Economics

Record $11Bn In Green Munis In 2017 Across U.S.; MTA In The Lead

Record $11bn in Green Municipal Bonds in 2017 across US; New York beats California as top issue; $20bn investment forecast for 2018

London 31/01/2018 15:00 GMT: Annual US green municipal bond issuance reached a new record in 2017, passing the symbolic $10bn mark with New York retaking the lead from California and becoming the US state with the highest 2017 issuance of municipal green bonds and the highest cumulative issuance.

[REITs]

Climate Bonds Initiative is forecasting $20bn of green municipal issuance in 2018 as US cities and states ramp up climate action.

The latest Climate Bonds Initiative analysis of US municipal green bond market finds the December 31st 2017 total stood at an annual record of $11.05bn, up from $7.11bn in 2016. New York reached a total of $4.59bn, followed by California’s $4.32bn for the year.

A giant December $2.17bn issuance confirmed the NY Metropolitan Transportation Authority (MTA) as the leading US municipal green issuer to date, and was also the sixth largest green bond issued globally during 2017.

Other notable green municipal bond issuers in 2017 included California Health Facilities Financing Authority, Massachusetts Water Resources Authority, the State of Connecticut, Iowa Finance Authority, San Francisco BART, San Francisco PUC and New York State Finance Housing Authority. (Full 2017 list attached)

Green Municipal Bonds

Overall Muni Top Ten

Repeat green issuance from New York MTA totalling $5.52bn (all Climate Bonds Certified ) helped push New York State into overall first place. California, Massachusetts, Iowa, Connecticut, New Jersey, Indiana, Colorado, District of Columbia and Tennessee filled out the remaining Top Ten states for total cumulative issuance as of December 31st.

Green Municipal Bonds

International figures for 2017

Internationally, Climate Bonds Highlights 2017 report shows that a record $155.5bn green bonds were issued in 2017 with the US leading the Top 10 nations at $42.4bn. At $11.05bn, green municipal issuance comprised 26% of the US total issuance for the year. Overall, US green bond issuance at $42.4bn was almost double that of China ($22.5bn) and France ($22.1bn) second and third place respectively in the 2017 Top 10. (See Chart)

Green Municipal Bonds

Water and Rail/Transit Dominate

Sustainable water management reached a cumulative total of $9.22bn at the end of 2017, raising over $3bn in the last two years.

Helped by smaller bond issuances in California, the transport sector has come close to passing sustainable water as the largest overall segment of municipal green bonds with over $8.54bn cumulative issuance in the market. $5.39bn of this was issued in 2017 alone, more than double the $2.08bn issuance of 2016.

65% of the projects financing low carbon transportation come from New York, 16% from Washington and 15% from California.

Green Municipal Bonds

$20bn forecast for 2018

Climate Bonds is forecasting green municipal issuance to almost double to $20bn in 2018. Primarily due to a combination of city and state based climate leadership, an emphasis on infrastructure spending, and the need for climate aligned infrastructure and increasing institutional investor demand for green and ESG based investments.

Justine Leigh-Bell, Director of Market Development, Climate Bonds Initiative

“It is encouraging to see US cities and states making strong commitments to implement their own climate action plans in light of Washington’s retreat from the Paris Agreement. This will lead to a growing interest in leveraging green bonds as a valuable tool for States and cities to finance their climate strategies. Climate action plans will increasingly be connected debt capital raising strategies and infrastructure investment.”

“The US continues to lead the way globally in green muni bond issuance. The next stage is to effectively link this new wave of green finance to real and measurable impacts.”

“More than 10 new US municipalities entered the green muni market in 2017. We expect this trend to sharpen as institutional investors increasingly seek green investment products for their portfolios.

“New York and California have been leading issuers of green bonds, notably in key sectors such as water and transport.”

“We expect we will see more examples of these types of investments following the State Treasurer’s February Green Bonds Symposium and Governor Brown’s September Global Climate Action Summit. California will look to position itself as the State paving the way on US climate action and working to stimulate sub national green issuance.

Patrick McCoy Director of Finance, New York MTA

“Everything the MTA does to operate an efficient public transportation system helps reduce the amount of carbon emitted into the atmosphere.”

“CBI certification provides a form of recognition for the sustainability embodied by operating our transportation network, and CBI Certified MTA bonds are a vital tool for its capital investment.”