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September 15, 2014
Opportunities for Green Bond Investment Increasing
    by Robert Kropp

The investment advisory firm Community Capital Management publishes a white paper describing several green bond opportunities that have become increasingly popular among sustainable fixed income investors.

In February, following a webinar hosted by A s You Sow, I titled my article for, Is 2014 the Year for Green Bonds? In January, a consortium of banks brought together by Ceres endorsed the Green Bond Principles (GBP), a set of recommended guidelines for issuing in green bonds.

At the February webinar, Amelia Timbers of As You Sow said, “In 2013, there were over $10 billion in green bonds issuances, and that figure is expected to double in 2014.” Her prediction has turned out to be far too conservative, according to Bloomberg New Energy Finance. “A record $16.6bn of green bonds have been issued to-date in 2014, driven by a surge in corporate self-labelled issuance and sustained volumes from large international and supranational banks,” Bloomberg reported in June. “At its current pace, total 2014 volume could surpass $40bn, triple the $14bn issued in 2013.”

The astute reader will have noticed by now that no definitive description of green bonds has been forthcoming as of yet. According to a new white paper from Community Capital Management (CCM), a fixed income investment advisor headquartered in Florida, “the green bond nomenclature still runs far and wide with a variety of differing opinions.”

In its white paper, CCM—whose flagship CRA Qualified Investment Fund recently celebrated its 15th anniversary—seeks to provide potential investors with a variety of options now available in a rapidly evolving investment landscape. “For investors interested in green investing, fixed income is a great place to start,” the paper states. Not only are fixed income investments generally considered to be lower risk; “fixed income securities are designed to positively encourage sustainability, as opposed to employing negative screens,” the paper continues.

Among the fixed income products described by CCM are agency mortgage-backed securities, which fund the sustainable development or redevelopment of multifamily properties; municipal bonds, which are issued by state or local governments to fund environmentally sound infrastructure and other projects; federal government-related securities, which provide credit to low- and moderate-income communities; and international fixed income products such as the World Bank Green Bonds, which “support World Bank lending for eligible projects that seek to mitigate climate change or help affected people adapt to it,” CCM stated.

“Corporations can issue green bonds with proceeds specifically earmarked to financing projects addressing environmentally sustainable initiatives,” the paper continued. In fact, as Bloomberg pointed out in its outlook, corporate bonds are among the fastest-growing green fixed income investment products; the annual market for them is expected to double in 2014.

A response to the growth of the green bond market itself has been the development of indexes to serve as benchmarks. In July, Barclays and MSCI announced the launch of the Green Bond Index. "With an increase in Green Bond issuance, we have seen demand from institutional investors for a new benchmark in this emerging and rapidly growing market," said Brian Upbin, Head of Benchmark Index Research at Barclays.

“Green bonds are changing the landscape of available investment products, helping to address solutions to global environmental challenges, and there are a variety of options to choose from for institutional and individual investors,” CCM's white paper concluded. “We believe this will continue to grow in the future as investors, in particular millennials, look to make a positive impact in their communities and worldwide via their investment portfolios.”


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