It is August 2018 when a double-tranche sustainability bond worth 156 million euros is issued in Australia. In itself there would be nothing unusual about this, given that during the same year issuances aimed at raising liquidity for projects with a marked social and environmental impact total 18 billion euros. The difference, however, lies in the fact that on this occasion the issuer is Macquarie University, in the city of Sydney — the first university in the world to opt for these ESG financial instruments, opening a path that many others are now thinking of taking.

Universities move closer to ESG finance

Major international universities have the ability to place bonds to finance their own projects; one need only think of Oxford's 100-year Methuselah bond. For a long time, however, they have taken a rather cautious stance towards the instruments of sustainable finance, as noted in an in-depth piece published by Capital Monitor. Some simply consider tuition fees and donations more than sufficient to cover their liquidity needs. Others may fear exposing themselves to external scrutiny over the merits of their social and environmental projects — above all from their own students, who typically demonstrate a considerable critical spirit when it comes to sustainability. In recent years it has been students who have been the most committed advocates of the movement to divest from fossil fuels.

A record semester for social, green and sustainability bonds

Since Macquarie University led the way, many others have followed in its footsteps. Among them is the National University of Singapore, one of the city's largest public universities, with more than 30,000 students and 12,000 postgraduate students. In May 2020 it launched a ten-year green bond worth 195 million euros; funds that will be invested according to detailed criteria subject to oversight by the consulting and auditing firm EY. Exactly one year later, a further issuance of the same amount followed. These are significant sums that will be used, among other things, to retrofit two buildings for energy efficiency, construct the first nearly zero-energy building, upgrade air-conditioning systems and install solar panels. It was precisely in May 2021 that a record semester began, in which issuances of social, green and sustainability bonds by universities around the world broke through the threshold of one billion euros — more than double the volume recorded between 2017 and 2020.

UCL and Stanford bet on sustainability

Also in May 2021 it was the turn of two other giants of the academic world. The first is UCL (University College London), the third oldest British university after Oxford and Cambridge, and the same institution where Indian independence movement leader Gandhi and inventor Alexander Graham Bell studied. Its 357-million-euro sustainability bond maturing in forty years will help it achieve the ambitious targets it has set itself, including net zero greenhouse gas emissions and 100 per cent energy from renewable sources by 2030.

Then there is Stanford University, in California, the first in the United States to place bonds with precise sustainability objectives in the round, not limited to the climate. The projects set to come to fruition in the coming years are indeed highly diverse: from initiatives linked to promoting diversity, to the construction of an academic medicine centre and the expansion of student residences. Because ESG finance has many outlets. And it is right that academic institutions — called upon to train the men and women who will lead the transition towards a more sustainable model — should be among those to demonstrate this.