Green bond investors are more data-driven
As the sustainable finance market evolves, investors are increasingly demanding more information from green issuers.
One sign is the rapid growth in Europe, the largest market for sustainable finance, of funds specifically driven by carbon emission reduction pathways. RBC research found 34% of new fund launches in 2024 were devoted to this theme.
“We are moving towards a focus on data and on carbon emissions as an additional layer of complexity for issuance,” Stefano Vitali, RBC Capital Markets’ European Head of Sustainable Finance, told the KangaNews sustainable debt summit in Sydney.
In response to investor demand, the Australian Office of Financial Management even publishes allocation and impact data in spreadsheet form, to save investors the task of transferring figures from reports.
“It’s really important that our approach is best in class, that it meets evolving investors’ expectations, and that we can set a standard,” explains Brad Parry, the organization’s Head of Sustainable Finance.
Jean-Luc Petit, of Australia’s biggest green bond issuer, Queensland Treasury Corporation, agrees: “We started publishing data following issuance of our first green bond in 2017. Our reporting has evolved and now it’s clearer what type of data drives investors. It’s very important that we help the market in this fashion.”
Marayka Ward, of Queensland sovereign investor QIC, points out that green-label issuers and investors are both held to a higher standard. “In 23 years in bond markets, I’ve never had a client ask me to prove why we think something is a triple B, but we get asked all the time how we’re assessing something as being green,” she says.
Ward hopes carbon accounting rules will evolve further: “There will be a demand driver if we’re able to tell investors about the emissions that relate just to the green bond, and not to the entire issuer.”
“There will be a demand driver if we’re able to tell investors about the emissions that relate just to the green bond, and not to the entire issuer.”
Marayka Ward, Director, Fixed Income Strategy, QIC
Greenium shrinks with market growth
As the market has matured, the ‘greenium’ – the extra value that investors are willing to pay for sustainable bonds – has gradually tightened.
The panelists are generally sanguine about this change. Ward believes the shrinking greenium is a reflection of greater investor choice as the market grows. “Any issuer who contemplates coming to this market purely for the greenium is going to be found out very, very quickly,” she adds.
Even at an estimated greenium of two basis points, Parry reckons the Australian government recouped AU$11m of interest savings over the tenor of its first green bond.
“We’ll continue to be a green bond issuer, even if greeniums remain low,” he says. “We didn’t introduce the program with the explicit aim of reducing borrowing costs on what’s ultimately a very small part of our portfolio.”
“We’ll continue to be a green bond issuer, even if greeniums remain low.”
Brad Parry, Head of Sustainable Finance, Australian Office of Financial Management
Issuers achieve diversification and signaling
Issuers have varied rationales for entering the market. Fiona Trigona of NBN Co, the Australian Government owned operator of Australia’s national broadband network, says the organisation’s first green bond issuance was designed to diversify its investor base.
With new investors already on board and made aware of NBN’s sustainability agenda, its second issuance, a year later, was heavily oversubscribed drawing double the interest of the first inssuance, demonstrating increasing interest in NBN Co from European investors.
“We’ve got the key investors who now have NBN bonds in their flagship green bond funds,” Trigona says. “That doesn’t necessarily mean we’re going to get that greenium – but what it does mean is that we’re not paying as much as a new-issue concession.”
“Key investors now have NBN bonds in their flagship green bond funds. That doesn’t necessarily mean we’re going to get that greenium – but it does mean we’re not paying as much as a new-issue concession.”
Fiona Trigona, Executive General Manager and Group Treasurer, NBN Co
For Queensland, part of the rationale for entering the market was to send a signal about the state’s activities, says Petit. “We are reaching different investors, internationally and locally, and also we can have a narrative around the policies of the government,” he says.
“We are reaching different investors, internationally and locally, and also we can have a narrative around the policies of the government.”
Jean-Luc Petit, Executive Director, Funding and Markets, Queensland Treasury Corporation
Reliance on ESG ratings under scrutiny
Australia continues to trail Europe in the sustainable space. Across equities and debt, Vitali points out, European sustainable AUM is valued at around US$2.7 trillion, compared to US$30 billion in Australia.
“It goes back to the fact that 84% of sustainable AUM is in Europe,” he adds. “So if you want to attract that type of capital, there are certain things you absolutely need to do – currency might be a factor, alongside ESG profile, ESG ratings, and the label’s alignment with the taxonomies.”
However, panelists question the ease of engagement with ESG rating providers, with Parry citing a “long and frustrating process” to qualify for the MSCI green bond index.
Trigona reveals that NBN is seeking a dedicated MSCI rating (having, until now, inherited that of the Australian Commonwealth) to further substantiate its AU$7 billion outstanding in green bond issuance. “We are going to get one, purely because there’s more investors in Europe that we might be able to attract, but it’s only on the margin,” she adds. (Since the time of the presentation, NBN Co has received, in May 2025, a provisional 'AA' ESG rating from MSCI).
Ratings retain importance, however, because they are the indices followed by the majority of investors, who lack the infrastructure to develop advanced investment strategies, Vitali explains: “The diehard green funds and dark green investors are still the minority.”
Ward sees danger here. “I think the passive investors are going to need to be careful, if they’re relying on the ratings, that they don’t get caught up with greenwashing risk,” she warns.
“The diehard green funds and dark green investors are still the minority.”
Stefano Vitali, European Head of Sustainable Finance, RBC Capital Markets