Private sector funding has enormous potential to accelerate decarbonisation. Recent banking innovations, such as sustainable finance and green bonds, are available to established organisations tackling their own emissions profiles. However, for early-stage companies focused on providing new technology and processes to facilitate wider decarbonisation, access to funding can be challenging. ASB Bank (ASB) is seeking to address that challenge.
MinterEllisonRuddWatts Special Counsel, Simon Gray, sat down with ASB’s Jonathan Oram, Jeremy Salthouse, and Mark Allen to zero in on the bank's recently launched Clean Tech Fund, the opportunities the fund seeks to unlock, and the value of partnerships in progressing decarbonisation. Hiringa Energy's Chair and Co-founder, Catherine Clennett, also contributes her view as one of the first recipients of assistance from the Clean Tech Fund.
What is Clean Tech?
Clean Technology (Clean Tech) is an umbrella term for the development of new technology or processes that reduce carbon emissions or improve the use of natural resources. Clean Tech has obvious applications in the energy sector via the replacement of fossil fuels, but its reach extends to manufacturing (e.g., low-carbon materials for construction and industrial processes), transport (e.g., alternative fuels) and agriculture (e.g., reducing farm emissions). Clean Tech has immense potential to help decarbonise New Zealand and to become a high-value export sector, providing solutions to global challenges.
New Zealand has a developing Clean Tech ecosystem of around 400 companies. Due to its innovative nature, the industry largely comprises early-stage companies that need significant capital to enable development. According to a recent report from the New Zealand CleanTech Mission, the anticipated growth from the Clean Tech companies surveyed will require new capital of $440 million in the year to March 2025.
However, the report also notes the common company perception that it is challenging to raise capital in the local market and that is hampering New Zealand’s ability to compete globally. Oram agrees: "The biggest problem we have in New Zealand is alternative sources of capital. There’s an angel community, there’s some venture capital money…but it’s not as deep as other parts of the world. So, bank capital does have an important part to play."
The biggest problem we have in New Zealand is alternative sources of capital. There’s an angel community, there’s some venture capital money…but it’s not as deep as other parts of the world. So, bank capital does have an important part to play.
ASB’s Clean Tech Fund
ASB has a cumulative sustainable lending target of $6.5 billion by FY30 for green, social, and sustainability-linked loans, but it has not traditionally funded early-stage companies. Its newly launched Clean Tech Fund is a unique initiative to support such companies that are producing the technology to enable others to reduce emissions as part of the transition of New Zealand to a low emissions economy. The fund is designed to address the lack of maturity around funding of the sector particularly by supporting companies looking to commercialise or scale up their own technology (locally or internationally), as well as those wishing to bring proven offshore enterprise and expertise to New Zealand.
The Fund will provide up to $5 million per business of debt to businesses focused on a proven technology or processes that have a direct, measurable, and significant impact on improving greenhouse gas emissions or the use of natural resources and have an application across the wider economy. The Fund will support businesses to develop or scale in areas such as renewable energy generation, new low-carbon transport or materials for construction and industrial processes, technology to reduce waste and pollution, carbon sequestration, reduce farm emissions or protect the natural environment.
The Fund is already proving its worth, not only for borrowers but also for the bank itself and its other customers. Partnerships and connectivity are a key part of the model. Decarbonisation and broader ESG initiatives are becoming business as usual for ASB’s wider customer base and as Oram says: “We have existing customers that are using some of these products so there’s always an opportunity to make more introductions. We are becoming part of a bigger ecosystem of Clean Tech organisations and forums that helps build those connections.”
ASB is excited about developing a new area of lending along with long term relationships with companies that have real potential to make a difference and are aligned with the bank’s own sustainability objectives.
We have existing customers that are using some of these products so there’s always an opportunity to make more introductions. We are becoming part of a bigger ecosystem of Clean Tech organisations and forums that helps build those connections.
Partnering with Hiringa Energy
The recently announced loan made from the Fund to Hiringa Energy is an excellent example of the Clean Tech potential and connectivity ASB hopes to unlock. Hiringa is a next generation energy company connecting the green hydrogen [1] value chain by making clean hydrogen, developing hydrogen infrastructure for use in the transport, industrial and energy sectors, and facilitating market use of hydrogen.
In April this year, Hiringa launched Australasia’s first zero-emission green hydrogen refuelling network. The network has been established in partnership with New Zealand’s leading independent fuel supplier, Waitomo Group, and TR Group, Australasia’s largest heavy vehicle fleet owner – both existing ASB customers. Three charging stations, with hydrogen produced onsite, have been launched at Waitomo sites at Wiri, Te Rapa and Palmerston North, with a fourth under construction in Tauranga. The current sites are designed to fill up to 60 trucks per day and the technology enables NZ Post’s fuel cell powered truck and trailer unit to refuel within 15 minutes. The network is positioned to service 95% of the heavy freight routes across the North Island with plans for another 24 stations across the country.
Trucks are just the beginning as Hiringa works with global manufacturers to introduce hydrogen technologies to New Zealand. Decarbonising export value chains is becoming a major business driver for Australasian exporters who are highly exposed to the carbon reduction mandates imposed on them by their international customers. Hiringa has other initiatives underway, including a joint venture with Ballance Agri-Nutrients to construct wind turbines which will supply renewable electricity directly to Ballance Agri’s Kapuni site and to the national grid. The electricity will also be used to produce green hydrogen for heavy transport and to decarbonise the production of urea (displacing imported urea). Through these projects, the company has developed valuable expertise and intellectual property which has the potential to be utilised offshore.
While Hiringa has received financial support from the New Zealand Government and growth capital from local and international investors, ASB has provided crucial debt funding via its Clean Tech Fund to facilitate and expedite progress of Hiringa’s New Zealand based initiatives and growth. The Clean Tech Fund allows ASB to have a debt relationship with Hiringa earlier than would otherwise be usual, but the relationship extends beyond banking support and is mutually beneficial. ASB has introduced Hiringa to other customers and opportunities. As Clennett says: “Enabling zero emission transport and the decarbonisation of industry requires partnership and support, ASB’s early-stage funding has been essential in progressing our vision.” In return ASB has gained insights into the experience of green hydrogen and alternative transport fuels.
Enabling zero emission transport and the decarbonisation of industry requires partnership and support, ASB’s early-stage funding has been essential in progressing our vision.
Looking to the future
ASB’s Clean Tech Fund is creating opportunities with a broad spectrum of applications. Other examples include locally developed technology that will allow more capacity from the grid at certain EV charging points and technology that will enable controlled release fertiliser to be used more efficiently thereby reducing nitrogen leaching with consequent improvements on water quality.
It is early days for ASB’s Clean Tech Fund but with just over half of the fund already allocated it has proven to be popular. Oram sees the Fund as being a catalyst for decarbonisation initiatives and is enthusiastic about helping set up these customers to succeed. ASB’s long term hope is that the Clean Tech funding relationships will evolve to be part of its core business as more organisations embrace the potential for technology to accelerate decarbonisation.
MinterEllisonRuddWatts has worked closely with the ASB team developing its Clean Tech Fund loan documentation with Partner Allison Hancock advising ASB on its loan to Hiringa Energy. Our firm is delighted to have worked alongside ASB Bank on this future-focused initiative that supports New Zealand’s decarbonisation journey as well as businesses seeking to create positive change.
Footnote
[1] Hydrogen produced by electrolysis using electricity from renewable sources. It is clean energy: both produced and used with zero carbon emissions.
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