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Australia’s CEFC invests in first university climate bond

The $163m offering, issued by a top Australian university, received investor bids of over $671m.

Melbourne's Monash University has issued a A$218 million ($163 million; €153 million) certified climate bond, the first of its kind issued by a higher education institution in the world. 

The Clean Energy Finance Corporation, the country's renewables financier, is investing $20 million in the issuance as a cornerstone investor. The offering was structured to provide investment options in US and Australian dollars over 15, 17.5 or 20 years. In excess of A$900 million of investor bids was received for the issue, according to the university. 

The state-backed financier said the bond issue “created an important new asset class for the financing of sustainability and clean energy projects in the university sector”. 

This is the third climate bond investment made by the CEFC this year. It committed to Westpac's A$500 million issuance in May, and FlexiGroup's Australian-first climate bond securitisation linked to solar and other renewable energy assets in April. 

The school will allocate the funds to a portfolio of clean energy projects in accordance with the standards of the Climate Bonds Initiative, including a new green learning and teaching building, library redevelopment, solar panel installation and LED lighting project. This is the second time the university made use of the US debt markets to raise fund. It raised $150 million in 2015 to fund the construction of student housing at the Clayton Campus. 

“The Australia climate bond market is growing rapidly, both in the scale of our capital raisings and the diversity of the underlying assets. Through this climate bond, Monash University is increasing and diversifying the pool of eligible assets for clean energy finance, as well as providing a powerful example to the university sector that we can expect to be followed in other markets,” said Richard Lovell, who leads CEFC's debt markets division. 

CEFC also estimated that Australian universities are paying as much as $700 million in energy costs each year, according to its recent report on clean energy opportunities for universities. The energy consumption in universities is driven by increasing student numbers and high energy intensity of technologically-sophisticated laboratories and research facilities.