This month, we explore how sustainability and climate change continue to drive the upward trajectory of new financing principles and a sustainable lending landscape.
The Growth of Sustainability-Linked Loans
In 2018, Adelaide Airport secured Australia’s first Sustainability-Linked Loan (SSL), marking the beginning of the growth in sustainable finance. H1 2024 sustainable debt issuance is now sitting at USD$26 billion across Australia and New Zealand, on track to match or exceed the peak of $USD51 billion in 2021.
Case Studies in Sustainable Finance
Cromwell Property Group: Recently, Cromwell Property Group converted a $1.2 billion loan facility into a Sustainability-Linked Loan, centred on achieving targets of net zero scope 3 emissions by 2045 and reducing the gender pay gap to a maximum of 12% by 2028. This demonstrates the growing appeal for major real estate players in Australia to leverage their sustainability commitments.
Blackstone made headlines last year by securing the largest ever Sustainability-Linked Loan in Australia’s industrial sector, a significant achievement totalling $1.45 billion. This highlights how strong ESG credentials are being increasingly rewarded in the market.
The Federal Government’s Sustainable Finance Roadmap
Alongside this, the Australian Federal Government has launched its Sustainable Finance Roadmap, outlining strategies to encourage financial markets to prioritise the allocation of capital towards net zero in support of Paris Agreement commitments.
What is described as a ‘climate first, not only’ approach focuses on both climate goals and nature-related financial risks and opportunities, with ten priorities listed across three pillars:
- Improving transparency on climate and sustainability;
- Enhancing financial system capabilities; and
- Strengthening Australian Government leadership and engagement.
Priority number one is “implementing climate-related financial disclosures”, which will soon be mandatory for companies under the National Greenhouse and Energy Reporting (NGER) scheme. This scheme, starting in January 2025, is a key step towards enhancing transparency and accountability in climate-related financial reporting.
While there are still legislative and consultation steps to be navigated in implementing the Roadmap, the program sets out the Federal Government’s approach to ensuring that investors can continue to have confidence, clarity, and certainty about managing climate and sustainability risks.
The ongoing developments in this space, including the increasing adoption of sustainability-linked loans by major players like Cromwell Property Group and Blackstone, set new benchmarks and drive a more sustainable approach to investment and lending in Australia and beyond.