The National Australia Bank (NAB) has unveiled a new investment model in which major Australian organizations can now directly invest in large-scale renewable energy projects. Described as the first of its kind in Australia, the NAB low carbon shared portfolio gives companies access to a portfolio of eight NAB loans that fund seven existing wind and large-scale solar energy projects — projects which the bank says the companies would not otherwise be able to invest in directly.

The electricity generated by the seven renewable energy projects avoids more than 2.5 million tonnes of CO2 emissions every year, equal to the emissions created by over 350,000 Australian households. NAB first announced this innovative finance facility in December 2017 as an offering under development. This is now finalized and valued at US$200 million, with investors that include Clean Energy Finance Corporation and Insurance Australia Group Limited

In announcing the launch of the portfolio on 18 June 2018, NAB chief customer officer of corporate and institutional banking Mike Baird describes renewable energy as an important part of Australia's future energy mix and clients were telling NAB that they want to participate in the transition to a low carbon economy. "We're responding by providing ways for institutional investors to back major renewable energy projects alongside NAB, while releasing capital for NAB to continue to re-invest in the renewable sector," he adds.

NAB is a leading arranger of renewable energy project finance in Australia and has helped raise over A$7 billion for renewable projects since 2003. The low carbon shared portfolio is part of NAB's updated climate change strategy. In 2017, the bank committed to increasing environmental financing for clients from US$18 billion by 2022 to US$55 billion by 2025. This includes US$20 billion to support green infrastructure, capital markets and asset finance, and US$35 billion of lending to support the development of six-star residential mortgages.

As at end-March 2018, NAB has already provided US$17.5 billion towards this commitment. "We are seeing tremendous growth in clean energy across our loan book, which is why we continue to innovate with offerings such as the NAB low carbon shared portfolio," says Baird.

The low carbon shared portfolio is a closed-end offering that gives investors an interest in a portfolio of loans to Australian-domiciled companies operating renewable energy projects. The loans are all denominated in Australian dollars and have a remaining tenor of at least 15 months. The loan portfolio has an expected weighted average life of 3.2 years. NAB will retain no less than 25% of each low carbon loan on its own balance sheet for the life of the investment, and will absorb the cost of managing them. The secured, floating rate, amortizing portfolio notes are the first Australia climate bond certified project bonds. Investors in the notes will receive principal and income from the trust's loans on an amortizing, pass-through basis.

Photo: National Australia Bank