The market for green bonds is building exponentially and New York City should tap it for multiple benefits, city Comptroller Scott Stringer said Monday.
"Now is the time for New York to enter the market," Stringer said at a Municipal Forum of New York luncheon - two days before Earth Day and concurrent with a market study his office released on environmentally conscious securities - Stringer said total issuance last year more than tripled 2013 levels, with more than $36 billion issued worldwide.
That total could reach $100 billion by the end of this year, he added.
"This represents an opportunity to tell the marketplace and residents that we're thinking about the city in the long term," he said at the Urban League in Midtown. "We want to call it our program and provide nationwide leadership."
Massachusetts two years ago became the first state offering green bonds, modeling its sale after the World Bank's inaugural 2008 issuance. Connecticut on Wednesday intends to sell $250 million to finance wastewater and drinking water infrastructure projects statewide in its first all-green bond sale. That state sold $60 million in such bonds last fall as part of a $300 million general obligation sale.
Stringer said green bonds help expand the city's investor base and could save taxpayer dollars.
Monday's report is an update to a report Stringer's office issued last September. Over the following months, representatives of Stringer's office and the Mayor's Office of Management and Budget met with seven "significant institutional" green bond buyers and investment firms focused on environmental, social and government matters.
According to Stringer, several investors identified a potential "halo" effect on the city's reputation from administrating a successful green bond program. They also cited the reputational benefit to the city from providing leadership to such an expanding market.
"We do things differently in New York. We have attitude, we have moxie, but we're also entrepreneurial," he said.
Other benefits, he said, would including the promoting of further investment in resiliency projects deemed necessary in the aftermath of Hurricane Sandy. Stringer also said that the sheer size of New York City's involvement would open up a new type of environmental-related capital investment for large cities and small towns worldwide.
Other investor priorities, said the report, including the ring-fencing of proceeds; process and disclosure for project evaluation and selection; the green-labeling of eligible projects the city could finance with general obligation, Transitional Finance Authority and Municipal Water Finance Authority bonds; third-party verification and impact reporting.
Stringer's report said investors were unwilling to accept lower yields for a green bond, but most were willing to accept spread tightening in the pricing process depending upon supply and demand. It also said that retail buyers would accept longer duration in a green product than typically for municipals; and that green buyers would be more willing to buy out-of-state bonds to get the green product.
