Green investing options emerge as MARTA buys its first sustainable bonds
By David Pendered
Georgians who want to invest in the green economy are to have more opportunities as cities and states start spending federal infrastructure funds and local governments seek to borrow money to put into projects.
Green bonds have become pervasive in the market. Last week, MARTA provided the latest indication when MARTA’s board approved its first-ever green bond deal. The $369.6 million transaction is expected to save $62 million over the life of a loan the bonds refinanced. The bonds are certified as Green Bonds by Kestrel, an independent verifier, according to a statement from MARTA.
“This savings enhances MARTA’s financial position, allows for further investment in the state of good repair of our system, and demonstrates MARTA’s commitment to sustainability,” MARTA CEO Jeff Parker said in a statement.
Other investment opportunities are likely to emerge as local and state governments seek to borrow money through the municipal bond market to add to federal funds approved this year. The sums include $1.9 trillion in the American Rescue Plan Act, enacted in March, and the $1.2 trillion Bipartisan Infrastructure Bill, approved in November.
Some of this borrowing could be structured in green municipal bonds, a segment that was still in its infancy when Patrick Brett, head of Citi’s Municipal Debt Capital Markets and Capital Solutions, discussed it in a 2018 report by Citi.
Brett updated his outlook during a Dec. 16 panel discussion hosted by the Volcker Alliance and Penn Institute for Urban Research. Brett said the flow of money into green investment funds has reached the point that the self-regulating Municipal Securities Rulemaking Board, which he chairs, is gathering comments on potential transparency rules for the sector.
“In terms of capital market, more and more investors are interested in putting their money to work in that way, with that kind of theme,” Brett said of green investing. “There’s capital formation happening around these things, so that will lower the cost of capital for making these kinds of investments.”
Meanwhile, the Biden administration is in process of easing restrictions on pension-fund investments in green projects. Restrictions were enacted during the Trump administration. Japan and the European Union have provisions similar to those proposed by the Biden administration, according to the proposal.
Last week, the public comment period closed on a proposed rule that affects pension plans. The proposal would remove Trump-era barriers the U.S. Labor Department has determined as limiting pension-fund investments in climate change and other environmental, social and governance risks. These risks are “selected, in part, for benefits apart from the investment return,” according to the proposal.
On Monday, the growing influence of the green sector of the market was underscored. Five energy firms were delisted by two European investment funds for “lack of progress in managing climate change risk.” The decision came after three years of discussions between investors and companies.
Exxon Mobile and Marathon Oil were among those dumped by the British pension fund Nest and UBS Asset Management. UBS AM delisted the five firms across its Climate Aware funds, actively managed equity and fixed income sustainability fund, according to a statement released Monday by Nest.
“At Nest, we aim to work with companies to encourage sustainable business decisions but will draw the line somewhere,” Katharina Lindmeier, senior responsible investment manager, observed in the statement. “The five companies being excluded have not done enough to convince us that we should remain shareholders.”
“Through engagement, investors can be a force for good in influencing corporate behavior and accelerating action in those sectors where it is most needed,” Francis Condon, UBS AM’s head of thematic engagement and collaboration, observed. “However, where we have not seen tangible progress, we are taking action.”