Issuance diversity

National Australia Bank (NAB) is Australia’s most diverse issuer of labelled bonds, including in green, social and sustainable development goal (SDG) format. Issuing a wide range of such product brings its own challenges.

Can you give some colour on how NAB is reporting impact, around bond use of proceeds in particular? What measurement tools are you are using?

JENKINS We have broad bank-wide initiatives as well as reporting on the green and social bonds. With regard to the bonds, impact reporting is front and centre for investors at the moment. The first question we are asked is what impact reporting we are doing and whether we will provide it on a regular basis.

Over the last three or four years, the green-bond space has been converging towards a key set of impact metrics. Initially this was informed by the harmonised framework for impact reporting developed by a number of supranational, sovereign and agency issuers back in 2015.

We have taken this as our guide as an issuer of green bonds. We look at the metrics, which are typically around avoided greenhouse-gas emissions. In the case of renewable energy it’s quite clear: annual generation times the various grid intensity factors arrives at an avoided greenhouse-gas emissions number.

For other categories of investments, for example green buildings, we look at relative emissions intensity or reduction in emissions. In the low-carbon transport sector, we focus on avoided emissions through modal shift from fossil-fuel-intensive transport to use of low-carbon transport options.

Everyone working in the social-bond or SDG bond area is facing the same issue. At NAB, we have already issued one social bond. This is clearly aligned to SDG 5 – gender equality – while our green bonds are mapped to a number of specific SDGs which will be relatively easy for us to report on. To date they have been mainly mapped to SDG 7, on clean energy, but also to SDG 9 and SDG 11 – which are industry, innovation and infrastructure, and sustainable cities and communities.

We are taking guidance from both the International Capital Market Association principles and the taxonomy developed by Dutch pension fund, APG. We will continue to develop our impact reporting in line with these developing standards and frameworks. Investors and the world want comparability and the whole idea is to arrive at a common or harmonised set of reporting metrics.

Do you report annually on the impact of your labelled bonds?

JENKINS We started in 2017, although we have a bit of a lag from our financial reporting cut-off date to when we can publish the impact report. Last year it took us several months to complete given the challenges involved. The key challenges are confidentiality and sourcing the appropriate data from clients and other sources, then the verification of the methodology used to determine impact metrics and the impact data.

We also use an independent third party to check our impact reporting and verify that the methodology used is consistent and reasonable. We have used an audit firm to complete assurance over use of proceeds before finalising and publishing the annual report.