Magazine article Stanford Social Innovation Review

Greenbacks for Green Projects

Magazine article Stanford Social Innovation Review

Greenbacks for Green Projects

Article excerpt

IMPACT INVESTING

Since the World Bank issued its first green bonds in 2008, institutional investors have shown increasing willingness to put their money to work on projects that address climate change. "The question has shifted from Why should we do this?' to Why wouldn't we do this?"' says Christopher Flensborg, head of sustainable products at Skandinaviska Enskilda Banken (SEB) in Sweden, who worked with the World Bank to develop the green bond instrument.

'We went from no one having heard of green bonds in 2008 to $7.5 billion now invested worldwide. That's a big achievement," says Flensborg, while acknowledging that there's still far to go. The International Energy Agency estimates it will take trillions to adequately fund lowcarbon initiatives worldwide.

Funds raised from green bonds are invested in developing world projects focusing on hydropower, solar, and other renewable energy projects, while guaranteeing investors a fixed return. Projects also help communities adapt to a changing climate through reforestation and other efforts. "These are projects that reduce risk and adapt to change caused by climate stress," Flensborg explains.

As a sign of the times, the International Finance Corporation (IFC), a member of the World Bank Group, made its first green bond offering in the United States in May, raising $500 million from investors such as BlackRock, TIAA-C REF, the California State Teachers' Retirement System, and the United Nations Joint Staff Pension Fund.

"The US dollar market is an integral part of our strategy to support the development of the private sector," said Jingdong Hua, IFC vice president and treasurer, in a prepared statement. "Green bond issues in the US market have been rare, compared to Europe and Asia IFC green bonds are an alternative investment opportunity for this market, offering both development impart and a safe investment vehicle of a top triple-? …

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