Comparative Report: Bonds from Commonwealth, Westpac, and NAB

This report provides a comprehensive analysis of bonds issued by Australian banks, specifically focusing on Commonwealth Bank, Westpac Bank, and NAB Bank. It examines various bond types, including climate bonds, social benefit bonds, and NAB SDG green bonds, highlighting their features, benefits, and purposes, such as funding renewable energy projects, low-carbon transport, and community initiatives. The report compares these sustainable bonds to traditional bonds, noting their differences in risk factors and objectives. It also explores the similarities between bonds and preference shares, such as their responses to interest rate changes and the absence of voting rights. The conclusion summarizes the role of these bonds in raising capital for socially beneficial projects and their distinctions from conventional bank bonds. The report is supported by references to academic journals and reports.

REPORT ON BONDS
FROM BANKS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Commonwealth bank..................................................................................................................3
Westpac Bank..............................................................................................................................4
NAB Bank...................................................................................................................................4
Comparison to the other Bond....................................................................................................5
Similarities in the bond and preference share.............................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Bond are issued to raise capital from the private and public investor by the company and
government. Banks issues bond for raising fund for various purpose such as increasing capital,
market share, contribute in renewable energy, social benefit, environment protection project etc.
The following report highlights the Bond issued by Australian Bank Commonwealth Bank,
Westpac Bank and NAB bank for the sustainable transport, community or social benefits project.
It explains the benefits and features of various bond such as Climate bond, social benefit bond,
Westpac climate Bond, NAB SDG green bond etc. report also explain that how the sustainable
environment and community benefit bond are differentiate to the normal bond issued by the
bank.
MAIN BODY
Commonwealth bank
Climate Bond: It is issued to pay in low transition of carbon economy by supporting
climate resilient and low carbon projects. It helps to fund twelve projects of Australia such as
generation of renewable energy via Hydro power and solar wind, low carbon transport project,
energy efficient building project etc. CBA climate bond are certified by Climate Bond Initiative
to promote investment in global low carbon economy (Sarra and Williams, 2018).
Features of climate bond
 Climate bond is used to find the renewable and low transition carbon project. They were
introduced on March 2017.
 Climate Bond maturity time is 31 March 2022. Currently they are charged on fixed and
floating interest rate basis.
 The size of Bond is AUS$ 650m (FXD AUS$ 450 m & FRN AUS$ 200 m)
 From 2017 the CBA climate Bond participation in renewable energy is increased. In 2017
commonwealth Bank aimed to $15 billion low carbon Target and in 2018 their progress
to Low carbon projects is $7.3 billion which indicate they are bitten closer to their target
(Queen and et.al., 2016).
Social benefits Bond: The TBA (The Benevolent Society) partnership with the
Commonwealth Bank and Westpac Institutional Bank to raise find for the preservation services
of resilient families. Social benefit bond aim is to raise private fund for the children home care
and government cost saving (Social Impact Bonds, 2011).
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Feature of social benefits Bond
 Social benefit bond or social impact Bond raised $10 million to support family
preservation services.
 It was issued in June 2013 and mature in 2018. The maturity time period of the social
benefit Bond is 5 years.
 The coupon rate of Australian social benefit bond of Commonwealth bank is 7.5%.
 Over the last 5 year it increases the capital of Australia to support the resilience families.
Westpac Bank
Climate Bond: This bond is issued by the Westpac bank to raise the fund to reduce the
impact of carbon on the environment and support the project which helps to reduce carbon
emission (Geddes, Schmidt and Steffen, 2018). Their aim behind issuing climate bond is to
reduce carbon footprints to zero by 2050. Westpac committed to collect $6 billion fr the
environmental and clean tech services by 2017 and surpassed their aim at 31 March 2016.
Feature of climate Bond
 Westpac climate bond is issued on 26 May 2016 and mature in 2021. The maturity time
period of the Bond is 5 years.
 It was used for the proceeds for wind power, low carbon commercial building etc.
 The current currency value is AUD 500 million or USD 360 millions.
 The coupon rate of Westpac climate bond is 3.1%.
 The growth rate of the bond rate is high and able to collect the fund from the private as
well as public sector for sustainable environment.
NAB Bank
Feature of NAB climate Bond
NAB SDG green Bond: National Australian Bank issue the NAB SDG green bond for
the various purpose at different time interval. They are issued finding the wind and solar energy
projects, electrified public transport project, commercial and residential building, property
upgrade, sustainable forestry and agriculture, LED and efficient light project etc. The aim of
NAB is to support the sustainable environment and renewable energy projects (NAB ANNUAL
Green Bond Report, 2017). They proceed their business in the direction to contribute in positive
environmental and social outcomes. The NAB SDG green bond are categorized in NAB AUD
climate bond and NAB EUR climate Bond.
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Feature of NAB SDG green Bond
 The both green bond such as NAB AUD climate and NAB EUR climate bond are issued
at fixed rate.
 The NAB AUD climate bond are issued at AUD 300 million and NAB EUR are issued at
EUR 500 million.
 AUD climate bond issued on 16 December 2014 and mature on 16 December 2021 while
EUR bond is issued on 7 March 2017 and mature on 7 September 2022.
 NAB EUR climate bond contribute AUD $1182 million in environment and social
projects.
 The total contribution in renewable energy is $1512 million and low carbon transport is $
482.4 million.
Comparison to the other Bond
In compare to the other bond social benefit bond and CBA climate bond are not affected
by the variables such as interest rate risk, market risk and reinvestment risk. They are issued on
the purpose of raising fund for society benefits such as children home care, raising fund for
renewable energy and low carbon transport projects while the other bond are issued by the bank
to expand the business and raise the capital for the future growth in the market (Laskowska,
2017). The climate bond, social benefit bond, green bond are issued for non-profit benefit while
other bond are issued for making profit in business.
Similarities in the bond and preference share
Bond and preference share are quite similar to each other in respect to different area such as:
 The bond and preference share both fluctuated with the change in interest rate. For
example: If the interest rate increased than the price of Bond and preference share were
declined. As well as the price of Bond and preference share is declined when interest rate
increase.
 Bond and preference share has call option. It gives the rights to the issuer to call back the
money or security at the time of falling interest rates and issued new securities on the
falling rate to gain the profit. It helps to deal with the reinvestment risk.
 Both bond and preference share did not offer the voting right to the company or
organization.
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 Both securities are convertible and change in stock or share. It provides them the
opportunity to participation in the growth of the company.
 The capital appreciation in both securities is limited because of the set payment. They did
not get any benefits from the growth of the company in market.
CONCLUSION
It can be summarized from the report that Australian Bank issues various category Bond
to raise the capital for the children development, environment protection, reducing carbon
emission, family resilience, renewable energy and government cost saving projects. The bond
mature in different time period such as some Bond mature after 5 year while the other bond
mature in more than 5 year. The interest rate charge on the Bond is also differed. It can be
concluded from the report that the aim of the various Bond is common i.e. to raise capital for
social benefit purpose. It can also be concluded that they are differed from the normal bond of
the bank because they are not affected by the interest rate risk, reinvestment risk and market rate
risk.
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REFERENCES
Books and Journals
Geddes, A., Schmidt, T.S. and Steffen, B., 2018. The multiple roles of state investment banks in
low-carbon energy finance: An analysis of Australia, the UK and Germany. Energy
Policy. 115. pp.158-170.
Laskowska, A., 2017. The Green Bond as a Prospective Instrument of the Global Debt
Market. Copernican Journal of Finance & Accounting. 6(4). pp.69-83.
Queen, I., and et.al., 2016. Integrated Climate Solutions: Green Bonds.
Sarra, J.P. and Williams, C., 2018. Commonwealth Climate and Law Initiative-Climate Change
and Legal Risk.
Online
Social Impact Bonds. 2011. [Online]. Available through: <https://cdn.americanprogress.org/wp-
content/uploads/issues/2011/02/pdf/social_impact_bonds.pdf>
NAB ANNUAL Green Bond Report. 2017. [Online]. Available through:
<https://capital.nab.com.au/docs/NAB_Annual_Green_Bond_Report_FY17.pdf>
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