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Green Bonds for Clean Energy Overseas Private Investment Corporation

Green Bonds for Clean Energy

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The promise and potential of alternative energy is rapidly becoming a reality. In the manufacture of green technology, the United States has a clear opportunity for significant export growth and global leadership. This sector is also becoming a sound investment. The issuance of “Green Bonds”, investment instruments of which proceeds are dedicated to the advancement of alternative energy initiatives, has skyrocketed in just a few years.

Forbes Magazine refers to the green bond market as “an upward spiral”. The amount of green bonds issued in 2014 stood at $36.6 billion, triple the figure of green bonds sold in 2013. A green bond facilitates the raising of capital for environmentally friendly projects. A consensus has yet to be reached as to what projects qualify for the issuance and use of green bonds. A framework of voluntary guidelines, created by a group of financial investors in January of 2014, has been met with criticism by environmental advocates and investors who demand more clarity regarding how their green bond investments can be used.

This new investment tool was launched in 2007 by development banks like the World Bank and the European Bank for Reconstruction and Development. There are many reasons for an increased demand for green bonds, but one new development has been particularly beneficial. Sean Kidney, CEO and co-founder of the Climate Bond Initiative attributes the surge to corporate and municipal bond issuers joining the “green party”.

While development banks are the foundation of this initiative, the number of private investors is rapidly growing. Eleven U.S. states are now issuing green bonds. Toyota issued $1.75 billion worth of these eco-friendly investment tools to be used in future zero emission vehicles. Let’s hope that American companies will not be far behind. Sweden’s public sector pension fund was one of the earliest investors, anticipating the future effects of regulation on fossil fuel industries and the effect that these policies will have on the value of the fund. The African Development Bank’s issuance of green bonds attracted a flurry of new investors and exceeded demand expectations.

The United States has incorporated green bonds into our foreign policy, issuing $47 million through the Overseas Private Investment Corporation (OPIC) towards the completion of the Luz del Norte solar project in Chile. When completed, this project will be the largest photovoltaic plant in Latin America. Based on the level of interest that investors are seeing in green bonds and alternative energy projects, it is clear that these financial tools will fund many more facilities like the Luz del Norte solar plant. The United States Trade and Development Agency has also experienced a significant increase in demand for green technology from developing and middle income nations. Thanks to the efforts of the USTDA, much of this demand has been met by American made green technology (a trend which American exporters must continue).

The green energy market is becoming increasingly lucrative to manufacturers, contractors, subcontractors and investment markets. Policy makers must do everything that they can to ensure that the United States remains at the forefront of this new market. The addition of green bond investment tools offers an opportunity for significant exports, increased American manufacturing and technological leadership. American firms must not only innovate these products in America, they must make them here as well. Advanced manufacturing of twenty-first century technology ensures strong wages and good jobs for American workers. These exports will go to where they are most needed, providing clean drinking water and a safer environment throughout the neglected or exploited regions of the world.  The growth of green bonds further illustrates that there is too much economic and investment opportunity in green technology for America to not be the trend setter. Clean energy is the future of energy. By incentivizing these endeavors through the use of innovative investment tools, we can also make clean energy the future of American industry and a foundation for sound, long-term trade strategy.

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