New York's Metropolitan Transportation Authority officials are looking to go green, and they don't mean the map colors of the Lexington Avenue subway line.
Finance manager Patrick McCoy told members of the MTA board's finance committee on Monday that the authority wants to include a green-bond component – "all or some of it" – with its $500 million sale of Series 2016-A transportation revenue bonds in January or February.
According to McCoy, MTA finance officials are working on certification with the London-based nonprofit Climate Bonds Initiative, which is developing global standards, notably in transportation, for green bond issuance.
"We're working on what the standards are and how they will be applied," said McCoy. "This is not a self-anointed green bond because we're calling it that."
Chief financial officer Robert Foran said the move should help the MTA pull in more investors.
"The whole goal is looking for pockets of investor interest that would broaden the market," he said.
The MTA, one of the largest municipal issuers with roughly $36 billion in debt, is also consulting on the project with its sustainability director, Projjal Dutta.
"There is an emerging green bond market and a growing investor class that earmark funds for green investments," said McCoy. "The goal here is to set a precedent as a leading issuer for green bonds, not just in the U.S. but worldwide. "
Massachusetts in 2013 became the first state to sell green bonds, modeling them after the World Bank's sale in 2008. States including Connecticut, California, New York State and Rhode Island have joined the mix as have the District of Columbia and Massachusetts Institute of Technology. Connecticut has held three green bond sales, including a $65 million component to last month $650 million general obligation sale.
McCoy, who expects a strong outreach to retail as well as institutional investors, touted the sustainability record of the MTA, which operates New York City's subway system, Metro-North and Long Island commuter railroads, and several bridges and tunnels.
"Any electrified rail is green, and all the investments associated with electrified rail, whether it's commuter rail or subway, are considered green. And green buses, of course," said McCoy. "But the verification adds a level of certainty by the investor that it really is green."
The only additional cost for green bonds would be in the $25,000 to $35,000 range for a verifier, said McCoy.
Board member Jonathan Ballan, who warned the authority not to get caught up in marketing buzz, asked for a follow-up report.
"There's been no tax law change, there's been no state law change. This is largely marketing and perhaps – that's a perhaps -- this is an investor-driven thing," said Ballan.
"But I would hope we listen to our financial advisors to where we should be selling our bonds and not trying to be in front and trying to push something," he said. "I think we should market along our purpose."
