESG storm. There have been more and more questions from investors every year, reaching a peak in February after Australia’s summer bushfires.

But the interesting thing is that investor focus became more near-term when COVID-19 hit. The issue around coal and ESG is a long-term financial risk, whereas COVID-19 presented near-term challenges for investors. As a result, the focus on ESG was almost zero for a period of 3-4 months. It is coming back now as we get into recovery phase, but certainly for a while investors were only focused on the near term.

We have been around for a long time and we treat ESG proactively through sustainability reports and disclosure on the long-term future of coal. Our update ahead of our recent bond deal focused on three things: a regulatory update, COVID-19 and the future of coal. There were no questions beyond this.

We know where the questions will be as we have had a few years of looking at the area. It is mostly focused on the future of thermal coal and what the transition away from it means for us.

Our job is about being on top of the market and where the industry is going, making sure we are aware of the long-term risks and communicating effectively with the investor base. The last thing we want to do is deny that it is a risk and then be in the position of being reactive. It is better to be on the front foot. Coal may be becoming a threshold issue for a minority of investors.

TRIGGELL ESG is a significant focus for the port and our owners. We have dedicated sustainability teams and report regularly on our initiatives and targets in this space.

We have just released our annual sustainability report, which maps out our strategies around the various aspects of ESG. They align to the UN SDGs [Sustainable Development Goals]. It is a constant focus for us, and there were noticeably more questions in this area through our last refinancing process.

GOLDING I agree with the comments made already. We have seen ESG growing as an issue over the last few years, particularly on the equity side but increasingly on the debt side, too. It is also creeping into the rating agencies as well.

We can see this naturally evolving into the bank and capital markets, including presenting opportunities for sustainability and sustainable finance. It will become a normal part of the credit process and less of a special feature going forward.

We saw our sustainability-linked loan as a huge positive during COVID-19 and we kept up all our efforts on sustainability. While we were focused on covenant and liquidity issues, one of the other things that went to our board was a set of sustainability targets and aligning with the requirements of the TCFD [Taskforce on Climate-related Financial Disclosures].

It would be a great outcome if these efforts reduce our interest costs by helping us achieve our margin incentive this year. But we see it as positive on any basis and believe the market will continue to grow.

MOMDJIAN Sustainable financing and sustainability more broadly continue to receive a great deal of focus internally and externally. We are receiving more targeted questions about sustainability, reflecting a clear increase in sophistication among market players.

Bank and bond investors haven’t stated an explicit preference between sustainability-linked and use-of-proceeds products.

In the context of COVID-19, where issuers require flexibility in how they are able to use liquidity and are slashing their capex budgets as a key countermeasure, there is greater scope for the issuance of sustainability-linked products than those with use-of-proceeds restrictions.

LEWIS We haven’t participated in a sustainability-linked debt product yet but I can see there is scope for it. The area that needs to be solved is the pricing of these products. If it is lower than like-for-like debt we have to get the conceptual buy-in from our clients, who are the end investors.

Participation also comes back to reporting requirements. I think it is helpful if there are controls in place over transition products, to give a bit more transparency as to how the funds are applied. It is quite limiting, though, if we are only able to look at ‘pure’ green assets.

We recently announced we will target net-zero emissions by 2050. Some clients are ahead of us with these goals and our progress will, to some extent, depend on the response across our entire client base. A transition vehicle that could work is a sustainable-infrastructure debt fund, dedicated to the cause – this would be far easier to manage.

DAVID We are very supportive of transition. We think it can help address the engagement issue. It is harder for a bondholder to engage with companies than a shareholder, just by virtue of the access available to them.

We need to strike the right balance between the amount of work that goes into determining what sort of thresholds are going to be targeted and the degree to which they are stretch goals versus being easy targets to achieve. From what we have seen offshore, though, it will be coming our way in the Australian market in the not-too-distant future.