National Australia Bank (NAB) took an innovative approach to green securitisation when it sold a A$300m green tranche as part of a A$2bn residential mortgage backed security (RMBS) on 8 February, with low carbon buildings part of a wider pool of mortgages.
The deal makes NAB only the second issuer globally to sell green RMBS.
Its strategy differs from the pioneering Green Storm RMBS of the Netherlands’ Obvion, a Rabobank subsidiary, which were wholly secured on green assets.
NAB said that including a single senior tranche certified as green by the Climate Bonds Initiative within a mixed pool can be a more feasible strategy given the need to otherwise carve out a larger pool of eligible assets. To help ensure that the green notes remain secured on corresponding assets, the green mortgage pool is some 1.6 times the size of the A$300m (EUR191m) tranche.
The green senior tranche (A-1G) was priced flat to a matching non-green A-1 tranche, at 85bp over the one-month bank-bill swap rate.
According to NAB, which arranged and lead managed the deal, the green tranche was close to two times oversubscribed, including demand from socially responsible funds and more mainstream investors from Australia and abroad.
“We are thinking outside the box when it comes to helping our customers back sustainable assets and act on environmental issues that are important to them, and to Australian communities,” said Mike Baird, chief customer officer, corporate and institutional banking, at NAB.
“It’s incumbent on us as a bank to play a part in addressing the bigger issues facing society, including Australia’s transition to a low carbon economy. This transaction is another small, but important, step in that journey.”
NAB building photo: Superfloop/Flickr