A new breed of muni bond is financing climate change adaptation

Cassie Owens in Next City: Scott Stringer has his way, New York will soon be the nation’s largest municipal player in the burgeoning green bond market. On Wednesday, Stringer, the city comptroller, proposed a new program for issuing municipal bonds specifically dedicated to financing climate-friendly projects. Announced during UN Climate Week, Stringer’s proposal came a few days after Mayor Bill de Blasio unveiled a plan to cut the city’s greenhouse gas emissions by 80 percent by 2050.

Internationally, interest has grown in green bonds as cities like New York embark on record numbers of big-ticket infrastructure projects aimed at boosting resilience to climate change. In New York alone, the tab on the planned projects will exceed $27 billion over the coming years. In 2014, worldwide green bonds issuance is expected to nearly quadruple last year’s total, and in another Climate Week announcement, several major investment banks such as Zurich, Barclays and Aviva made promises to invest in the bonds and help strengthen the market.

New York isn’t the first city to see opportunity in green bonds. In July, the District of Columbia Water and Sewer Authority issued a $350 million, 100-year certified green bond. The $2.6 billion project will all but rid the city of combined sewer overflows, or treat wastewater from multiple pipes and tunnels that would have otherwise flowed altogether into the city’s rivers. Investors placed orders for about $1.1 billion worth of bonds, with about $100 million coming from those specifically focused on green bonds, the Wall Street Journal reported. George Hawkins, general manager of the water authority, told the Journal that the robust reception from Wall Street was unusual; the green bond “brought more investors to the table” than a regular bond might have.

D.C. Water and Sewer CFO Mark Kim believes that green bonds could be great for other utilities. D.C. Water and Sewer will certainly be issuing more. “Our intent is to finance all remaining capital expenditures for the Clean Rivers Project with a green bond,” Kim says.

Green bonds have been slow to catch on. The World Bank sold the first green bonds in 2008 as part of its efforts to encourage climate change adaptation and mitigation, but the bonds didn’t pick up steam in America until 2013. Experts say total bond issuance is on track to reach $40 billion by year’s end, a pool of money that will in large part go to strengthening infrastructure, including water systems, electrical grids and transportation networks.

What green bonds bring to the table is a not a new order, but rather a new label for reaching investors interested in climate-friendly projects. Matt Fabian, a managing director of Municipal Market Advisors, points out the processes for a muni green bond and any other muni bond are identical....

Driving on the Verrazano Narrows Bridge, shot by Bob Jagendorf, Wikimedia Commons via Flickr, under the Creative Commons 2.0 license