Assessing the Potential for U.S. Utility Green Bonds
Financing the transition of our energy systems to carbon-free generation is one of the foremost challenges in sustainable energy. Green bonds are a relatively new kind of debt security that offer some real advantages to utilities and other issuers committed to making new investments in clean energy resources.
In the ISE’s new report, Assessing the Potential for U.S. Utility Green Bonds, we estimate the balance sheet capacity of the U.S. utility industry to issue green bonds to assist their strategic transitions. Our analysis finds that utilities could issue approximately $350 billion of green bonds without adversely affecting their credit ratings – a significant contribution to sustainability in the United States.
“This report demonstrates the huge potential that green bonds have to propel us towards a clean energy future,” said Dan Adler, Vice President, Policy, Energy Foundation. “Several utilities are already demonstrating the potential of green bonds as a powerful catalyst for finance at the scale climate solutions require. There is incredible untapped potential to wield these bonds to serve our public health and financial goals, and when utilities and their regulators use green bonds instead of equity, our low-cost clean energy solutions are even cheaper for consumers.”
“Green bonds ― a recent innovation in impact investing ― have been shown to hold significant promise for fighting climate change globally, whether governments act or not,” said Caroline Flammer, Associate Professor of Strategy & Innovation, Boston University Questrom School of Business. “This new paper adds to our understanding of utilities’ ability to issue these new securities.”
We hope this report encourages further consideration of the financial dimensions of sustainability and of green bonds as a financing option.
The report is authored by Tan Lam, Peter Fox-Penner, and Jennifer Hatch. Funding was provided by the Energy Foundation.