Real Assets Working Group: Community Bonds Update

In line with the mission of creating mechanisms for positive change in sustainability and the financial markets, the Real Assets Working Group (RAWG) is developing initiatives that will provide impact in areas that the RAWG feels require new perspectives and tools to unlock opportunity and material change. One area where the Network for Sustainable Financial Markets (NSFM) has already unlocked change is in the green bonds market that was pioneered by the Climate Bonds Working Group which led to the establishment of the Climate Bonds Initiative and the establishment of the global climate bonds market that has grown with incredible momentum; largely in part to the pioneering work undertaken by Sean Kidney.

Since the formation of the RAWG in 2016, RAWG Co-chairs Gordon Noble and Stuart Kay have been discussing areas of potential focus with the Working Group members. Rather than focus on more obvious areas such as green buildings and infrastructure, the view was taken to explore alternative areas of impact that were on less trodden paths and that needed new strategies to service a market need. Through this process, the RAWG made a decision to focus on the area of Community Bonds that would initially direct attention to sporting infrastructure. Three areas of interest of the RAWG Co-chairs were identified for address; sustainability, sustainable finance, and sustainability in sport.

Billions of dollars of infrastructure assets exist globally. The rise of state-private funding of initiatives in the form of Public Private Partnerships (PPP) and the like have demonstrated the opportunity, and indeed need, for private sector funding of what traditionally were viewed as state-driven and funded programs. We once believed that it was the state that would always support us, but the realities of the 21st century make it plain to see that this is no longer a reality. Cities and countries carry large amounts of debt and many of them simply do not have, and will not have, the funds available to finance the volume of new and planned infrastructure projects that need to be undertaken in the years ahead. And this scenario does not consider existing infrastructure assets, many of which are aging and ailing and requiring significant attention. Within this scenario, the area of sporting-related infrastructure exemplifies the market need for a Community Bonds product. Currently, it is typically either the role of the state or club alumni to fund expansion or improvements programs. Neither of these is ideal. The state has ever-decreasing funds available to finance such initiatives. Regarding alumni, reliance on funds of private individuals provides (in most cases) limited scope for the large amount of funding typically necessary to undertake meaningful programs. This is where the RAWG believes that a market intervention is needed and will be welcomed. For any bond issuance, scale is important. With the volume of sporting infrastructure assets requiring address and financing globally, the RAWG believes that significant scale will attainable.

The RAWG is interested in developing frameworks that will not only address funding itself, but also the very nature of that funding. There is an opportunity to establish projects that not only deliver social impacts, but also environmental benefits through incorporation of design/ operational criteria and renewable energy into project specifications. Not only will this ensure that community bonds deliver appropriate and responsible projects, but also that the program parameters will be attractive to investors that place value on responsible investment.

The RAWG will be providing regular updates regarding the development of Community Bonds on the NSFM website and invites interested parties to join us in the development of this meaningful program. Please contact the RAWG Co-chairs, Gordon Noble and Stuart Kay, at the following email addresses with expressions of interest:

Gordon Noble: noble@gnbk.com.au

Stuart Kay: stuartkay72@gmail.com