Projects that reduce emissions, generate clean energy or aid sustainable development could benefit from more financial support this year thanks to recent announcements from financial firms in the United States, United Kingdom and Australia. From Bank of America (BofA) issuing its fourth and largest green bond to date, to Lloyds Banking Group’s new £2 billion scheme to offer discounted financing and a partnership that will see more emissions reduction credits listed on CBL Markets (CBL)’s global exchange, it’s been a good month for green investments.
Bank of America Corporation announced the issuance of a $2.25 billion green bond yesterday, making it the first U.S. financial institution to issue four corporate green bonds. As with the previous bonds, the proceeds will support increasing renewable energy generation.
“Green bonds are an important tool for the private sector to finance clean and alternative energy sources, as well as other environmentally-minded activities, at competitive market rates. We’ve seen tremendous demand in the debt capital markets, with all four of our green bonds significantly oversubscribed, and we are responding to that demand,” said BofA Vice Chairman Anne Finucane.
“By providing transparency into how the proceeds will be used, green bonds also offer a relatively new way for fixed income investors to drive social and environmental change through the debt capital markets,” Finucane added.
The company has raised a total of $4.35 billion for renewable energy projects since 2013, and has underwritten more than $27 billion on behalf of more than 100 clients since 2007 under the Bank of America Merrill Lynch (BofAML) banner. For its own part, BofA has provided more than $87 billion in financing for low-carbon business activities since 2007 – a figure it aims to raise to $125 billion by 2025.
Meanwhile, UK businesses that are Commercial Banking clients with Lloyds Banking Group will have cheaper access to capital for investments that will reduce their environmental impact. Lloyds Banking Group’s new Clean Growth Finance scheme represents £2 billion of new funding for “green lending.”
The scheme aims to deliver the “most inclusive” green funding in the U.K. market by offering discounted lending to businesses investing in reducing their environmental impact through a broad range of activities. The funding will support clients in their efforts to:
- reduce carbon and greenhouse gas emissions for business processes, properties and infrastructure;
- increase energy efficiency and make “environmental sustainability improvements;”
- invest in low carbon vehicles and transport;
- improve water efficiency; and
- reduce waste and improve recycling rates.
“Our funding will support small improvements in production, heating, transport, or environmental impact, right through to large scale renewable energy infrastructure,” said the company’s Group Director of Commercial Banking, David Oldfield. “By building on our commitments to help clients with discounted finance for investments in sustainable business, we will in turn support the UK’s goals for clean growth.”
The scheme effectively triples the firm’s total commitment to green investments, from its existing £1 billion in support to improve energy efficiency in commercial real estate and power 5 million homes with renewable energy by 2020.
CBL’s announcement also represents broader access to those looking to lower their environmental impact. CBL has partnered with UN Climate Change to list more emission reduction credits from projects in developing countries on CBL’s global spot exchange for energy and environmental commodity markets.
The certified emission reduction credits (CERs) come from projects registered under the UN’s Clean Development Mechanism (CDM). The CDM, which was established under the Kyoto Protocol, incentivizes investment in emission reduction projects that also contribute to sustainable development. The CERs have been used by countries and companies both with and without commitments under the Protocol to offset their emissions.
“We are happy to work with CBL to make UN certified emission reductions available to a wider group of users,” said Niclas Svenningsen, Manager of Global Climate Action at UN Climate Change. He added the partnership “offers a win-win solution for users who wish to offset their climate footprint while supporting real emission reductions in developing countries.”
Under the new partnership, CBL will integrate with the UN Climate Change CDM Registry in order to facilitate the listing, purchase and cancellation of CERs alongside other products on its global energy and environmental trading screen, making it one of the first electronic trading venues to list CERs.
“Given the increasing appetite for CERs across both voluntary and compliance carbon markets, combined with the transparency and price discovery of our exchange, we expect significant demand for CERs via the CBL platform,” said Ben Stuart, Managing Director at CBL.
To date, more than 8,100 projects and programmes in 111 countries have been registered under the CDM, ranging from clean cookstove and water purification projects to wind power and large industrial gases projects. The projects earn a saleable credit for each tonne of greenhouse gas they reduce or avoid, which has lead to the issuance of more than 1.9 billion CERs, each equivalent to one tonne of carbon dioxide.
As a financial product, CERs have historically relied on over-the-counter trading (e.g. trading via a dealer network as opposed to on a centralized exchange). By listing CERs on its exchange, CBL expects to promote increased participation, price transparency and confidence in broader carbon markets.
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Published May 25, 2018 1pm EDT / 10am PDT / 6pm BST / 7pm CEST