Domestic bid comes through for CPPIB as it expands green issuance in Australia

Majority domestic distribution highlighted the book of the first green bond issued by CPPIB Capital – the financing arm of the Canadian Pension Plan Investment Board – off its Kangaroo programme. This level of domestic support is a relative rarity in the high-grade Kangaroo sector, and the issuer credits its extensive investor relations work and demand for green labelled product for the outcome.

CPPIB priced a A$500 million (US$333.4 million) three-year green bond on 30 May – the first green-bond print off its Kangaroo programme – via Deutsche Bank, RBC Capital Markets, TD Securities and UBS. CPPIB also issued A$750 million of seven-year green bonds from its EMTN programme in June 2021.

A A$350 million tap of its May 2028 Kangaroo, priced on 6 June with Deutsche Bank and UBS as leads, took CPPIB’s outstanding Kangaroo volume to A$4.7 billion – all issued since it debuted its domestic programme in August 2022 (see chart 1). Its maturity profile is relatively short – its longest-dated Kangaroo redeems in May 2028 as all its Kangaroo issuance to date has been at three- or five-year tenor.

The final orderbook for CPPIB’s latest Kangaroo closed at about A$1.9 billion and included 35 unique investors, with domestic accounts taking more than half the final distribution (see chart 2). Asset managers were the most common investor type, followed by central banks and official institutions (see chart 3).

Source: CPPIB Capital 7 June 2023

Source: KangaNews 8 June 2023

Source: CPPIB Capital 7 June 2023

This is a notable step-up in Australian investor participation for the issuer and sector. When CPPIB issued A$1 billion of three-year vanilla Kangaroo bonds in January this year, the domestic portion of the book was just 23 per cent. Its debut Kangaroo deal saw just 13 per cent of bonds sold to Australian investors.

A transaction summary released by the issuer also says domestic interest was “significantly higher” than other Australian dollar supranational, sovereign and agency deals priced in the same period. It attributes this to the green label and CPPIB’s growing local following.

Sam Dorri, managing director at CPP Investments in Toronto, says engagement with Australian investors is paying off. “Since the EMTN transaction in 2021, we have established a Kangaroo bond programme – consistent with our desire to be programmatic in this market,” he tells KangaNews. “During this time we have also undertaken two roadshows in Australia, as well as presenting at the KangaNews [Debt Capital Market Summit] in 2023. The dialogue with investors has helped guide our ESG [environmental, social and governance] and vanilla issuance decisions.”

CPP Investments’ issuance programme has five core currencies, Dorri explains – of which the Australian dollar market is one. Having a substantial asset position in this market makes it a strategic one for the fund, and Dorri reiterates its plans for a programmatic, consistent and predictable approach to issuance that investors have indicated a preference for.

This appears to include a preference for labelled bonds. “The green label is a reflection of [the issuance strategy], as the feedback we have received from in-person meetings is a strong desire for green issuance and positive receptivity to our green-bond framework,” Dorri adds. “The green label helped us access unique domestic investors that may not otherwise purchase vanilla bonds. This is one objective of our green-bond programme.”