Largest US certified green bond issued – by New York’s Metropolitan Transportation Authority (MTA)
New York’s Metropolitan Transportation Authority (MTA) just established a series of ‘firsts’: not only has it issued its first-ever green bond, but at $500 million it is the largest U.S. certified green bond to date. It is also the first U.S. municipal bond to be certified under the Climate Bonds Initiative new Low Carbon Transport Standard criteria for investment in transport infrastructure compatible with a 2°C warming outcome.
The bonds’ proceeds of $500 million will pay for continuing work on infrastructure renewal and upgrade projects on New York City Transit, Long Island Rail Road and Metro-North Railroad that were begun during the MTA’s 2010-2014 Capital Program.
“Eight and a half million people travel on MTA trains and buses every day,” said MTA Chairman and CEO Thomas F. Prendergast. “By leaving their cars at home and embracing mass transit, New Yorkers play a dramatic role in reducing carbon emissions. These bonds recognize the ways in which mass transit and commuters work together to keep carbon out of the atmosphere, and that makes them the perfect choice for people who want to invest in the renewal and modernization of the greatest transportation system in the world, while at the same time helping New York to be greener, and healthier.”
MTA is to report annually to confirm that the pool of funded assets are consistent with the Climate Bond Standard’s transparency and disclosure requirements in its [MTA] 15c2-12 Annual Combined Continuing Disclosure filings.
While it is seeking interest from institutional investors, MTA has also launched a retail investor advertising campaign aimed at New Yorkers. “Invest In The Planet, Invest In The MTA,” say the advertisements appearing online on the websites of media outlets that cover the New York region and over the air on New York-area radio stations. “Supporting public transportation is a powerful action that you can take to reduce greenhouse gas emissions. You have an opportunity to not only sustain the transportation network that is essential to the New York metro region, but also to help combat climate change and reduce our region’s carbon footprint,” says the radio ad.
“We are very excited to be the first U.S. issuer of a Certified Climate Bond. MTA’s transportation network is the lifeblood of the New York Metropolitan Region and vital to its economy. We know that our network of electrified rail services is efficient and directly results in carbon avoidance. To be recognized for this by the investment community reinforces the essentiality of having a large and robust transportation infrastructure in this dense urban region,” said Pat McCoy, Director, Finance at MTA.
As an investor-focused not for profit organization, the Climate Bonds Initiative promotes large-scale investment in the low-carbon economy. Its Low Carbon Transport Standard was developed by a technical working group made up of 12 internationally recognized academics and experts. Its fully functioning sector specific standards currently also include solar, wind, and low carbon buildings.
Green bonds – or climate bonds as they are also known - were popularized in 2010 as a method for raising capital for climate-friendly projects across the globe. In 2015, $41.8 billion in Green Bonds were issued, according to the Initiative.
“This bond is a statement of international leadership by the MTA,” said Sean Kidney, CEO of the Climate Bonds Initiative. “Significant investment in low carbon mass transport is needed in existing and emerging urban conurbations. This MTA bond issuance is a milestone in the inclusion of rail transport in the burgeoning green bond market.”
Last month the World Bank (International Bank for Reconstruction and Development or IBRD, rated Aaa/AAA) said it had issued two more Green Growth Bonds, which are part of its Green Bond program. They bring the total issued in this format to over $555 million through 16 transactions – approximately $389 million from international retail and high net worth investors and approximately $167 million through institutional private placements with European insurance companies, pension funds and private banks.
The most recent transactions were issued to retail investors in Europe and the United States respectively. The European trade, which settled on January 8, 2016, was linked to the Ethical Europe Climate Care Index. It was issued to retail investors in Belgium and Luxembourg raising $16.3877 million. The U.S. trade was linked to the Ethical Europe Equity Index and settled on December 31, 2015 raising $1.436 million.
World Bank green bonds are designed to offer investors an opportunity to support environmental solutions through a bond product that benefits from the triple-A credit strength of the World Bank. These green bonds “support the financing of projects in member countries that meet specific criteria for low carbon and climate resilient growth, seeking to mitigate climate change or help affected people adapt to it,” said the IBRD.
Since its first green bond launched in 2008, the World Bank has issued 110 green bonds in 18 currencies, totaling over $8.6 billion.
For the Climate Bonds Initiative, the MTA issuance is “a clear vote of confidence that the Standards are applicable, relevant and usable for the international bond market,” said Justine Leigh-Bell, its International Standards Manager.
Having undergone public consultation, Climate Bonds standards for bioenergy, agriculture & forestry and geothermal are now awaiting board approval, while standards for water are currently under public consultation.
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com