You may think of bonds as the boring, tried and true part of your investment portfolio. Government-issued, 1-2% interest, yawn.
Green Bonds are different, and there are increasingly compelling reasons--both financial and feel good--for individual investors to consider adding them to their investment portfolios.
What’s a green bond?
First let’s back up a little further and start with: “What’s a bond?”
You can think of it as an IOU. An investor purchases a bond and the issuing institution, whether a government or a company, pledges to pay the principal back plus interest over a fixed period of time. One of the most common types of bond is a government bond. Canada Savings Bonds or Ontario Savings Bonds, for example, have financed much of the public infrastructure you use every day.
Green bonds can be considered a spin on that classic, tried and true investment strategy.
The money raised through green bonds help fund infrastructure projects that offer environmental benefits like clean energy, public transit, or building energy-efficient buildings.
A growing market
While the global green bond market is booming—Corporate Knights Magazine recently estimated the market capacity for green bonds in Canada at $56.3 billion in 2017/18—this market has traditionally been dominated by major institutional players like pension funds and governments.
For example, the province of Ontario issued its first green bond in 2014 and has since raised over two more issuances totalling over $2 billion for various transportation and health projects, including Toronto’s Eglinton Crosstown LRT. All three issuances were snapped up instantly by major institutional investors who put in advance orders.
But what about the rest of us?
More and more individual investors are seeking investments that reflect their concerns about climate change and that contribute to building clean energy solutions.
While a great way to achieve that, most green bond investment opportunities have largely been limited to major investors, but the good news is that’s changing.
- Green Bond funds, like Desjardin’s SocieTerra Environmental Bond Fund allow green-minded individuals to get broad exposure to those otherwise-restricted green bonds issued by governments and companies globally.
- Community-owned clean energy cooperatives are a more common option for smaller investors. While the structure of investment products can vary, co-ops like Solarshare offer its Ontario members the opportunity to support local solar projects through the purchase of solar bonds.
- CoPower’s Green Bonds are another example. As part of our mission to bring clean energy investment opportunities to the general public, we’ve developed a Green Bond that supports the development of clean energy and energy efficiency projects and is accessible to investors of all sizes through our online platform.
CoPower Green Bonds: What am I actually investing in?
When you invest in a clean energy-backed Green Bond like CoPower’s, you’re essentially investing in loans to clean energy projects like solar panels, LED retrofits and geo-exchange heating and cooling projects. Those projects generate steady revenues from the sale of clean energy or energy savings and as clean energy developers repay their loans, that money flows through to investors as interest payments.
This model, supported by the excellent economics of clean energy, allows investors to earn attractive returns of up to five percent annually while providing catalytic financing to help grow the clean energy industry.
At CoPower we believe that the transition from an older-energy economy to a new energy economy is one of the greatest wealth-creation opportunities of this generation. Green Bonds, whatever size of investor you are, are a great way to be part of that.