Key points
- Australia has issued its first Green Treasury Bonds to directly fund projects related to its green energy transition.
- Our strong reputation as long-term investors granted us unique access to the issuer and a large bond allocation, and we were encouraged to see how our recommendations were taken on board.
- We believe the plan for these funds represents an excellent opportunity for both our clients and Australia’s progress towards its Sustainable Development Goals.
Your capital is at risk.
Green shoots
Australia has some of the world’s most ambitious green transition targets, requiring substantial investment. In May, Treasurer Jim Chalmers' announced an A$22.7bn allocation towards achieving a net-zero economy. This funding, earmarked for the advancement of renewable hydrogen, green metals and low-carbon liquid fuels, represents a significant financial commitment from the government.
It can pay for this through tax revenues or borrowing. Herein lies our opportunity for the Sustainable Multi Asset Fund: to both generate returns for clients and support the Australian government’s sustainability initiatives by purchasing these green bonds.
After members of our Multi Asset and Global Bond teams met with representatives from the Australian Debt Management Office (DMO) in June 2024, we invested in the inaugural issuance of Australian Green Treasury Bonds. As these bonds mature in ten years, the proceeds will be used to help Australia meet its 2030 climate objectives, which include reducing emissions by 43 per cent and reaching 82 per cent renewable energy generation.
Sustainable alignment
Our journey with Australian Green Treasury Bonds began in 2023, when the Australian DMO consulted with leading global investment firms on what they would want to see from an Australian green bond. Baillie Gifford’s reputation as a large, global and long-term investor grants us excellent access to opportunities like this, as the Australian DMO wants investors like us to hold their debt.
Recognising the potential for impact, we eagerly participated, offering our perspectives on what investors like us would seek in green bonds. Our commitment to sustainable investment principles, and experience managing a wide range of sustainable investment funds, enabled us to provide valuable insight.
Engaging in the initial phases not only allowed us to help shape the framework for the issuance – investing time in providing the Australian DMO with our feedback also demonstrated our commitment as long-term investors and bondholders. This is a trait that debt management offices around the world want in their investors, as it creates a stable financing base for them.
In 2024, our engagement deepened during the DMO’s roadshow for its inaugural Green Treasury Bond. We were pleased to observe how our initial feedback had been integrated into its issuance plan. A key point of feedback we provided during the 2023 consultations was that we would want to see specific examples of projects that the funds would be used for.
During the roadshow, the DMO showed us various examples of how the proceeds could be used, one of which, ‘Rewiring the Nation’, is a A$20bn investment centrepiece of the government’s ‘Powering Australia’ plan. This investment is crucial in making clean energy more accessible and affordable across Australia by modernising the electricity distribution network the help achieve the country’s net zero ambitions.
The DMO’s efforts to create a robust, transparent and sustainable framework resonated with our investment ethos. The example projects were specifically linked to Australia’s Sustainable Development Goals (SDGs), giving investors a clear indication of where capital would likely be deployed. The DMO also detailed the rigorous governance frameworks that determine how the funds would be allocated to different projects.
| ICMA categories | Indicative eligible green expenditures | UN SDGs |
| Renewable energy |
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| Energy efficiency |
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| Clean transportation |
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| Green buildings |
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Visit www.un.org/sustainabledevelopment to learn more about the United Nations’ Sustainable Development Goals. The content of this publication has not been approved by the United Nations and does not reflect the views of the United Nations or its officials or Member States.
Our investment
After the roadshow presentation, our in-house ESG experts confirmed that these bonds met the suitability criteria for our Sustainable Multi Asset Fund, so we were confident to proceed when the inaugural auction was announced.
Due to our active involvement throughout the process and our standing as a large, long-term global investment firm, we were granted a high allocation in the auction. Although the demand was four times higher than the initial supply, we were offered 85 per cent of the order we submitted – an excellent outcome for our clients.
This acquisition marks the first ever green bond purchased directly by our Multi Asset team, achieved through excellent collaboration between our investment teams and the Australian DMO. Leveraging our Global Bond team's expertise in sovereign debt markets allowed us to deliver an attractive opportunity for Sustainable Multi Asset Fund clients while contributing to global sustainability goals.
Overall the transaction exemplifies how Baillie Gifford’s proactive stance on identifying and engaging in green financing opportunities can enable us to add significant value for our clients and play a pivotal role in the green transition. We remain vigilant in seeking out similar opportunities.
Important information and risk factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in July 2024 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
The Baillie Gifford Sustainable Multi Asset Fund is a collective investment scheme managed by Baillie Gifford & Co Limited. The Fund does not guarantee positive returns. The Fund aims to limit the extent of loss in any short-term period to a lower level than equities.
The value of your investment can be affected by changing conditions in the markets in which the Fund invests. The value of the Fund can go down as well as up so you may not get back what you originally invested.
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs
The specific risks associated with the Baillie Gifford Sustainable Multi Asset Fund include:
- Market values for illiquid securities which are difficult to trade, or value less frequently than the Fund, such as holdings in weekly or monthly dealt funds, may not be readily available. There can be no assurance that any value assigned to them will reflect the price the Fund might receive upon their sale. In certain circumstances it can be difficult to buy or sell the Fund's holdings and even small purchases or sales can cause their prices to move significantly, affecting the value of the Fund and the price of shares in the Fund.
- Bonds issued by companies and governments may be adversely affected by changes in interest rates, expectations of inflation and a decline in the creditworthiness of the bond issuer. The issuers of bonds in which the Fund invests, particularly in emerging markets, may not be able to pay the bond income as promised or could fail to repay the capital amount.
- The Fund has exposure to foreign currencies and changes in the rates of exchange will cause the value of any investment, and income from it, to fall as well as rise and you may not get back the amount invested.
- The Fund invests according to sustainable and responsible investment criteria which includes employing carbon screens. This means it cannot invest in certain sectors and companies. The universe of available investments will be more limited than other funds that do not apply such criteria/ exclusions, therefore the Fund may have different returns than a fund which has no such restrictions.
Further details of the risks associated with investing in the Fund can be found in the Key Investor Information Document or the Prospectus, copies of which are available at bailliegifford.com.
