QIC raises green bond to upgrade shopping malls

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Institutional fund manager QIC’s real estate arm has issued a $300 million green bond certified by the London-based Climate Bonds Initiative with the goal to enhance environmental performance across its Australian retail portfolio. The QIC Shopping Centre Fund (QSCF) green bond is described as the world’s first Climate Bonds-certified issued by a retail property owner.

The green bond will fund initiatives for three of the retail assets within QSCF’s $15 billion portfolio: Toowoomba’s Grand Central, Robina Town Centre on the Gold Coast and Eastland in Melbourne. Improvements include energy efficient technologies such as new building management systems, LED lighting, heating and cooling systems, and a potential rooftop PV program.

“Issuing a green bond is an important milestone for QSCF and the retail property sector globally, and is an endorsement of QIC GRE’s progress and ongoing focus on sustainability,” said Managing Director of QIC Global Real Estate’s (QIC GRE), Michael O’Brien. “The QSCF green bond was five times oversubscribed and attracted new investors with green and ESG investment mandates to the Fund from across Asia and Australia.”

The Clean Energy Finance Corporation (CEFC) has made a cornerstone investment of $30 million in the green bond, building on its earlier work with QSCF in terms of setting ambitious sustainability targets. One of the largest shopping centre owners in Australia, QIC GRE, is also implementing a program of energy efficiency upgrades across its other 11 assets. 

“This green bond builds on the $200 million senior debt facility the QSCF secured via the CEFC in 2017 which included a framework to undertake improvements in energy performance across the QSCF shopping centre portfolio,” said Michael Fattouh, QSCF Fund Manager.

Underpinned by the green bond, QSCF’s upgrades are expected to reduce the centres’ greenhouse gas emissions intensity by more than 35% in the next three years. Overall, Australian shopping centres account for 36% of commercial building energy consumption, CEFC notes, and ongoing improvement in energy efficiency is vital to reducing the load on the electricity grid.

“We have worked with QSCF since 2017 regarding setting ambitious sustainability targets. Their program of works delivers reduced energy costs and emissions, and a lighter load on the electricity grid,” said CEFC Debt Market Lead, Richard Lovell. “It also establishes QSCF as a market leader in sustainability, with this bond attracting a new pool of green investors.”

Sustainability-linked financing 

According to Lovell, the market would expect to see new types of green bonds issued by Australian corporates as they continue to increase their focus on sustainability and energy efficiency. Earlier this year, Australian retail giant Woolworths became the first supermarket in the world to issue green bonds, as part of its efforts to fund the development of low-carbon supermarkets and the installation of solar at its stores and distribution centres.

With airports around the world looking for ways to reduce their carbon footprint, green debt financing is gaining momentum in Australia. Sustainability-linked loans (SLLs), which tie a borrower’s cost of funding to a borrower’s ESG (Environmental, Social and Governance) rating or other sustainability metrics, have been secured by a number of Australian airports.

Globally, the sustainable debt market has been going from strength to strength over the last couple of years. According to BNEF, issuance of sustainable debt products surged 26% to a record $247 billion last year as green bonds issuance amounted to $182.2 billion, whereas one new product – SLLs – reached $36.4 billion. Namely, growth in green bonds drastically slowed to 5% in 2018 YoY compared to 68% in 2017, while SLLs surged 677%.