LOS ANGELES — Investors have yet to reward green bonds with better pricing, but there is growing demand for the niche, according to one speaker at the Bond Buyer's California Public Finance Conference.

"I haven't seen a pricing differential between green bonds and traditional bonds," said Julia Kim, vice president with Wells Fargo Securities and a member of a panel on green bonds.

Over time, Kim said she thinks the market might experience a pricing differential.

While investors aren't yet willing to pay more to purchase green bonds, there is demand for the bonds from large institutional investors who seek out green bonds over traditional bonds, she said.

Worldwide the market for green bonds has doubled in 2016 to roughly $80 billion by July compared to $42 billion in 2015, said Leonard Jones, a managing director for Moody's Investors Service.

In the United States, green bond investing has grown to $5 billion from $400 million over the past several years, Kim said.

The millennial focus on socially-conscious investing is part of the reason for the growth, Kim said, but traditional accounts are also creating funds targeting these investments.

Moody's, Fitch Ratings and S&P Global have also come up with way to analyze the greenness of green bonds.

The first green bond was issued in 2007, but Jones said what the bond proceeds were being used for was amorphous.

Guidance from the rating agencies helped investors discern which bonds were really being used for green projects and which were really "green-washing" projects that weren't environmentally beneficial.

"We thought the way to help this market was to come up with a green bond assessment," Jones said. "We had some experience looking at credits and setting up ratings for sovereigns. We used that same process to come up with a green bond assessment."

Though Moody's always has considered environmental factors in its rating, what changed is it laid out details specific to the programs being targeted with the bonds, he said.

Some market participants don't see refunding bonds as green bonds, because they are not used for new green projects, Kim said. Even it is refunding a LEED certified building, some investors would not consider the bonds green, because the project has already been completed, so it is not contributing to future environmental strides, she said.

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