FOUR FAST FACTS ON: SUSTAINABLE FINANCE FEBRUARY 2022
What is sustainable finance?
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Sustainable financing describes transactions that link use of proceeds of loans, or the cost of funding, to sustainable practices or outcomes. Climate change is a key driver, but there are also other forces in operation, including corporate sustainability strategies reflecting social and reputational pressures.
New Zealand deals Sustainable financing is on the rise in New Zealand’s loan and bond markets.
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This demonstrates the growing significance of sustainable finance, given approximately 35% of the largest listed market participants have recently engaged in this area.
Sustainable finance allows corporates to align their financing with those strategies and pressures, and meet demands from investors with environmental social governance (ESG) mandates.
New Zealand products
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A range of sustainable financing products have developed in New Zealand, the most prominent being ‘green’ bonds and ‘sustainability-linked’ loans. Notable recent developments in the New Zealand market (or coming to market) include: •
New Zealand’s first green ‘capital bond’.
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Development of New Zealand’s first sustainabilitylinked swaps.
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The designation of existing bonds as sustainability bonds.
Last year alone, seven of New Zealand’s top 20 NZX listed companies (by market capitalization) entered into some form of sustainable debt product. This included the first green bond of its kind to be issued into an offshore market by a New Zealand company.
The future
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BANKING & FINANCE Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to its content.
With demand for ESG-linked products continuing to grow, it is expected that the green and sustainabilitylinked bond and loan market will become increasingly mainstream in the broader New Zealand loan and bond market. With this rapid development and increased investor demand will come increased scrutiny from regulators and investors to quantify and disclose ESG risks and ensure compliance, with a view to guarding against ‘green washing’.e