Funding Clean Energy Projects with Green Bonds

Green Bonds were introduced to the world stage in the mid-2000s by government and public-sector organizations like the European Union and the World Bank as a way to fund international environmental policy programs. The World Bank Group is the largest source of green bonds, issuing about $4 billion since 2008 to address pressing human issues such as poverty, disease, food shortages, air and water pollution resulting from population growth, environmental degradation and regional conflicts.

Today, independent banks and investment firms are issuing their own green bonds that connect socially responsible investors with initiatives to fund clean energy projects that help advance lower-carbon economic solutions while addressing climate change and reducing demands on natural resources. The bonds also provide investors with opportunities to earn tax-exempt income and attract a new subset of investors, which in turn, equates to lower borrowing costs.

Today, even mid-sized and smaller companies are seeking to raise money that support economically viable and environmentally friendly projects around the world. Green Bonds offer them an avenue to fund specific projects such as solar, wind, and geothermal energy or improving energy efficiency by reducing consumption, retrofitting lighting, and building insulation in residential, commercial, and public properties. Holders of the bonds are not exposed directly to the risk of each project. The bond pays interest and repays the principle like any other corporate bond. The banks generally manage the risks and the bondholders invest in a manner that fits their financial goals.

Green Bonds, also called Climate Bonds, are screened and certified by the London-based Climate Bond Standards Board to help investors and governments assess the integrity of the bonds.

On December 25th, 2013, posted in: Latest News by Vinay Loganadan
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