Climate bond opens investment pathway

solar energy, battery, climate bond

An Australian-first climate bond is giving investors access to Australia’s burgeoning rooftop solar and small-scale energy storage market, providing further evidence of the economy-wide impact of the accelerating transition to clean energy.

According to Bloomberg New Energy Finance, 6.3 million rooftop solar systems are expected to be installed in Australia by 2050 – with 4.3 million of these systems to be combined with storage. This means that 74 per cent of rooftop solar capacity is expected to include energy storage by the middle of the century.

The Clean Energy Finance Corporation (CEFC) has invested $10 million in the latest FlexiGroup Limited (flexigroup) $90.9 million green bond issuance, which includes a large portion of rooftop solar, alongside a smaller portion of small-scale storage receivables.

CEFC Debt Markets lead Richard Lovell said, “We see 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 capitalised on technology gains and rapid price declines to install rooftop solar,” Mr Lovell said.

“We can expect to see a similar pattern with energy storage, as consumers take even more control over their energy use, extending the benefits of their solar systems with the capacity for energy storage.

“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.  With institutional investors increasingly prioritising carbon reduction assets within their portfolios, issuers have the opportunity to develop a broader range of bonds to tap into this demand.”

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.

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flexigroup CEO Rebecca James said, “We’re delighted to once again have the CEFC support our green notes issuance. 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.

“Australian householders are taking control of their energy bills by capitalising on flexible financing solutions and government incentives to install solar and storage.

“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.”

In 2016 flexigroup issued Australia’s first asset-backed green bond.  The CEFC invested $20 million in the $50 million note issuance and invested a further $20 million in flexigroup’s 2017 $50 million green note issuance.

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 appropriately. 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.

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