The Rise in Green Bonds: What This Means for Investors and Our Planet
In the first half of 2021, the total value of new green bonds issued reached $248.1 billion, more than the value of all bonds issued in all of 2020.
Green bonds help finance environmental and climate change mitigation projects around the world, and they’re already proven to be an effective way to mobilize private capital. They have the same fundamental risk and return characteristics as conventional bonds, and investors may not need to sacrifice yield or assume additional risk to add these fixed income options to their portfolios.
The rising use of green bonds is great news for our planet. We need to invest roughly $6.9 trillion in sustainable infrastructure each year up to 2030 to meet the goals of the Paris Agreement – and government budgets are insufficient. Green bonds are playing an increasingly important role in mitigating climate change.
Green Century° was an early proponent of green bonds. The Green Century Balanced Fund purchased its first green bonds in 2008, when they were still a new development. Today, green and sustainable bonds constitute more than 60 percent of the fund’s fixed-income holdings.1
While the marketing of green bonds is expanding, not all “green” bonds fund projects with clear and measurable environmental benefits. To ensure that you and your clients are making an impact, you may want to seek bonds that follow the standards that we use:
- Have earned the Green Bond label. While the term “green bond” is not legally defined in the U.S., many issuers abide by voluntary third-party standards that determine which projects are eligible for green bond financing.
- Follow value-based screens. We do not invest in bonds associated with fossil fuels, tobacco, factory farms, GMOs, nuclear power or weapons (including U.S. Treasury bonds).
- Score highly on the issuer’s financial standards, credit quality, and Environmental, Social, and Governance (ESG) criteria.
- Make an impact. We seek solution-oriented bonds, including those that provide clean water, public transportation and renewable energy.
A sustainable investment strategy which incorporates environmental, social and governance criteria may result in lower or higher returns than an investment strategy that does not include such criteria.
Recently, the Balanced Fund purchased a green bond issued by Visa, Inc.,* which is the first green bond in the digital payments industry and exemplifies the expanding options available to investors. This bond supports sustainable buildings, energy efficiency renovations, on-site clean energy projects and clean energy purchasing. In under a year, these projects helped Visa reduce its carbon emissions by over 125,000 metric tons CO2e, equivalent to the emissions from powering 15,000 homes for one year, and work towards its goal of carbon neutrality by 2040.
Since green bonds’ purpose is known, investors can see the difference they’re making, whether by helping coffee farmers in Africa adopt more sustainable practices (Starbucks Sustainability Bond*) or expanding public transportation to reduce carbon pollution (The San Francisco Transbay Transit Bay Bond*). Adding green bonds to a portfolio allows your fixed income holdings to make a positive impact.
Article by Leslie Samuelrich, who leads Green Century’s unique three-pronged approach combining a fossil fuel free sustainable investing strategy with award-winning shareholder advocacy and support of environmental nonprofits. The Green Century Funds have experienced 570 percent growth under her leadership and reached $1B AUM recently.
Ms. Samuelrich has more than 30 years of experience in ESG investing, corporate engagement, and environmental and public health advocacy. Her comments have appeared in The Wall Street Journal, Bloomberg, the New York Times, and many other outlets. She is serving her second term on the Board of Directors of the Forum for Sustainable and Responsible Investment (USSIF), was honored with the 2019 SRI Service Award and selected as one of the “43 World-Changing Women in Conscious Business” in 2020.
About Green Century Capital Management
° Green Century Capital Management, Inc. (Green Century) is the investment advisor to the Green Century Funds (The Funds). The Green Century Funds are the first family of fossil fuel free, responsible, and diversified mutual funds in the United States. Green Century Capital Management hosts an award-winning and in-house shareholder advocacy program and is the only mutual fund company in the U.S. wholly owned by environmental and public health nonprofit organizations.
Footnote: 1. As of June 30, 2021, green and sustainable bonds comprised 62.42 percent of total bonds held in the Green Century Balanced Fund.
* As of June 30, 2021, Visa, Inc., Starbucks Corporation, San Francisco Bay Area Rapid Transit District, the U.S. International Development Finance Corporation comprised 0.49%, 2.07% and 0.00%; 1.89%, 0.69% and 0.00%; 0.54%, 0.00% and 0.00% and 1.49%, 0.00% and 0.00% of the Green Century Balanced Fund, the Green Century Equity Fund and the Green Century MSCI International Index Fund, respectively. References to specific securities, which will change due to ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or their distributor.
You should carefully consider the Funds’ objectives, risks, charges and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds, please visit www.greencentury.com for more information, email email@example.com or call 1-800-934-7336. Please read the Prospectus carefully before investing.
Stocks fluctuate in response to factors that may affect a single company, industry, sector, country, region or the market as a whole and may perform worse than the market. Foreign securities are subject to additional risks such as currency fluctuations, regional economic or political conditions, differences in accounting methods, and other unique risks compared to investing in securities of U.S. issuers. Bonds are subject to risks including interest rate, credit, and inflation. A sustainable investment strategy which incorporates environmental, social and governance criteria may result in lower or higher returns that an investment strategy that does not include such criteria.
This information has been prepared from sources believed to be reliable. The views expressed are as the date of this writing and are those of the Advisor to the Funds.
The Green Century Funds are distributed by UMB Distribution Services, LLC. 235 W Galena Street, Milwaukee, WI 53212. 10/21