Auckland Council continues to expand sustainable finance initiatives

Publish Date : 15 Mar 2022
Le Roys Bush

As part of its ongoing commitment to sustainable finance initiatives, Auckland Council has converted an existing $200 million standby facility into its first sustainability linked loan.

The council has also executed a sustainability linked derivative for $120 million, making it the first council in New Zealand to do so.

Auckland Mayor Phil Goff says the initiative supports other financial innovations undertaken by the council in recent years to improve its sustainability.

“Like green bonds, these sustainable finance initiatives will enhance our work to become more sustainable and put strong climate, environmental and social parameters around how funds raised through borrowing are spent.

“The council will need to meet three different sustainability performance targets on an annual basis, centered on fleet transition, emissions reduction and diverse procurement, with tools in place to measure progress and success and ensure compliance.

“This includes increasing the number of low emissions buses in Auckland Transport’s bus fleet, reducing the council’s greenhouse gas emissions, and supporting Māori and Pasifika owned businesses and social enterprises in Auckland by strengthening our social procurement model.

“Auckland Council was the first organisation in New Zealand to issue green bonds to raise finance for projects and infrastructure that benefit the environment, and I am proud that we are once again taking a leading role with sustainability linked loans to support climate action and deliver positive social and economic outcomes for our communities.”

Councillor Desley Simpson, Chair of the council’s Finance and Performance Committee, says the council is committed to conscious sustainable financing, giving Aucklanders confidence in the council’s commitment to tackle climate change using all available financial tools at our disposal.

“We’ve seen increasing investor demand for sustainable financing products, which is reflected in the growth of our green bond programme. This sustainability linked loan and derivative are additional examples of our continued efforts to drive sustainability action through finance, by linking them to our sustainability performance.

“Increasing our spend with diverse suppliers is one of the areas we are focusing on and has been included as a sustainability performance target.

“The loan and derivative, both established with ANZ, financially incentivise the council to meet sustainability performance targets, as higher rates of interest will be applied to the loan and derivative if we fail to reach our targets.”

ANZ New Zealand Head of Sustainable Finance, Dean Spicer, says “Auckland Council has shown clear leadership in pioneering the New Zealand Sustainable Finance market, having been the first domestic issuer of Green Bonds in 2018.

“ANZ commends Auckland Council’s commitment in continuing to innovate through the recent transactions and in being bold in establishing the Sustainability Performance Targets as part of the financing.”

Environment and Climate Change Committee Chair, Councillor Richard Hills says he’s supportive of the council’s sustainability initiatives.

“We’ve made ambitious commitments through Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan, and the use of sustainability linked loans and derivatives will increase accountability across the council group towards the delivery of our sustainability targets.”

As part of the loan arrangement, EY provided independent assurance over the sustainability linked loan and targets to ensure they meet the international principles and standards.

The sustainability linked loan and derivative were structured by Auckland Council, together with Sustainability Coordinator ANZ, to encourage ambitious, meaningful progress against material sustainability challenges for both the council and the Auckland region. These align with previous sustainability incentives undertaken by the council, including endorsing the C40 Divest/Invest declaration and being the first organisation in New Zealand to issue a green bond, now reaching almost $2 billion in funds raised.

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