Normally new issues of semi-government bonds is fairly sedate with around four a month on average. This week we have had three and one of them is the first of its kind in this segment of the Australian bond market. Victoria has become the first state to issue a green bond. Treasury Corporation Victoria (TCV) issued $300 million worth of 1.75% July 2021 bonds which have been certified as green bonds.
Green bonds, otherwise known as climate bonds, have been around for a few years now but until this week they had only been issued by corporate borrowers such as ANZ, NAB and Stockland. Bonds are defined as green if they fund projects which have positive environmental and/or climate benefits. TCV, as central financing authority for the Victorian Government and other state enterprises, will on-lend the funds to various Victoria agencies for use in energy efficiency, renewable energy, public transport and water treatment projects.
Green bonds are typically priced in the same fashion as standard bonds. In this case TCV’s bonds were issued at ACGB + 19.75bps, which is comparable to the spread on bonds such as NSWTC April 2021s. Investors were a mix of insurance companies, fund manager and other investors.
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