The idea of “green bonds” goes back at least a decade, to the first issuance in 2007. Development banks like the World Bank were the pioneers, and it only took a few years for the concept to filter down to state and local governments in the U.S.
EPC’s first paper under this project, “The Growing U.S. Green Municipal Bond Market: Labeled, QECBs, CREBs, and Unlabeled,” analyzes the current market for municipal green bonds. Green municipal bonds are at the intersection of “municipal bonds” and “green bonds”. They are debt securities issued by cities, counties, states, and other municipalities to finance projects with positive environmental impacts or refinance bonds previously issued for such purposes. Examples of green projects include: water efficiency improvements, mass transportation, energy efficiency upgrades, renewable energy, habitat conservation, environmental remediation, afforestation, and climate mitigation and adaptation measures in infrastructure development. In 2013, Massachusetts issued the first labeled green municipal bond in the U.S.2 By the end of 2016, about $7.5 billion in labeled municipal green bonds had been issued.
EPC’s report finds $18.2 billion in labeled municipal green bonds issued since 2013 and $79.8 billion in unlabeled green municipal bonds issued between 2005 and 2017. Labeling bond issuances as green can attract new investors for an issuance and give them confidence regarding the utilization of bond proceeds, but there can be significant transaction costs that may not be recouped by any price break or “green premium”. It is perhaps not surprising, then, that the volume of unlabeled municipal bonds used for green purposes is larger than that of the labeled universe.
The Growing U.S. Green Municipal Bond Market: Labeled, QECBs, CREBs, and Unlabeled,
June 2017
Green Municipal Bonds Paper Appendices
Contacts
For additional information on EPC’s green bonds project, please contact:
Mark Wolfe
202-625-0308
mwolfe@energyprograms.org
Donna Chen
dchen@energyprograms.org