February 25, 2014
Is 2014 the Year for Green Bonds?
by Robert Kropp
As You Sow hosts a webinar exploring the role of green bonds in the transition to a low-carbon
The market for green bonds is projected to more than double in 2014, to $25 billion, according to a
recent webinar hosted by the nonprofit
organization As You Sow. Green bonds, which are fixed-income products that invest in clean energy
and other sustainability measures, were highlighted recently by expressions of support for the Green Bond Principles (GBP) by many of the world's largest
“In 2013, there were over $10 billion
in green bonds issuances,” said Amelia Timbers of As You Sow, “and that figure is expected to
double in 2014.”
“Green bonds are quickly emerging as one of the most competitive options
for financing the trillions of dollars for a low-carbon infrastructure,” Timbers continued.
The first speaker on the webinar panel was Sean Kidney, CEO of Climate Bonds Initiative, a London-based nonprofit whose
goal is to help facilitate the flow of $1 trillion in investments each year to low-carbon
“It's important to understand that bonds are primarily a refinancing tool,”
Kidney said. He noted further that 89% of bonds currently issued are investment grade, with
low-carbon transport bonds currently being the most successful. And he pointed to the issuance in
2012 of green bonds by French municipalities as a watershed moment in the growth of green bonds.
They were over-subscribed several times, Kidney said, largely due to purchases of them by French
“The public sector has a role,” Kidney continued, “in encouraging
the growth of the refinancing market.”
Colin MacNaught of the Massachusetts State Treasurer’s Office said
that of the $11 billion his agency plans to borrow over the next five years, at least $1 billion
will be directed to environmental or energy improvement capital projects.
“In order to
take advantage of the growing investor interest in sustainable investments, to attract new
investors to diversify the state’s investor base, and to give investors the ability to invest
directly in environmentally beneficial projects, the Commonwealth decided to be the first state to
offer Green Bonds,” MacNaught's presentation stated.
“We pulled out all of our
environmental projects and decided to put them in one bond,” MacNaught said. “Knowing that we did
not have a specific mandate to reduce carbon or reduce climate change, we still wanted to offer
investors a totally rational investment that would allow the investor to invest directly in
projects that make strong improvements to the local environment.”
Last June, MacNaught
reported, the state sold $100 billion in green bonds. “In total, the state received 154 retail
orders for green bonds and at least 7 new institutional investors. During a difficult market
environment in which the overall financing had to be substantially downsized, the Green Bonds saw
significant investor demand, receiving 30% more orders than there was supply available.”
Evelyn Hartwick, the head of the socially responsible bond program at the International Finance Corporation (IFC) noted in her presentation
that climate change and environmental and social sustainability is one of the five major focus
areas of the organization.
“IFC climate change activities have grown from 4% of total
commitments in 2005 to 14% in 2013,” Hartwick's presentation stated. “Growth is due to a greater
focus by IFC and explicit institutional mandate, but also market to renewable energy’s high
“We are scaling our investments in climate change for three reasons,” Hartwick
said. “First, because there is compelling evidence that the impact of climate change effects will
hit the poor the most. Second, because we know that businesses everywhere are susceptible to
climate risks. And third, because there's no doubt that the private sector, and especially the
private sector in emerging markets, is the key source of innovation and solutions to address
IFC engages in three major areas, Hartwick observed: clean energy and
energy access, resource efficiency, and climate adaptation. Since its inaugural issue in 2010, IFC
has raised $3.4 billion through its green bond program, including a landmark $1 billion three-year
public issue in February 2013, she reported; and a subsequent $1 billion three-year issue was made
in November 2013.
Hartwick also noted that the transparency of IFC's green bond offerings
is enhanced by third-party opinion services provided by Center for International Climate and Environmental Research – Oslo
(CICERO), an independent research center which provides consultancy services.
Bonds will help deliver trillions of dollars of investment in low-carbon infrastructure that is
needed to stabilize emissions," Timbers of As You Sow said. "Green Bonds are an ideal financial
vehicle for the challenge of climate change in that their ability to scale and be deployed quickly
matches the urgency of climate change."
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