The European Investment Bank (EIB) increased its AUD Climate Awareness Bond (CAB) due February 2028 by A$150 million (US$103 million) on January 21, bringing the total outstanding amount to A$1.55 billion, making it the largest SSA green bond in Australian dollars.

Upsized from the initial minimum amount of A$100 million, the transaction was priced in line with initial guidance with a spread of 42bp above semi-quarterly coupon matched asset swap, equivalent to +41.4bp over ACGB 2.75% due November 2027. Australian and Japanese investors accounted for most of the allocations (93%).

In December 2019, the EU co-legislators agreed on the regulation establishing a framework to facilitate sustainable investment, which foresees the adoption of an EU Sustainability Taxonomy (EUST). The latter will provide a shared and clear definition of core aspects of sustainability, so that a consistent set of standards can be developed for sustainable investment (e.g. green loans and bonds).

EIB is the first issuer to have tuned the documentation of new CAB lines to evolving EU legislation on sustainable finance, which considers renewable energy and energy efficiency (RE&EE) as well as other climate change mitigating activities.

The proceeds raised through this Climate Awareness Bond, which are still ruled by previous documentation, are earmarked for EIB’s lending projects within RE&EE only. Within these two areas, allocation of proceeds will follow the same principles applied to allocation of proceeds under the new CAB documentation.

Cooperation across jurisdictions aims to establish a level playing field and to foster cross-border capital flows. Its relevance was stressed last year by the Network of Central Banks and Supervisors for Greening the Financial System - of which the Japan Financial Services Agency and the Reserve Bank of Australia are members.

This approach is now becoming topical in Japan and Australia. At a joint financial regulatory forum with the EU in October 2019, Japan reiterated the commitment to cooperate and promote ways to support deployment of private capital towards sustainable investments globally.

In December 2019, the Australian Sustainable Finance Initiative highlighted the need for globally agreed definitions of sustainability to facilitate private capital flowing to sustainable investment and enhancing comparability.

Eila Kreivi, director and head of Capital Markets at the EIB, says, “EIB has recently tuned its CAB-documentation to evolving EU legislation in sustainable finance. Upon adoption, the upcoming EU Taxonomy will apply to both CABs with original and new documentation in the respective eligible project areas following the same principles. The bank is committed to providing liquidity in all CABs.”

Anthony Miller, CEO of Deutsche Bank Australia, says, “Deutsche Bank is delighted to be assisting European Investment Bank with its commitment to climate action by acting as both a sole lead manager and an Investor in its latest Australian Dollar Climate Awareness Bond. As a leader in green bond issuance globally, we foresee an increasing demand from clients this year in green financing as they seek to play a role in addressing climate change. As an investor, EIB’s clearly defined climate action priorities align with our own Environmental, Social and Governance principles. We congratulate EIB on its position as the European Union’s climate bank and its leadership in climate action financing.”