How Green Bonds Work
What You Need To Know About This Innovative Way Of Financing A Cleaner Planet

How
Green
Bonds
Work
What You Need To Know About This Innovative Way Of Financing A Cleaner Planet

How Green Bonds Work

  • What Are Green Bonds?

  • Green Bonds Glossary

  • Green Bonds Are
    Making A Difference
    Around The World

  • Who Is Involved In Green Bonds?

  • How Can Individual Investors Get Involved?

  • Investing In Bonds: The Basics

  • Bank of America: A Leader
    In the Green Bond Market

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What Are Green Bonds?

Businesses and government entities issue green bonds to raise funds for a range of environmental projects. Like other bonds or debt securities, green bonds allow investors to earn interest, and to receive their principal back at maturity.

What makes green bonds different?
Green bonds finance projects that support:

What makes green bonds different? Green bonds finance projects that support:

What Are Green Bonds?

What Are Green Bonds?

Biodiversity conservation

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A number of species on earth are threatened by habitat loss, degradation and fragmentation.

Conservation efforts are focused on maintaining biological diversity and habitat restoration; one example might be a reforestation project.

Renewable energy

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This energy comes from naturally replenished resources like sunlight, wind, waves or geothermal heat.

Projects such as large-scale wind farms collect and deliver energy from these sources.

Energy efficiency

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These projects promote the reduction of energy required at all stages of consumption.

For example, one project in China supported by a green bond is focused on improving energy efficiency in factories and therefore reducing greenhouse emissions.

Sustainable waste management

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Waste dumped in landfills produces toxic gases that contribute to global warming and pose risk to human health.

Green projects help reduce the waste going to landfills and bring practices in line with environmental standards.

Sustainable land use

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These projects can promote open space conservation and restoration.

Clean transportation

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Clean-energy trains and other public transportation systems contribute to healthier air quality by lowering the number of cars on the road.

Sustainable water management

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Projects can protect water resources while also supporting flood protection as the climate changes.

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What Are Green Bonds?

What Are Green Bonds?

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Green Bonds Glossary

Here’s a breakdown of the four most common types.

Green Bonds
by Type

Green use of proceeds bonds

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From investment-grade issuers such as financial institutions and corporations, and earmarked for a variety of green projects.

Green asset-backed bonds

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Issued by a pool of smaller assets, which might be leases for rooftop solar panels or mortgages for energy-efficient homes.

Green project bonds

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Issued for specific green projects, like a large wind farm or transit systems. The project’s assets and profits are used to fund the bond debt.

Pure play bonds

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Issued by companies whose revenues stem entirely from the environment sector, such as a wind-turbine manufacturer, electric-car producer, or waste recycling plant. Bonds issued by these companies are green by definition, because of the nature of their businesses.

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Green Bonds Glossary

Green Bonds Glossary

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Green Bonds Are Making
A Difference Around The World

Europe and the U.S. remain the largest regions for issuers, but Asian and Latin American issuers are a growing percentage of the market. Green bonds are funding environmental projects in all parts of the globe, including emerging global markets. Asia is expected to be one of the key growth areas for green bonds. China is now the largest domestic green bond market in the world, with $27 billion in new green bond issuance in 2016, according to Bloomberg New Energy Finance.

Select a bond type to see:
What types of projects each one is funding and
the regions where those projects are focused.

Swipe down to see:
Bond types, the projects each one is funding and the regions where those projects are focused.

Green Bonds Are Making A Difference Around The World

Green Bonds Are Making A Difference Around The World

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Sustainable Forestry

Sweden

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Waste Recycling Co.

France

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Wind Turbine Manufacturing

Denmark

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Solar Energy Farm

UK

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Leases and Loans for
Hybrid Vehicles

USA

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Leases and Loans for
Rooftop Solar Cells

USA

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Wind Farms

Peru and Mexico

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Wind Turbine
Manufacturing

Germany

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Reducing Air Pollution, Providing Clean Water
and Flood Prevention

California

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30 Miles of Light Rail
Extensions

Washington

SELECT A BOND TYPE BELOW:

Securitized Bonds

Municipal Use-of-Proceed Bonds

Project Bonds

Pure-Play Bonds

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Swipe Right
To See Bond Types

What it is and the types of projects that it’s funding - The regions where those projects are focused

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Pure-Play Bonds

Location:

Sweden, UK, France, Denmark


Project(s)

Sustainable Forestry

Solar Energy Farm

Waste Recycling Co

Wind Turbine Manufacturing

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Securitized Bonds

Location:

USA


Project(s)

Leases and Loans for Hybrid Vehicles

Leases and Loans for Rooftop Solar Cells

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Project Bonds

Location:

Peru and Mexico

Germany


Project(s)

Wind farms

Wind turbine manufacturing

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Municipal
Use of Proceed Bonds

Location:

California

Washington


Project(s)

Reducing air pollution, providing clean water

and flood prevention

30 miles of light rail extensions

Green Bonds Are Making A Difference Around The World

Green Bonds Are Making A Difference Around The World

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Who Is Involved In Green Bonds?

Several kinds of investors are able to participate in green bonds.

Who Invests In Green Bonds

  • Pension Funds

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    Pension Funds

    Why?

    • To meet goals: Many corporations have sustainability goals for their pension funds to help address their long-term liabilities.

    • To attract investors: Climate-conscious investors seek out these investments to align their retirement investments with their interests and values.

  • Individuals

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    Individuals

    Why?

    • For good: 49% of Boomers, 70% of Gen-Xers and 85% of Millennials consider environmental, social and political issues an important factor in their investment decisions.

    • For lower risk investing: Green use of proceeds bonds are on an equal footing with other debt from the same issuer. They can make up some or all of a fixed income allocation.

  • Institutions

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    Institutions

    Why?

    • To collaborate: 120 institutional investors from nine countries have joined the Institutional Investors Group of Climate Change.

    • For transparency: Over 60 institutional investors have signed the Montreal Climate Pledge, stating clearly how they will commit to climate change goals.

    • To invest responsibly: More than 1,500 institutions around the world are signatories of the United Nations Principles for Responsible Investment.

  • Asset Managers

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    Asset
    Managers

    Why?

    • To meet demand: Consumers often express interest in investing in green bonds.

    • To manage risk: Investments that promote a low-carbon and clean energy economy may reduce overall portfolio risk.

  • Insurance Companies

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    Insurance Companies

    Why?

    • To align assets to liabilities: Green bonds can provide steady long-term fixed-income assets.

    • To manage risk: An increase in the number of extreme weather events can affect insurance company payouts.

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    How Can Individual Investors Get Involved?

    A variety of strategies can help you support different green projects.

    Here is what you can do to get involved.

    A variety of strategies exist to help investors support green projects. Never underestimate the change that can be effected by committed individuals.

    How Can Individual Investors Get Involved?

    How Can Individual Investors Get Involved?

    Drag
    Seedling
    Here To Get
    Involved

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    You can…invest personally in green bonds and green bond funds,
    and share information with friends and family.

    Repeatedly
    Click Here

    Repeatedly
    Press Here

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    You can…encourage institutions such as universities,
    pension fund or asset managers and employers to invest in green bonds.

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    Universities

    Pension fund or asset managers

    Employers

    Click Here

    Press Here

    Click Here

    Press Here

    Click Here

    Press Here

    Press
    and Hold
    Here

    You can…ask your employer to add a green bond fund to your 401(k) or other retirement investment options, and encourage them to issue a green bond.

    Drag
    Seedling Here
    To Continue

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    It’s that simple.

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    > Click here to learn the basics of investing

    > Press here to learn the basics of investing

    Or scroll to begin

    How Can Individual Investors Get Involved?

    How Can Individual Investors Get Involved?

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    Investing In Bonds: The Basics

    Bonds generate interest payments to the investor over time. The bond issuer promises to pay fixed interest for a set number of years and to repay the original amount in full on the maturity date.

    The
    basics
    of investing
    in bonds

    1

    Step
    1

    2

    Step
    2

    3

    Step
    3

    4

    Step
    4

    DRAG ME

    Investors purchase bonds,
    which transfer funds to the issuer.

    The issuer gives the investor a promissory
    note that specifies the coupon rate and payment frequency, whether quarterly, semi-annually or annually, as well as the maturity date.

    The issuer pays the bondholder
    interest each year at a rate
    that doesn’t change.

    When the bond reaches maturity,
    the issuer repays the principal plus
    the final interest payment.

    Issuer:

    Corporations, governments, government agencies, U.S. municipalities or banks

    Coupon:

    The annual interest rate paid on a bond, expressed as a percentage of the face value

    Maturity:

    The date when the principal amount of a bond or other debt instrument comes due, and is repaid to the investor

    Principal:

    The amount borrowed or still owed on a bond, separate from interest

    Investing In Bonds: The Basics

    Investing In Bonds: The Basics

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    Bank of America: A Leader
    In the Green Bond Market

    Supporting a low-carbon future is core to Bank of America’s responsible growth strategy and developing a robust green bond market is a natural extension of that strategy. Green bonds help to fund clean energy and other sustainability projects for clients across the globe, and are a key part of Bank of America’s $125 billion multi-year environmental business commitment.

    Since 2007, Bank of America has provided more than $70 billion in financing toward low-carbon and other sustainable business activities–including solar, wind, energy efficiency and sustainable transportation.

    2007The first green bonds are issued by the European Investment Bank and underwritten by Merrill Lynch.

    November 20132010Merrill Lynch underwrites the first green retail bonds, issued by the World Bank and sold through Merrill Lynch Wealth Management.

    2013The first corporate green bonds are issued by Bank of America, Vasakronan and EDF. Suzanne Buchta, now Managing Director and Global Head of Green Bonds at Bank of America Merrill Lynch, together with Citibank’s Mike Eckhart, publish “A Framework for Green Bonds,” which form the basis of Green Bond Principles.

    2014Buchta and Eckhart garner support from multiple other banks as “A Framework for Green Bonds” is republished as Green Bond Principles. The authors formally name International Capital Markets Association as the secretariat for this living set of guidelines.

    October 2014Oct 2014Bank of America Merrill Lynch launches its Green Bond Index (ticker: GREN). The green bond market gains momentum and total issuance more than doubles from 2013.

    2015Green bonds hit almost $46 billion, and Bank of America Merrill Lynch is the number-one underwriter of green bonds for the last two years according to Bloomberg New Energy Finance. Bank of America issues its second corporate Green Bond for $600 million.

    2016Green bond issuance tops $95 billion, and Bloomberg New Energy Finance recognizes Bank of America Merrill Lynch for the third straight year as the number-one underwriter of green bonds. Bank of America issues its third and largest green bond for $1 billion, furthering the company’s commitment to advancing renewable energy generation.

    Bank of America: A Leader in the Green Bond Market

    Bank of America: A Leader in the Green Bond Market

    >  Learn more about Bank of America’s commitment to green financing

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