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Using capital markets for the greater good

Using capital markets for the greater good

CommBank is working on ground-breaking transactions to produce better social and environmental outcomes.

Enhancing the wellbeing of communities is at the heart of our vision. We are committed to working with partners to achieve positive social, environmental and economic outcomes and make a real difference in the communities in which we operate.

Social impact investing

In conjunction with the NSW Government, we helped develop The Benevolent Society Bond. Launched in October 2013, the $10 million five-year bond funds The Benevolent Society’s Resilient Families program. It provides intensive support for families in Sydney whose children are at risk of being removed and placed into out-of-home care.

The program has improved the safety and wellbeing of all the 360 children in the 156 families referred to it. It aims to have up to 400 families in the program by the end of the five-year period. As at November 2017:

  • 89% of families in the program are still together

  • 24% fewer children entered foster care versus the control group

  • 59% fewer Safety and Risk Assessments, further reducing demand on the child protection system

The results defy the nationwide trend of increasing numbers of children entering out-of-home care. It is producing great outcomes for children and their families, the government and the bond’s investors, whose returns depend on the program keeping children safely with their families.

With the bond maturing next year we are in discussions to take this pilot to the next stage and expand it.

We are further supporting the development of impact investing – namely investing with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return – at the Federal Government level. We are discussing contributing financing to a unique independent fund that would draw mainly from capital provided by Government and financial institutions. The fund would have the mandate and mission to drive the market towards impact investing at scale.

Growing momentum in social impact investing is a way to address some of Australia’s most pressing social challenges.

Local government debt aggregation vehicles

Another Australian first we worked on was the Local Government Funding Vehicle (LGFV), a debt financing aggregation vehicle for local councils in Victoria. Its inaugural issue in November 2014 provided 30 Victorian councils with $240 million of five- and seven-year fixed-rate debt at significantly lower rates than traditional bank borrowing. Conceivably, the interest savings could be reallocated towards community services.

We are taking the experience we have gained from establishing the LGFV debt aggregation vehicle to explore ways to apply the concept to fund social housing in NSW and/or nationally.

Climate financing

Green financing is very much on our broader agenda. For example, we have a $200 million pledge with the Clean Energy Finance Corporation to help Australian small businesses transition to a low-carbon environment.

We have partnered with clients to support the growth of climate bonds. Together we have taken more than $1 billion of climate bonds to the market: 

  • A$218 million in the US private placement market for Monash University. It was a world-first for a university to issue a climate bond

  • A$50 million FlexiGroup asset-backed securities backed by solar equipment receivables. It was Australia’s first ‘green’ securitisation

  • A$650 million Commonwealth Bank climate bond

Now we are sharing that knowledge and experience about green financing with various state governments.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.