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December 10, 2014
Green Bonds Growth a Positive Development in 2014
    by Robert Kropp

In a year when ExxonMobil rejects stranded assets and half a million march for climate in New York, green bonds offer an increasingly popular fixed-income investment strategy for sustainable investors.


Prospects for an encompassing agreement among nations at the Lima Climate Change Conference, remote at best to begin with, are receding faster than an out-of-control gas guzzler headed for a cliff.

Capping a calendar year in which global emissions continued to increase even with the publication of the Fifth Assessment Report of the the IPCC, which unequivocally warns that the makings of an impending climate crisis are already upon us—the Conference reveals yet again the disconnect between scientific reality and the self-interest behind national and international political maneuvering.

Some advances, however, were recorded. The concept of stranded assets not only contributed to the impressive growth of the fossil fuel divestment movement; in response to shareowner engagement, ExxonMobil even agreed to report on the financial risks associated with the reserves that scientists have concluded must stay in the ground if the worst effects of climate change are to averted.

Of course, Exxon's report effectively denied the company's responsibility to the planet, offering as justification for planning to burn all its reserves the opinion that society will want it that way.

2014 also revealed that a decently sized swath of that society does not intend to grant ExxonMobil and its industry peers the social license to bring about the worst effects of climate change for their profit. Half a million marchers in New York City, and many more in other cities around the world, gathered to state the obvious: that continuing to burn fossil fuels will be suicidal, and that technologies exist already that can be used to bring about a low-carbon economy.

So how do we pay our way to that economy? Divestment from fossil fuels is largely symbolic, unless it is accompanied by reinvestment in renewable energy technologies. Sustainable investment firms such as Green Century Capital Management offer fossil fuel free investment opportunities, but information on its website does not indicate that its Equity Fund invests in renewables; the firm's Balanced Fund, however, does invest a significant portion of its assets in green bonds.

Green Bonds constitute another of the few bright spots for the climate in 2014. At the United Nations in January, a coalition of investment banks organized by Ceres announced its support for the Green Bond Principles (GBP). According to Ceres, the Principles “serve as voluntary guidelines on recommended process for the development and issuance of Green Bonds. They encourage transparency, disclosure and integrity in the development of the Green Bond market.”

At a February webinar hosted by A s You Sow, Amelia Timbers of the organization stated, “In 2013, there were over $10 billion in green bonds issuances, and that figure is expected to double in 2014.” But by June, Bloomberg reported, “At its current pace, total 2014 volume could surpass $40bn, triple the $14bn issued in 2013.”

In September, while marchers on behalf of the climate filled the streets of New York, a group of institutional investors published an Investor Statement, which welcomed the evolution of the Green Bonds market. “We, as investors and fiduciaries, understand that we have a responsibility to address threats to the future performance of our investments from climate change,” the signatories wrote.

As You Sow recently published Green Bonds in Brief, which reports that Bloomberg's forecast in June was on the mark: according to the Climate Bonds Initiative, over $35 billion have been invested in Green Bonds thus far this year.

“While green bonds are not a panacea for closing the tremendous financing gap needed for sustainable projects, they can provide a significant proportion of the needed capital,” the report states. “Green bonds also offer an opportunity to advance important environmental projects while sidestepping the US’ paralyzed national political processes, thus moving the economy in a cleaner more sustainable direction without legislation.”

 

 
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