Monash returned to the USPP market in December 2016, having debuted with a US$150 million, 25-year transaction just over two years previously. Its latest deal was for A$218 million (US$167.3 million) equivalent spread across four tranches, three maturity points and two currencies (see table).

SOURCE: COMMONWEALTH BANK OF AUSTRALIA FEBRUARY 2017

David Pitt, senior vice president and chief financial officer at Monash in Melbourne, says the university is heavily involved in sustainability initiatives in both infrastructure and academics, including through its Sustainable Development Institute. It is focusing on high-quality, energy-efficient assets as it grows its “world-class” infrastructure.

Pitt says: “The climate bond represents international best practice in matching capital raising with sustainability initiatives. It reinforces Monash’s position as a leader in the domestic and international finance and investment sectors.”

The ongoing capital-development plan enabled Monash to find suitable assets to finance via a climate bond, but Pitt says a continued commitment is required to make the transaction work.

“Issuing a Climate Bond Initiative-certified bond means tougher tests and a range of constraints – it certainly means we have to maintain high environmental standards when we build. We clearly identified the way proceeds would be spent.”

Sustainable investment is becoming more prominent among investors globally, and Pitt says Monash’s green USPP was an eye catcher. “There was a great deal of interest from investors during the whole process of coming to market and indeed after it,” he tells KangaNews. “It’s difficult to say there was a significant pricing impact, though the level of interest in and scarcity value of the product certainly can’t have hurt.”

Deal data reveal that the transaction garnered a four-times oversubscription. It attracted interest from a diverse group of investors including Australia’s Clean Energy Finance Corporation (CEFC). The CEFC and some US investors were willing and able to provide Australian dollar liquidity to the tune of almost half the deal’s aggregate volume. This was a positive for an issuer that swapped US dollars to its home currency.

A domestic transaction would of course have been fully Australian dollar denominated, but Pitt says the extended tenor available in the USPP market made it a natural fit for the university.

Even though Monash was offering an innovative deal format the normal rules of bond issuance still applied, including the significant influence of timing to market. “We thought it was worth accelerating the deal process to completion in 2016 given the complexities of the political situation in the US,” Pitt reveals. “It’s amazing how quickly you can get to market, even when you are offering a product with additional complexities, when you believe it to be necessary.”