KWEE We are just starting to see the mainstreaming of UOP bonds and SLBs [sustainability-linked bonds]. The fact the market is open and is being well received by investors means other borrowers – those that still need to develop sustainability frameworks, and set goals and ambitions – will begin to participate.

We think this is the beginning, even though we have already started talking about the end state of the market. It is an area that still needs to grow and become mainstream. As the market becomes more accustomed to sustainable finance we can think about whether tradable environmental credits become part of debt structures and accepted in investor portfolios and mandates.

WARD At the moment, I am watching the Australian Prudential Regulation Authority’s CPG 229 – which asks regulated entities to model the financial risk of climate change in their portfolios – with a great deal of interest.

We are preparing modelling at the moment – things like what the potential temperature trajectory looks like, what sort of physical risks could have a financial impact on investments, what the composition of net-zero targets within portfolios is, and whether they are verified and science-based targets. We expect this will elevate sustainability conversations with clients and issuers and dominate over the next few years.

MATHEWS I can see the level of engagement with this topic on the issuer side. We have seen huge growth over the past 12 months in particular, and hopefully we will also see more diversity of sectors. We need all areas of the economy to be thinking about improving sustainability performance and taking the step forward.

The material ESG [environmental, social and governance] risk to a business will be specific to that business. But we need to assess whether to cater for it at the same time as we move to streamline sustainable finance, or at least some of the core KPIs covering emissions reduction.

CHEUNG The Australian sustainable-finance market is still in its infancy. I expect to see a lot more growth, in issuers and volume.

Certain sectors will continue to be the focus of growth. In the property sector, it feels like the majority of recent issuance has been in green or in SLB format.

MCGUINNESS There is a lot of energy in this market. Plenty of issuers have been considering sustainable finance for years and hopefully more issuance will come to market.

The further companies go down the sustainable-finance pathway – and can talk about the benefits of it, including the fact these transactions are doable and do not expose the balance sheet to an excessive amount of risk – the more energy we will get behind it.

PRABHU One area of interest for me is whether green bonds and SLBs are being placed with ethical- or green-focused funds, or just vanilla fixed-income funds. There are only about half a dozen fixed-rate bond funds domestically that are badged as ethical or ESG, and only one or two floating-rate funds. It does not seem to me that there are a lot of dedicated ESG or green funds out there.

BLOCK Even if we take CEFC [Clean Energy Finance Corporation] and a couple of other investors out, there is a depth of funds within the existing investor set – funds we would all be very familiar with – that can put in larger bids and be more aggressive in sustainable transactions.

The books we saw in SLBs from Wesfarmers and Woolworths were considerable. There may be an influence from the structure, market or the brand names of these issuers, but when I look at the behaviour of investors in these transactions it certainly differs from an unlabelled deal.

For me, the outlook for labelled issuance comes down to the behaviour of companies going forward – and this is the theme everybody has spoken about today.

Marayka Ward made the great point that we want to see these bonds changing behaviour. Well, we have to change behaviour full stop – whether using financing linked to doing so by a label or through issuers’ DNA and credit ratings.

It is a great time to be watching this develop and it will be really exciting to see where it goes over the next 10 years. I personally do not believe labels will last forever.

It is pretty easy to understand the principles behind UOP bonds. But the reality is SLBs, if they are properly structured, have the ability to change behaviour. This is the way I would like to see things go – a DNA change within companies that allows them the biggest pool of funds, hence allowing the best pricing. Companies that undergo this behavioural change will survive best in future.

DOLTON As an entity, we would love to issue another SLL [sustainability-linked loan] or look to the SLB market. We would love to get further return on investment for the effort we have put in to understand the sector.

I would also love to see a reporting framework for this area in the next 3-5 years. We have modern-slavery reporting that is compulsory for entities over a certain size and we get assurance on it through an external auditor. It would be great to have a similar framework for companies to standardise ESG reporting. It would make things a lot easier if this was something the government could mandate.

LOVELL It feels a bit bleak to say this but often we see companies start out by pretending to be doing things about emissions. But when they actually get going, lo and behold they find themselves doing it properly – because they work out it is not that hard. We have seen this quite a lot. At the same time, we need people who are sincere, motivated and want to change behaviour within companies in order actually to achieve progress.

The only other comment I would make is that I think it is worthwhile for investors to interrogate their credit departments and processes, and challenge their investment committees – because there are a bunch of fantastic technologies and business models that will need support. They are going to be critical to the transition, especially for the hard-to-abate sectors. The role of debt is going to be really important in funding this.

YUAN I really like Richard Lovell’s point. Some global leaders start by pretending to care about climate change – but then they actually make an impact when they begin to act. My optimistic, and perhaps naïve, prediction is that we will have a global carbon price within five years and thus all issuers will be forced to think about carbon or pay for it.