ANZ on August 20 announced the issue of a A$1.25 billion (US$893 million) tier 2 capital bond linked to the UN Sustainable Development Goals (SDGs), the first bank issued SDG bond in Australia’s domestic bond market.

The transaction represents ANZ’s return to the green, social and sustainability (GSS) bond market in Australia, having issued its inaugural green bond in June 2015 amounting to A$600 million – which at the time was the largest climate-related bond by an Australian issuer.

The bond matures on February 26 2031, with the first optional redemption date of February 26 2026, and pays a floating rate of interest with a coupon of 185bp over three-month bank bill swap rate (BBSW).

“The transaction uses our SDG bond framework, which links our asset base to certain UN SDGs, giving our investors a unique opportunity to drive positive environmental, social and sustainability outcomes while earning an attractive rate of return,” says ANZ group treasurer Adrian Went. He says demand was strong following the maturity of its 2015 green bond earlier this year.

The latest bond is ANZ’s third issuance under its SDG bond framework, which has been in place since February 2018. The bank now has around A$4 billion-equivalent of SDG bonds on issue, having arranged its first and second SDG bonds in Europe, including its first tier 2 capital SDG bond in November 2019.

ANZ launched and priced its first SDG bond in the European wholesale debt capital markets in February 2018, raising 750 million euros (US$893 million) to fund its loans and expenditures that directly promote nine of the UN’s 17 SDGs. The bond was primarily distributed to European institutional investors with the proceeds supporting projects offering broad social, economic and environmental benefits, including funding for hospitals, schools, green buildings, clean water, public transport systems or renewable power plants.

ANZ has a A$50 billion SDG-linked commitment to fund and facilitate sustainable solutions for customers by 2025, including initiatives to help improve environmental sustainability, increase access to affordable housing and promote financial well-being. It replaced its previous A$15 billion low-carbon funding target set for 2020, which reached A$19.1 billion as at September 30 2019.