Friday, January 6, 2017

California Green Muni Bonds Top $1.3 Billion in 2016

Record Year; 3 Year Total Over $2 Billion


California government agencies are showing increasing leadership in the green financing marketplace.

In 2016, California agencies issued over $1.38 billion in labelled green bonds, or nearly a $1 billion over the 2015 total.

In the three years since the State Treasurer's Office issued the first California green bond, there have been over $2 billion in government issued green bonds in the state.




Green bonds are used to finance projects with environmentally positive attributes.  Some of the projects, such as renewable energy or energy efficiency projects, may contribute positively to climate solutions.  Others may assist with climate adaptation.  Green bonds are often used to finance projects that provide the infrastructure that will be needed in a world responding to climate change, including mass transit and clean water.

Many investors are looking for assistance in evaluating the attributes of a green bond, such as the worthiness of the underlying projects, transparency, disclosure and other factors.  The two major certification schemes for green bonds are the Green Bond Principles and Climate Bond Standards.  In addition, ratings agencies S&P and Moodys and others have developed evaluation tools.

The Climate Bond Standards validate the environmental integrity of the bond, assuring that the projects funded have positive environmental benefits and are consistent with current practices.  The Standards are sector-specific and are developed with input from experts and stakeholders.  The Climate Bonds Standards process is overseen by an Advisory Board that includes the California State Treasurer (John Chiang) and a representative of  CalSTRS - the California State Teachers Retirement System (Cathy DiSalvo).

The Green Bond Principles are more focused on the attributes of the bond, including transparency, reporting and disclosure.  The principles are intended to assist financial markets and investors in assuring the integrity of green bonds and green bond transactions.  The Principles are overseen by the International Capital Markets Association, with advice from a range of stakeholders including CalSTRS.

The Climate Bonds Standards and Green Bond Principles are complementary and it is possible to be certified to both.

The Standards are seen as providing more robust environmental requirements.  A recent bond issued by the San Francisco Public Utilities Commission for water projects was the first to use the new Climate Bond Standard for Water.

The trends in California are consistent with growth in the green bond market internationally.  According to the Climate Bonds Initiative, over $81 billion in green bonds were issued worldwide in 2016, about double the amount issued in 2015.

Preliminary 2016 data showed $81 billion in Green Bond issuances.
source:  ClimateBonds.net


The largest government agency green bond issuers in California in 2017 were the San Francisco Public Utilities Commission ($500 million for clean water projects), California Infrastructure Bank ($410 million for clean water),  Los Angeles County Sanitation District ($170 million for reclaimed water and sewage system improvements), and the San Diego Unified School District ($100 million for green building projects.

Below is the latest CalGreenFinance summary of California government agency issued green bonds:




Government agencies weren't the only entities issuing green bonds 2016.  Among private companies, Apple Computer issued a $1.5 billion green bond for green building and other environmental related projects.  

California based Renovate America has issued nine green bonds totalling nearly $2 billion for financing related to energy retrofits. Their most recent issuance in September totalled $264 million to assist with over 9,000 home retrofits in 36 California counties and attracted investors from around the world.  "We are grateful to all of our existing and new investors across the globe who are making it possible for Americans to finance home improvements that enhance local infrastructure, create jobs and that conserve water, save energy, and reduce our carbon footprint," said Renovate America Head of Investor Relations Nicole Montecalvo.

California Treasurer John Chiang is expected to be increasingly involved in green bond markets in 2017 following intensive work by his office in analyzing the marketplace (see CalGreenFinance story from January 2016:  Green Bonds: California Treasurer Chiang Explores Expanded Role).

2017 is expected to be another record year for green bonds worldwide.  California state and local agencies as well as California-based companies will continue to be significant participants in this marketplace.



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