“Green Bonds” were quite the hit in 2015’s debt capital markets, totaling a record issuance of $59 billion, triple their 2013 value, according to Bloomberg New Energy Finance. Broadly defined, governments, municipalities, corporations, and banks issue green for projects that have an environmental benefit, such as developing electric vehicle charging stations; public green spaces; producing solar panels, energy efficiency retrofits for schools and housing, as well as bicycle paths. Green bond issuance totaled more than $59 billion in 2015, up from $36.6 billion in 2014 and $11 billion in 2013. This large increase reflects not only the environmentally friendly projects that need to be financed but also the demand from investors for this type of investment—demand ranging from institutional investors that may use these securities to help hedge portfolio risks to climate change to individual investors that may want to support a local or regional investment in more sustainable infrastructure.
Of note in the Puget Sound region, Sound Transit issued the world’s largest municipal sale of green bonds to date in August of last year. The sale of nearly $1 billion of green bonds will help fund voter-approved regional transit projects, including construction of more than 30 miles of light rail extensions. And in October of last year, the State of Washington sold $53 million of General Obligation Green Bonds. The State has indicated that proceeds will be used for projects identified as green project categories: 1. Protection of Puget Sound; 2. Habitat Conservation; 3. Energy Efficiency and Conservation; and 4. Clean Water Projects. Given the strong growth in green bond financing and investor demand we are likely to see more offerings both locally and globally in the coming years.
To download the Green Bonds Report, click here.