Australian first climate bond gives investors new access to solar and storage market

Adding further momentum to the trend towards ‘responsible investing’ in clean energy assets, a green bond has been issued to give investors access to Australia’s burgeoning rooftop solar and small-scale energy storage market. The issuance has won the backing of the federal government’s green bank, the Clean Energy Finance Corporation (CEFC).

The CEFC said it had invested $10 million in a $90.9 million green bond issued by Sydney-based financial services company FlexiGroup, which included a large portion of rooftop solar, alongside a smaller portion of small-scale storage receivables.

According to CEFC Debt Markets Lead Richard Lovell, the inclusion of energy storage receivables in this green note issuance as an important market development. “Investor confidence in solar receivables has deepened as consumers have capitalized on technology gains and rapid price declines to install rooftop solar,“ he said on Monday. Lovell noted that a similar pattern is expected with energy storage, as consumers take even more control over their energy use.

“With this issuance, flexigroup is giving institutional investors ready access to this evolving energy storage market, while further expanding the universe of investable green assets through the introduction of a new ‘A’ rated green tranche to the transaction structure.“

The CEFC has a strong record of investing in the emerging climate bonds market, having committed $489 million to 11 bond issuances since it began investing in 2013. Two of these bonds were previous green note issuances by FlexiGroup.

In 2016, the financier issued Australia’s first asset-backed green bond to fund its solar panel installation financing. The CEFC acquired $20 million of the $50 million bond, which was fully redeemed in July last year. In 2017, FlexiGroup floated its second $50 million certified green solar asset-backed securitization, which was also underpinned by $20 million from the CEFC.

“Appetite for these tranches has grown with each deal we’ve done, and we will continue to explore the development of new green investment products to satisfy this demand,“ says FlexiGroup CEO Rebecca James. “We expect interest in adding battery storage to solar panels to continue to grow, which presents an expanding asset base from which to offer future green investment opportunities to our investors.”

The FlexiGroup green notes have been certified by the global Climate Bonds Initiative (CBI) as being aligned to the Paris Agreement goals and the bond proceeds will be managed accordingly. The CBI estimates the global green bond market will reach US$250 billion this year, up from US$167 billion in 2018, continuing a sustained growth trajectory as investors tap into sustainable investment opportunities.