RAH refinancing could set ESG standard for public projects

The record setting $2.2 billion refinancing of the Royal Adelaide Hospital (RAH) using social and green loans has set a benchmark for other public/private partnerships (PPPs), according to Aberdeen Standard Investments (ASI).

The environmental, social and governance (ESG) financing of the project could also set a precedent in education projects, as well as in health.

ASI said it took a lead role in the refinance of Celsus, the consortium that managed and maintained the RAH under a 30-year PPP with the South Australian Government.

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It was owned by six investors including ASI, AMP Capital, InfraRed Capital Partners, The Infrastructure Fund, HRL Morrison and Co, and MM Capital Partners.

The refinancing by a consortium of 18 banks was the largest green loan for a PPP in Australia to date, the first to be issued with a social loan component in Australia and also the largest combined green and social loan in the healthcare sector globally.

Green and social loans are issued by governments, organisations, and companies to exclusively finance environmental and climate projects and those that offer strong social benefits.

Bill Haughey, ASI head of infrastructure investment and asset management – Australia and New Zealand, said Australia and New Zealand PPPs had been slower to embrace ESG financing than those in Europe but landmark deals like this one could help both markets quickly catch-up.

“Climate change outcomes is a central concern for investors, and we are pleased to deliver another strong green infrastructure project to meet this demand, and one that has a positive social component as well,” Haughey said.

“This refinancing demonstrates that ESG lending is not just for renewable or transportation projects but with the right credentials ESG lending can be utilised more broadly.

“The size of the loan at $2.2 billion and the number of financial institutions which were eager to be a part of this ‘first’ is really significant. This value is larger than the first three PPP green loans in Australia combined.”

The green loan was structured in accordance with Green Loan Principles and Social Loan Principles 2021 issued by the Asia Pacific Loan Market Association and the Loan Syndications and Trading Association and was certified by DNV GL Business Assurance.

The eligibility for the green loan for the RAH was based on its green buildings; it was the first large scale hospital in Australia to achieve a 4 Star Green Star – Healthcare As Built rating from the Green Building Council of Australia in recognition of its sustainable design, construction and operation.

It was eligible for a social loan because it provided access to essential services, as the largest public hospital in South Australia it provided a comprehensive range of treatment options and was the state’s largest accredited teaching hospital.

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