Ebook Green Fixed Income Investing
This white paper provides an overview of green fixed income investing and outlines some of the research, best practices, and opportunities currently available in the green fixed income marketplace. Green fixed income investing gained widespread attention in the United States in 2004, when an amendment to the American Jobs Creation Act of 2004 authorized the U.S. Treasury to issue $2 billion in bonds to finance the reclamation of contaminated industrial and commercial land.The "Green Bond" legislation, as the amendment has become known, contains strict requirements and is applicable only to revitalization projects of extraordinary size targeting brown fields.
Since 2004, initiatives of significantly smaller scale have become increasingly popular, offering fixed income investors a variety of project types and sizes as well as numerous geographical locations in which to invest. In recent years, green projects have multiplied throughout the United States as federal and state governments have embraced the mandate of energy efficiency. In December 2007, the Energy Independence and Security Act (EISA) of 2007 was signed, which responded to then President Bush’s “Twenty in Ten” challenge to improve vehicle fuel economy and increase alternative fuels. Twenty in Ten has the goal of reducing U.S. gasoline usage by 20 percent in ten years (2007-2017). In 2009, the American Recovery and Reinvestment Act of 2009 (the “Act”) was signed into law. One of the environmental goals of the plan is reviving the renewable energy industry and providing the capital over the next three years to eventually double domestic renewable energy capacity.
The Act lays the foundation for a more robust and sustainable 21st century economy and it is anticipated that with the Act’s passing, opportunities for fixed income investments in green initiatives will rise. For example, the Act increases the allocation available for Clean Renewable Energy Bonds (”CREBs”) and for Qualified Energy Conservation Bonds. CREBs are issued by state and local governments and provide tax credits to finance renewable energy projects. Qualified Energy Conservation Bonds are issued by state and local governments for projects which allow for energy improvement in public buildings, for green community projects including energy efficiency improvements in buildings and for renewable energy development and energy conservation projects.The Act also creates the new Build America Bond program which is intended to assist state and local governments in financing capital projects at lower borrowing costs to stimulate the economy and create jobs. Government initiatives like EISA and the Act should help increase bond production for green projects and provide investors with additional resources for investment in environmentally sustainable projects.
Contents
I. EXECUTIVE SUMMARY
II. INTRODUCTION
III. ENVIRONMENTAL BENEFITS OF GREEN FIXED INCOME INVESTMENTS
IV. OVERVIEW OF MARKET-RATE, GREEN FIXED INCOME INVESTMENTS
V. INCORPORATING GREEN FIXED INCOME INVESTMENTS INTO YOUR PORTFOLIO
VI. CONCLUSION
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