Many financial institutions had already been factoring climate change into their lending policies, including setting lending targets for green loans, says Iain Melhuish, Macquarie Capital’s Head of Debt Capital Markets, Australia and New Zealand.
“This has been driven by so many factors including shareholder and stakeholder demands, but also by financial markets themselves, including fund managers and bond investors. We’re even seeing ratings agencies include ESG concerns, such as environmental impact and climate change risk, in how they assess the riskiness of borrowers.”
“Those companies that have committed to decarbonisation are generally seen as lower risk and are therefore able to get access to cheaper finance.”
This, he says, was what underpinned Macquarie’s Green Investment Group’s ability to arrange finance for the Murra Warra II wind farm project in Horsham, Victoria. The project, which will provide 290 MW of green energy when completed, received financing through a consortium of international banks including ICBC, ING, Mizuho, MUFG, SMBC and Société Générale and was the first time a green loan was used to fund a wind farm in Australia.
“It would be remiss of any company director not to try to lower the cost of their capital,” Melhuish says. “But at the same time, qualifying for a green loan is about more than keeping down costs. It’s a signal to the broader community and economy that you’re future-looking and an active part of the broader energy transition.”