(Bloomberg) — A rare parrot that lives at the gateway to Australia’s Great Barrier Reef has become the centerpiece of the country’s sustainable finance boom.
North Queensland Airports Group this month refinanced around A$760 million ($508 million) of debt with terms that included a requirement to improve habitats for threatened species including the double-eyed fig parrot in partnership with some of the local Aboriginal population.
The debt refinancing marked the country’s first biodiversity-linked corporate loan, the company and its lenders Commonwealth Bank of Australia, Westpac Banking Corp., and National Australia Bank Ltd. said. The new type of loan may well pave the way for other future developments , said Michele Wong, chief financial officer at North Queensland Airports.
“We didn’t really have to drive very hard to convince people,” North Queensland Airports Chief Executive Officer Richard Barker, who pushed for the biodiversity target in the loan, said in a phone interview.
As one of the fastest growing areas of the boom in environmental, social and governance investing, sustainability-linked loans contain a more rigorous set up, reporting and compliance regime than green or social loans. For companies, like North Queensland Airports, it can broaden their investor base, while banks can benefit from a boost to internal ESG objectives.
Investor interest in natural capital such as woodlands and their inhabitants saw a surge in a recent survey from the Responsible Investment Association Australasia, whose members have about $29 trillion in assets.
Investments concentrated on sustainability surged from A$76 billion in 2020 to A$161 billion in 2021, the RIAA report this month showed. The hunt for companies that make a positive impact on biodiversity and conservation in particular saw one of the largest jumps by survey respondents, up from 0% to 35% over the same period.
Major Climate Law
Meantime, Australia’s government last month said it would introduce legislation to support a market for biodiversity, where tradable credits will be awarded to conservation projects that can prove measurable improvements to the environment. The Labor government in September passed its first major climate legislation in more than a decade to set legally-binding targets to deepen emission curbs, a key step for a country long seen as a laggard in the world’s push for greener energy use.
Bespoke and unique measurements that link the cost of borrowing to sustainable targets, like biodiversity, require intensive work and that’s precisely what gives them their value, according to Bláthnaid Byrne, director of sustainable finance at Commonwealth Bank, the country’s biggest lender.
“Our flora and fauna are so very different to the rest of the world,” she said. “In Australia we have the highest mammal extinction rate in the world and many of the animals here can’t be found anywhere else in the world in their natural environment.”
For Elizabeth O’Leary, who serves on the G7-backed Taskforce on Nature-related Financial Disclosures — a group aimed at measuring the impact firms have on the natural world, the nascent industry needs to ensure biodiversity is framed with possible gains for companies as well as recognizing it as a material risk.
“We’ve been at pains to look at not only risks, but what are the risks and the opportunities,” said O’Leary, who also manages about A$3.7 billion as Macquarie Asset Management’s head of agriculture and natural assets. “The risks — that’s what we shouldn’t do. But actually, are there opportunities through investment intervention or corporate activity that actually have a co-benefit?”