Green Infrastructure Investment Opportunities AUSTRALIA & NEW ZEALAND
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Green Infrastructure Investment Opportunities AUSTRALIA & NEW ZEALAND Sponsors Green Infrastructure Investment Opportunities, Australia & New Zealand Contents This report highlights green infrastructure investment opportunities in Australia and New Zealand 3 Executive This report highlights green infrastructure superannuation funds and asset summary investment opportunities in Australia and managers and their global counterparts, New Zealand. It has been prepared to potential issuers, infrastructure owners 4 Green help meet the growing demand for green and developers, as well as relevant infrastructure: an investment opportunities – including Government ministries (Finance, Planning, green bonds - as well as to support the Energy, Transport, Environment). It is part opportunity for two countries’ transition to a low-carbon of a research series which commenced growth economy. It aims to facilitate greater with the Green Infrastructure Investment engagement on this topic between Opportunities, Indonesia report in 5 Macroeconomic project owners and developers, and May 2018 and will investigate green institutional investors. infrastructure investment opportunities outlook around the world, initially focusing on the Green finance instruments and trends Asia-Pacific region. 6 Infrastructure are explored in the report, with sector- by-sector options presented. Green In developing this report, the Climate financing infrastructure investment opportunities Bonds Initiative consulted with key are also explored sector-by-sector, with Government bodies, industry, the 8 Green finance projects presented in reference case financial sector, peak bodies, NGOs studies and a sample green pipeline and think tanks – in partnership with 13 Green standards of opportunities. The sample pipeline ANZ, Commonwealth Bank of Australia, is not exhaustive – rather a snap shot Macquarie Group, NAB, Westpac, the 16 Green of the different types of opportunities Clean Energy Finance Corporation infrastructure available in the short and medium-term (CEFC), IFM Investors, the Investor future. A more comprehensive list of over Group on Climate Change, the Principles investment 400 green infrastructure investment for Responsible Investment and RIAA. opportunities opportunities is available on the Climate We would like to thank these partners Bonds Initiative website. along with the other organisations that contributed to the report: Australian 17 Low-carbon The report is intended for a wide Water Association, Green Building Council range of stakeholders in Australia transport of Australia (GBCA), GRESB and New and New Zealand, including domestic 21 Renewable Zealand Green Building Council. energy 24 Sustainable Climate Bonds Initiative water The Climate Bonds Initiative is an Climate Bonds Initiative screens green international investor-focused not-for- finance instruments against its Climate management profit organisation working to mobilise the Bonds Taxonomy to determine alignment USD100tn bond market for climate change and uses sector specific criteria for 27 Green buildings solutions. certification (see Annex 1). It promotes investment in projects and Climate Bond Partners range from 32 Green investment assets needed for a rapid transition to a investors representing USD14tn of AUM opportunities are low-carbon and climate resilient economy. and the world’s leading investment banks The mission focus is to help drive down to governments like Switzerland and growing the cost of capital for large-scale climate France and include major Australian and and infrastructure projects and to support New Zealand institutions such as ANZ, 33 Annexes governments seeking increased capital Commonwealth Bank of Australia, NAB, markets investment to meet climate goals. CEFC, GBCA, Investor Group on Climate 36 References Change and Westpac. The Climate Bonds The Climate Bonds Initiative carries out Initiative is also the lead partner in the market analysis, policy research, market Green Infrastructure Investment Coalition. development; advises governments and regulators; and administers a global green bond standard and certification scheme. Australia & New Zealand GIIO Report Climate Bonds Initiative 2 Executive summary Since the signing of the Paris Agreement This report identifies over 400 projects and there has been an increasing demand assets that could qualify for refinancing, “Climate change is real. It’s from institutional investors for investment additional financing, or new financing in the happening now. This is not opportunities that address environmental near- to long-term. about talking about what we challenges and support sustainable The Climate Bonds Taxonomy1 was used to do in the future, but the action development. Australia and New Zealand identify eligible green projects under four that we have the potential are both characterised by small populations, sectors. To narrow the scope and volume of to carry out as leaders in the high GDP per capita and well-developed projects the following filters were also applied: business community and the capital markets. Australia also benefits from international environment.”3 access to a AUD2.6tn national savings pool. Low carbon transport – mostly projects valued Both nations face challenges in adapting to New Zealand Prime Minister above AUD100m climate impacts and in meeting tightening Jacinda Ardern (Australia) and NZD100m international emissions targets. They also (New Zealand) need to develop sustainable urbanisation models and to address congestion. There Renewable energy - Most Australian and all New Zealand green is a mounting urgency for government only renewable energy bond issues to date have been Certified under and industry to increase their emphasis generation facilities above the Climate Bonds Standard reflecting strong on policies and provision of low-carbon, 50MW adherence to international best practice. The sustainable and climate resilient ‘green’ label of ‘green’ is, however, not widely applied Sustainable water infrastructure. The brown to green to infrastructure. The ‘green’ standards management – mostly transition from emissions intensive brown that do exist are mostly voluntary and projects valued above infrastructure to cleaner assets needs administered by non-government bodies. AUD50m (Australia) and to attract broad-based support and NZD50m (New Zealand) There is an immediate and growing considerable momentum in order to meet opportunity for institutional investors the Paris goals. Low-carbon buildings - to become more active, to expand their Green Star certified projects There is an infrastructure construction boom participation in green infrastructure - mostly 6-star rated underway in Australia and New Zealand. financing, building on the impressive projects Although both nations have traditionally relied foundation established so far. Investing in heavily on high-emission, fossil fuel-powered The report has been prepared to help green infrastructure will ultimately help the transport – there is an increasing focus on (low- meet the growing demand for ‘green’ and governments to reach their climate targets, carbon) public transport and freight rail. There ESG investment opportunities – including spur innovation, broaden the economic base, is a boom in building small- to large-scale green bonds - as well as to support both reduce urban congestion and promote more renewable energy capacity. Green building nations’ respective transitions to a low- sustainable economic and social well-being. certifications have grown significantly, and carbon economy. It aims to identify green The infrastructure pipeline found in this resilient buildings are becoming mainstream. investment projects with investment report is encouraging, but the scale of the potential and explore how investors can gain Almost half the projects included in challenge requires far greater ambition. The exposure to these using innovative green Infrastructure Australia’s Infrastructure Asian Development Bank estimates the finance instruments. Priority List 2018 meet international investor climate-adjusted infrastructure investment definitions of ‘green’, although they are Internationally, growing interest in green needs for Pacific region countries at 9.1% of not always labelled as such. Similarly, just finance has resulted in the development and their GDP between 2016 and 2030.2 With over 40% of New Zealand projects in the growth of dedicated green financial products Australia’s and New Zealand’s GDP totalling Australia and New Zealand Infrastructure including green bonds, green loans, social USD1.5tn, this translates to approximately Pipeline (ANZIP) could be considered ‘green’. and sustainable bonds, green infrastructure USD1.5tn by 2030. There is no time to rest investment trusts and green index products, on laurels - the scale and timeframe is such Green infrastructure development presents which complement opportunities in public that far more needs to happen and quickly. a range of attractive green investment and private equity investments. Green bonds opportunities. There is an increasing Both nations have the potential and have become a popular debt instrument for number of low-carbon transport, renewable economic conditions to develop a well- exposure to green assets and projects. energy, sustainable water management planned sequential pipeline of green and green building projects in the pipeline. A green bond market emerged in Australia investment opportunities. Australia in in 2014 and more recently in New Zealand. particular