ESG's growing profile
More labelled green, social and sustainability (GSS) issuance is coming from Australia’s semi-government sector. Even those that have not issued labelled bonds say environmental, social and governance (ESG) themes are gathering momentum in the investor community.
KENNEDY ESG has been a slow burn in recent years but it is now centre stage. The conversation with investors has changed substantially. Instead of being an add-on it is now the primary aspect. Investors want to understand what the state’s ESG credentials are and exactly what is being done to manage and promote sustainability.
Rating agencies have also changed the way they assess the states, to incorporate ESG into ratings. This is a primary focus for much of the market so we are looking to ensure we provide the best possible information we can.
SAFA [South Australian Government Financing Authority] has taken a considered approach to managing ESG and sustainability credentials over a long period. We have been building out an across-government framework rather than focusing on single-issue green or sustainability bonds.
South Australia (SA) is a leader in a number of areas, including renewable energy – which contributed 60 per cent of the state’s supply in 2020. This puts SA well up there among the best providers globally. SA also focuses on social aspects such as essential infrastructure, housing, health and education, and responsible governance through fiscal management.
ESG has been a slow burn in recent years but it is now centre stage. The conversation with investors has changed substantially. Instead of being an add-on it is now the primary aspect. Investors want to understand what the state’s ESG credentials are and exactly what is being done to manage and promote sustainability.
WHEADON We certainly keep a close eye on developments in the sector globally. To reiterate our position, we recognise that the tide is coming in on ESG and investors increasingly want to talk about it with us. In these discussions, we often present Australia’s ESG credentials rather than focusing on green-bond issuance. We collate data on Australia’s ESG credentials, such as on climate change and emissions-reduction policy, and we provide this information to investors when they ask for it.
I would classify our position as maintaining a watching brief over what other sovereigns are doing in the space and keeping an eye on developing trends across investors and sustainable finance.
We are also a conduit for passing this information back to government. Ultimately, however, our mandate does not give us the option to go down the GSS pathway at this point in time.
KELLY Our only outstanding green bond matured in July. Going forward, our thinking is that the sustainability approach gives a lot more flexibility and allows us to have a more diverse pool of assets as part of a labelled bond. Our conversations with investors over the last year tell us they really want to see diversity.
There is no doubt we have a large enough pool of assets to provide this diversity, as the government continues to invest heavily into green and social infrastructure. We see issuing under the sustainability label as the best way for us to support the government’s strategic objectives.