Assessing the Potential for U.S. Utility Green Bonds
Green bonds offer utilities billions to power clean energy transition
By Tan Lam, Peter Fox-Penner, Jennifer Hatch
May 2019
Green bonds are a newer debt security in impact investing that could help finance what is likely the largest challenge in sustainability: the full transition to carbon-free energy systems. To determine the potential power of green bonds in the transition, an Institute for Sustainable Energy (now the Boston University Institute for Global Sustainability) analysis found the U.S. utility industry has the capacity to issue $350 billion in green bonds without adversely affecting credit ratings.
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Key Findings
- Green bonds can serve as a powerful catalyst to finance a clean energy future in the United States, especially if they contribute to new revenues and cash flow.
- Globally, the utility sector was the second-largest issuer of green bonds in 2017, accounting for $26.2 billion primarily issued to finance renewable energy projects.
- The utility sector is one of the most logical for issuing green bonds as it moves to a cleaner portfolio of energy sources.
- Green bonds allow investors to participate in environmentally and socially responsible projects and obtain greater transparency into the effects of the bonds they purchase. There is also some evidence that green bonds carry a lower risk than regular bonds.