The government has ruled out investment in nuclear energy in its new green bond program, which will focus on renewable energy, energy efficiency (including home upgrades) and climate change adaptation.
Treasury yesterday released the Green Bond Framework, which outlines how the Australian government will issue green bonds, including the basis for identifying, selecting, managing and reporting on expenditures financed with green bonds.
Other areas green bond funds will target include clean transportation, green buildings, biodiversity, sustainable water management, pollution prevention and control and the circular economy.
The government sees green bonds as one of the tools available to help reduce the impact of climate change. The bonds will be used to finance government projects that have targeted environmental outcomes.
The framework has been developed in accordance with the International Capital Markets Association Green Bond Principles. It commits the government to annual reporting on allocation and impact.
Impact reporting will include environmental impact indicators for each expenditure and outcomes measured against “green goals”.
Funds raised from the issue of green bonds will support the government’s climate policies, which include a reduction in emissions to 43 per cent of 2005 levels by 2030, 82 per cent renewable energy by 2030 and a net zero position by 2050.
The bonds will be earmarked for projects funded under the government’s eligible green expenditures, which must align with one of three key green goals: climate change mitigation; climate change adaptation; and improved environmental outcomes.
Eligible expenditures include: direct and indirect investment and physical assets and intangible assets (such as research and development); transfers to public or private entities in the form of grants, loans and subsidies; and tax expenditures, such as concessional rates that reduce the rate of tax that apply to income that meets green bond criteria.
Exclusions are in line with established environmental, social and governance investment practices and include investment in nuclear energy, the development, refining and transportation of fossil fuels and assistance to high greenhouse gas emitting facilities.
An interdepartmental Green Bond Committee will advise Treasury on project allocation, and Treasury will update a list of eligible green expenditures annually.
Green bonds will be no different to “non-labelled” bonds in terms of their structure and payments. Coupon payments will be made every six months, with the face value and financial interest payment on the maturity date.
The Australian Office of Financial Management will be responsible for green bond issuance.