Green Giants: A New Investment Opportunity

Savvy advisors can take advantage of the expanding global green bond market while pricing is still competitive. Several SRI investment managers have underwritten the latest $1 billion IMF issue, which is being used to finance energy efficiency and alternative generating capacity in developing economies around the world.1This is good news, since we are way behind China, the UK and France in capitalizing this market opportunity for US investors.2

The Time Is Right

Competitive pricing won’t last long, however, as several giants of the financial services industry are awakening to the need for green bond debt. CERES raised the clarion call around this need in a May 2013 study, noting that relatively small (under $100 million) building retro-fit green bond issues have come to market in recent years through municipal and corporate issuers.3

These issues don’t raise large enough pools of capital market assets to attract the industry’s large fixed income buyers. But it’s just a matter of time. Green bonds have attracted the support of mayors from major cities in the US, who are publicizing the need for more of the same, not only in the US but around the world. The need could not be greater or more urgent for coastal communities facing rising sea levels during the next 50 years.4

Competitive Advantage

The opportunity in this situation for SRI advisors is to position retail clients in the green bond market alongside smaller institutional investors while pricing of these smaller issues is still competitive. Uncovering this kind of value in the financial markets is an advantage for SRI advisors, and another way you can position yourself as the “Go To” advisor for SRI strategies in your community.

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1 “Central banks, corporates and SRI investors snap up new $1 billion IFC green bondds,” Daniel Brooksbank, Responsible Investor, November 6, 2013. http://www.responsible-investor.com/home/article/central_banks_and_corporates_ifc/
2 “Climate Bond Market Doubles to $346bn in 2012,” Business Green, June 14, 2013. www.businessgreen.com.
3 “Power Factor: Institutional Investors’ Policy Priorities Can Bring Energy Efficiency to Scale,” CERES, 2013. www.ceres.org.
4 “South Florida Faces Ominous Prospects From Rising Waters,” Nick Madigan, November 10, 2013. New York Times: http://nyti.ms/1gC0pCE.