Most of us will agree that climate change is happening, and that we must take action to protect our home. What you may not know, is that your investments are some of the best tools that you have to fight climate change. Author and Environmentalist, Paul Hawken said, “Wrong is an addictive, repetitive story; Right is where the movement is.” We know what no longer works both for the world, and also for our investments. Companies that are not sustainable in the long-term will ultimately cease to exist. There is an opportunity both as concerned individuals and as investors to right this course. This second post in the series for investing for the environment includes a few ways that you can begin to invest sustainably.
Step Two: Invest in Sustainable Bonds
Green bonds are designated bonds intended to encourage sustainability and to support climate-related or other types of special environmental projects. This can include projects involved with energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, clean water, and sustainable water management. They also finance the cultivation of environmentally friendly technologies and the mitigation of climate change.
Green bonds come with tax incentives such as tax exemption and tax credits, making them a more attractive investment compared to a comparable taxable bond. These tax advantages provide a monetary incentive to tackle prominent social issues such as climate change and a movement to renewable sources of energy. To qualify for green bond status, they are often verified by a third party such as the Climate Bond Standard Board, which certifies that the bond will fund projects that include benefits to the environment.[1]
However, there are bonds that are not official green bonds, that still have a positive environmental impact. There are many green bond funds as the market continues to grow. You might consider an investment like the TIAA Core Impact Bond Fund which was featured in a previous post. The fund invests in a portion of its portfolio in green bonds and investments such as, Bay Area Water Supply and Conservation Agency, Ohio Air Quality Development Authority, CarbonLITE, the Conservation Fund, Florida Hurricane Catastrophe Fund Finance Corp, the Nature Conservancy, and Mosaic Solar Loans.
As of December 31, 2019, the fund’s environmental impact includes:[2]
TIAA CREF also has a green bond fund of its own. Not all of the bonds in the portfolio are official green bonds but every bond has a positive environmental impact. For example, Tthe fund held a California water utility bond, that uses solar panels for its wastewater treatment plant. The utility then sells energy it doesn’t use back to the grid.The portfolio’s investments in 2019 generated enough renewable energy to power 17.9 million houses for one year.[3]
You might also consider an investment like the Mirova Green Bond Fund. The portfolio management team has been actively involved in green bonds since 2012 and is supported by Mirova's ESG research team. As of June 30th, 2021, the portfolio’s environmental projects breakdown included:[4]
According to Mirova, “the challenges related to energy and ecological transition require major investments and green bonds help meet these challenges by financing projects that provide environmental benefits while providing a yield and total return similar to that of their conventional counterparts.”
In the coming posts you will see how to invest in sustainable companies, advocate for the environment, and invest in high impact solutions. “For most of history, man has had to fight nature to survive; in this century he is beginning to realize that, in order to survive, he must protect it.” —Jacques-Yves Cousteau
GIVE’s is a community that makes sustainable investing accessible to all through online courses, consulting, and a soon to be published book. You can find more information online at www.give.how.
This shall not constitute an offer to buy, sell, or solicit securities. All information provided herein is for informational purposes only and should not be relied upon to make an investment decision and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision.
[1] https://www.investopedia.com/terms/g/green-bond.asp [2] https://documents.nuveen.com/Documents/Nuveen/Default.aspx?uniqueId=a1a3498b-5238-4226-824e-92e2cd2f830f [3] https://www.kiplinger.com/investing/mutual-funds/602283/how-green-are-your-bonds [4] https://www.im.natixis.com/us/fund-documents/mirova-global-green-bond-fact-sheet