The 2019 poll asked investors whether the issuance of an ESG bond would change their view on a company. Nearly half of all respondents said it would result in a favourable uplift and 14 per cent said they would pay for the uplift.
“While most investors won’t admit to paying a premium for green issuance, we are certainly seeing benefits coming through in the form of heavy over-subscription rates and tighter sales processes,” Tapley said.
“As the market evolves it is becoming harder for us to say there are no pricing benefits for issuing in this format.”
Tapley points to the experience of Woolworths as an example of how pricing tension is generated during the bookbuilding process. The Australian supermarket chain issued a debut $A400 million green bond in April through joint lead managers ANZ, Citi and JP Morgan.
The proceeds will finance a portfolio of low-carbon supermarket assets, as well as energy efficiency projects such as lighting and air conditioning upgrades, and the group’s solar energy installations.
The final book closed with more than $A2 billion in orders from 90 investors, mostly from the domestic market. Nearly all of these were dedicated green investors.
Paul White, Head of Debt Capital Markets, Australia and New Zealand at ANZ said while Woolworths’ primary deal priced 10 to 15 basis points tighter than initial guidance, the biggest uplift came in the secondary market.
“The bonds priced at 120 basis points over the semi-quarterly asset swap curve and quickly traded in by 30bps,” he said.
Smaller overall deal sizes and larger individual tickets are driving secondary demand, White said.
The poll results show over the past 12 months Asia-based companies have sharpened their awareness around green financing. In fact, a whopping 62 per cent of companies which haven’t yet issued in green or sustainable format are now considering it, compared with 44 per cent in 2018.
These businesses are driven to issue by a wish to improve investor diversity and meet their sustainability objectives.