Aligning green investment with citizen engagement
During World War II, more than 80 million Americans purchased Series-E War Bonds to support their country and their troops in the fight for liberty and freedom. The war was an expensive effort, both in terms of the loss of human life and financial costs. Through the purchase of War Bonds, individual investors contributed the equivalent of $3 trillion in today’s dollars. It was an incredible mobilization of capital for a greater cause, and it parallels an obstacle we face when confronting climate change.
Connecting capital to projects that reduce greenhouse gas (GHG) emissions is at the core of our struggle against climate change. The existing capital markets provide a great opportunity to do just that through green bonds. Since the first issuance of a Green Bond in 2007, there has been a marked increase in the issuance of green bonds with more than $250 billion issued globally in 2019.
At the Connecticut Green Bank, our mission is to confront climate change and provide all of society a healthier and more prosperous future by increasing and accelerating the flow of private capital into markets that energize the green economy. To achieve this mission, we must partner with the communities we serve by engaging citizens to invest in clean energy. The more we can engage citizens to invest, the more momentum we can create allowing us to foster not just renewable energy projects but also community. Imagine a world empowered by the renewable energy of community.
To this end and in continued celebration of Earth Day’s 50th anniversary earlier this year, the Connecticut Green Bank created the Green Liberty Bond. These bonds are a category of lower-dollar denomination bonds available to individual investors, the proceeds of which are independently certified as financing projects with climate and environmental benefits.
A Green Liberty Bond is a “green bond” that has three specific features to it:
- The use of proceeds from the bond must go toward projects that confront climate change (i.e., both mitigation and adaptation) and create jobs in our communities.
- Modeled after the Series-E War Bonds of the 1940s, the bonds must be able to be purchased by everyday citizens through denominations no more than $1,000.
- Because we want more and more citizens to buy Green Liberty Bonds, there must be consumer protections embedded within the bonds. Green Liberty Bonds are required to have independent certification and verification that the proceeds are being invested to confront climate change.
This initial Green Liberty Bond issuance is backed by the solar photovoltaic system production from over 4,800 Connecticut residences or the equivalent of 39 megawatts of clean energy generation. The Solar Home Renewable Energy Credits (SHRECs) generated by these systems are sold to the state’s utilities and will generate the revenue to back the bonds over a 15-year term.
The issuance has also been certified to meet the Climate Bonds Initiative (CBI) standard for zero-carbon renewable energy resources (solar PV) through Kestrel Verifiers. CBI is the gold standard in assuring bond proceeds have the intended climate impact.
The first Green Liberty Bond offering of $16.7 million to both retail and institutional investors was over-subscribed, reflecting the strong demand for investment opportunities in Connecticut’s Green economy. It received an A rating from Standard and Poor’s. Retail investors, who were prioritized by the Green Bank, submitted $9.9 million of orders with $5 million from Connecticut retail investors. Among the institutional investors, there was strong interest from traditional municipal investors as well as Environmental, Social, and Governance (ESG)-focused investors.
Encouraged by the success of this first issuance, the Green Bank is already discussing its next Green Liberty Bond issuance, and looking into other ways to allow for more inclusive citizen investment in green projects beyond supporting rooftop solar PV for homeowners and toward reducing the burden of energy costs for nonprofits, municipalities, and small businesses through the deployment of clean energy. More information can be found here.
It is our hope that others, who are planning on accessing capital markets to finance projects that combat climate change, will follow suit and issue their own Green Liberty Bonds. The more opportunities where we can align investment with citizen engagement, the more we will advance toward a world powered by the renewable energy of community or said another way “a planet protected by the love of humanity.”