CFA Society New York hosted the 2nd Annual Green Bonds Event on May 3rd 2018 which featured an esteemed discussion among senior level investment executives. Speakers included Henrik Jeppesen, CFA, Head of Investor Outreach at Carbon Tracker; Shellka Arora-Cox, Senior Associate at Norton Rose Fulbright US LLP, Amy Hauter, Associate Portfolio Manager at Brown Advisory, Guy Van Syckle, CFA, at Hannon Armstrong, and Sarah Wilson, Director and member of the Responsible Investment team at Nuveen.
Green Bonds Overview
There are two categories of green bonds, i.e. green labelled bonds which are certified as green and unlabeled green bonds which are issuances linked to projects that produce environmental benefits.
The green bonds market is an emerging topic even though they have been around since 2007. Their structure, risk, and returns are identical to those of traditional bonds. In recent news, Apple issued a seven-year $1.5 billion green bond that would be the largest corporate issuance in the U.S to date.
Examples of green bonds include:
• Renewable Energy: Investments in equipment and systems which enable the use of energy from solar, wind, hydro, biomass, geothermal, tidal and other renewable sources.
• Energy Efficiency: Investments in equipment, systems, products and services which help reduce energy consumption per unit of output, such as installing waste heat recovery systems, reducing transmission and distribution losses and producing energy efficient motors.
• Investments that reduce GHG emissions in other ways, like sustainable forestry and agribusiness, capturing and flaring or use of methane, carbon capture and storage.
What organizations have issued Green Bonds?
A few examples include:
• Toyota Financial Services
• The World Bank
Green Bond Themes
1. Demographic changes- aging population
2. Climate changes- vulnerable population, food climate, and climate migrants
Green Bonds offer several benefits:
• New Investors
• Provides issuers with the opportunity to offer green products that deliver real meaning
• Impact change behaviors Key Facts
• Green bonds are similar to classic bonds; therefore, you must assume some financial risk
• Reporting makes it easier for investors to analyze green bonds
• The market is still growing. Companies can enhance their reputation by branding themselves as innovative and sustainable
• More corporate green bonds issuances.
• Communicate to stakeholders about what they are getting
• Be transparent and speak about the benefits