$1.8b green sustainability-linked loan will keep Sydney’s trademark Waratahs on sustainability track

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$1.8b green sustainability-linked loan will keep Sydney’s trademark Waratahs on sustainability track

Sponsored by CBA

A $1.8 billion green and sustainability-linked loan to fund Sydney’s largest electric passenger train fleet represents a significant advancement in the financing of operating public private partnerships, according to the borrower, Reliance Rail, and CBA, a Sustainability Co-ordinator of the loan.

The $1.8 billion green sustainability-linked loan will electrify Sydney’s transport sector.

The $1.8 billion green sustainability-linked loan will electrify Sydney’s transport sector.Credit:Reliance Rail

The loan, one of the first transactions of its kind in the Asia-Pacific and the first sustainability-linked instrument for an Australian public private partnership (PPP), combines two previously separate labels – Green and Sustainability-Linked – in one transaction.

Reliance Rail, which owns Sydney’s famed Waratah electric train fleet, will have its interest rate tied to a host of sustainability targets that, if achieved, will result in a discounted rate. Reliance Rail will use any savings from the loan to fund a raft of new green initiatives, further bolstering its sustainability credentials.

Louise Iida, Reliance Rail’s Chief Financial Officer.

Louise Iida, Reliance Rail’s Chief Financial Officer.Credit:Reliance Rail

Reliance Rail’s Chief Financial Officer Louise Iida and CBA’s Managing Director Sustainable Finance and ESG Charles Davis say they believe the loan format could be applied across a range of industries, from energy and infrastructure to property and education.

“The pace of change that we’ve seen and the amount of emphasis and focus on green and sustainability over the last 12 to 18 months has been amazing,” says Iida.

“I’m optimistic this trend will continue over the next couple of years and within a few years’ time we may even be looking beyond net zero and then the next frontier after that.”

New environmental benchmark

The CBA’s Davis added that the loan structure will help other companies to consider further improvement on their already green assets.

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“Finance has a significant role to play in assisting our clients in the transition to a more sustainable future” says Davis.

“There are many existing green assets and projects out there that are looking at ways of making their operations even more sustainable. Australia’s transition will require broad-based change, and our role is to continue supporting clients to help them progress on that journey.

“We’ve seen a significant increase in the adoption of sustainable finance instruments and we expect the innovation demonstrated in this loan will continue across the board, as sustainable finance becomes more broadly embedded in our client’s financing arrangements.”

Reliance Rail provides 78 Waratah electrified trains to Sydney Trains, which enable roughly half of Sydney’s 1.2 million daily passenger journeys. The PPP with the NSW Government also owns the Auburn Maintenance Centre which is used to maintain over 60 per cent of Sydney Trains’ passenger fleet.

Reliance Rail’s Waratah electrified trains enable roughly half of Sydney’s 1.2 million daily passenger journeys.

Reliance Rail’s Waratah electrified trains enable roughly half of Sydney’s 1.2 million daily passenger journeys.Credit:Reliance Rail

The green portion of the loan facility is certified by the Climate Bonds Initiative (CBI), meeting its Low Carbon Transport electrified rail criteria, which Davis describes as a key independent certification benchmark for sustainable finance.

The loan is also aligned with the APLMA Green Loan Principles under its clean transportation criteria.

Reliance Rail is helping to drive the transition to a low carbon future through the increased use of electrified transport to reduce vehicle pollution and traffic congestion in Sydney.

Green rating score

The sustainability-linked portion of the facility is dependent on Reliance Rail meeting four Sustainability Performance Targets (SPTs) over an initial 10-year period.

Charles Davis, CBA’s Managing Director Sustainable Finance and ESG.

Charles Davis, CBA’s Managing Director Sustainable Finance and ESG.Credit:CBA

“The key SPT is an Infrastructure Sustainability Council (ISC) operations rating score,” Iida says.

“That will be a new rating that we will put in place, which has a broad sustainability focus. Additionally, there are SPTs related to energy efficiency, both of our maintenance facility and of the fleet of trains itself, as well as solar power generation at the Auburn Maintenance Centre.”

Iida says that importantly, the SPTs also include reducing water intensity in washing the city’s trademark Waratah carriages.

“Carbon gets a lot of press these days, but water is something that people are less focused on. Although there is currently no shortage of rainfall, we are a long-term project and we believe it is important to look at what we can do to reduce water consumption going forward.”

Davis says one of the key challenges in bringing an innovative structure to market such as this, is managing the various stakeholders.

“We were able to work with the different project partners to bring this structure to life, with each buying into the vision of what Reliance Rail was looking to achieve.”

Iida says operators of mature assets may be apprehensive about adopting ambitious sustainability targets because of the difficulty in improving existing infrastructure.

“It can seem too hard to move the dial, especially for a PPP, but that doesn’t mean we shouldn’t try,” she says.

“We’ve had tremendous support and enthusiasm for this deal from our project partners, our investors and our lenders - so hopefully we’ll see a progression of similar transactions focussed on improving the sustainability performance of PPPs and large mature infrastructure.

“And I’m hopeful from a sustainable finance perspective, that it will encourage everyone to lift their game and that we’ll see even more ambitious and innovative structures coming to market.”

“We are very happy with how the transaction turned out and with the agreed targets. We believe that they are ambitious, material, impactful and relevant to our business.”

Disclaimer:This information is published solely for informational purposes. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on the information, consider its appropriateness to your circumstances. Commonwealth Bank of Australia ABN 48 123 123 124 and AFSL and Australian Credit Licence 234945.

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