RIAA observes assets flowing into green bonds
As investors seek to diversify their portfolios, the naming of bond labels has broadened out to include green, social, and impact bonds.
The annual Responsible Investment Benchmark Report, conducted by the Responsible Investment Association Australasia (RIAA), surveyed 291 organisations, 87 per cent of which were domiciled in Australia.
In 2023, some 93 green, social, impact and sustainability bonds were issued in Australia by 28 different issuers, contributing $25.5 billion. This was up 144 per cent on 38 funds in 2022.
These can be broken down in three main categories: green bonds, social bonds and sustainability bonds.
Green bonds primarily finance environmental projects aimed at mitigating climate change and enhancing sustainable practices; social bonds are aimed at funding projects that address societal challenges; and sustainability bonds finance both social and environmental initiatives.
RIAA noted the variety of bond descriptors had grown compared to last year’s report.
“The variety of bond labels also grew, demonstrating the expanding scope of impact investment, where projects are increasingly cross-cutting, addressing both environmental and social objectives. This trend is likely to continue as investors seek to diversify their portfolios while aligning with broader sustainability goals.”
The market focus on ESG-labelled bonds in Australia was magnified in 2024 when the Australian government issued its first-ever sovereign green bond with a 10-year maturity, following in the footsteps of multiple states which have done so.
Breaking down the 93 launches, green bonds dominated with 27 bonds issued during the year, contributing $13 billion.
“The strong presence of green bonds reflects ongoing investor interest in funding projects that directly address environmental concerns, aligning with global commitments to reduce carbon emissions and enhance resilience to climate impacts.”
Looking at social bonds, 42 bonds were issued which was a larger volume than green bonds but they attracted fewer assets at $5.1 billion. Some 23 sustainability bonds were issued, contributing $7.4 billion.
“The large number of social bond issuances highlights the increasing awareness and action on pressing social issues, with investors actively supporting projects that aim to improve social welfare and economic equality,” RIAA said.
AUTHOR
Laura Dew
Recommended for you
Boutique real estate credit manager COI Capital Management has appointed a former private equity head from MLC Asset Management.
GSFM and its fund manager partner, Munro Partners, have launched an investment fund for New Zealand wholesale investors, marking a “natural extension” of its capabilities.
In its latest quarterly update, alternative asset manager MA Financial said it saw a 22 per cent increase in net inflows (ex institutional) to $444 million and is holding onto cash at historically high levels.
First Sentier Investors is the latest investment manager to enter the ETF space, enabling financial advisers and investors to access an existing geared fund via an ETF structure.
