The Name Is Bonds, Green Bonds
This new investment option can be good for business in more ways than one.
July 24, 2015 at 10:10 AM
9 minute read
Companies succeed in large part due to their ability to analyze current circumstances (at the micro and macro level), while positioning themselves to make the most of what they believe the future will bring. In today's economic environment, a “greener” focus could be key to sustained business success. And this may also extend to companies' financing options.
So-called green bonds have terms and conditions similar to those found with traditional bonds, but are issued by corporations or governments and their agencies specifically looking to raise funds earmarked for one or more projects that tackle climate change. Examples include Toyota Financial Services' issuance of asset-backed securities that were linked to hybrid and electric vehicle loans, and the issuance of corporate bonds by Unibail-Rodamco SE, Vasakronan AB and Regency Centres Corporation for investment in various green building portfolios.
With increasing pressure on governments to address climate change, companies need to be aware of potential restrictions that may be imposed on them in the event governments come to an agreement on curbing carbon emissions. Such restrictions include limits on the amount of carbon companies will be able to emit annually, above which they will be required to acquire carbon credits in the open market or pay a penalty. Companies that can't afford to pay for the additional carbon credits and/or penalty will be forced to ensure that projects they undertake respect the carbon emission restrictions imposed on them.
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