Want to use some of your school construction money with the aim of supporting a cleaner planet? Hoping to leverage the promise of energy efficiency and environmental responsibility to finance big-ticket projects?
One option: so-called “green bonds.”
Green bonds tie capital raised in bond issues to projects with eco-friendly or climate benefits such as energy efficiency, clean water, renewable energy, clean transportation, or habitat restoration. They are purchased largely by pension funds, individuals, institutions, asset managers, and insurance companies.
Such bonds are a growing segment of the national municipal-bond market: The ratings agency Moody’s expects $120 billion in green bonds to be issued this year, up from a record $93.4 billion in 2016. They give school districts and other public entities interested in low-carbon projects an attractive way to invest.
One prominent recent example: the 74,500-student Fort Bend Independent school district in Sugar Land, Texas, about 20 miles southwest of Houston. It was the first district in the state to issue green bonds, for the construction of three new environmentally sustainable elementary schools. The district issued $99 million in tax-exempt bonds in April, and approximately $52 million of those were designated as green bonds, part of a $484 million bond package approved by the district’s voters in 2014.
Issuing green bonds “demonstrates our conservative approach to managing our building program,” said Fort Bend Superintendent Charles Dupre.
In its second and most recent transaction, Fort Bend sold $45 million in green bonds for a three-year interest rate of 1.35 percent, along with $50 million in regular bonds for a four-year interest rate of 1.5 percent.
“It’s not an exact science because you don’t really know whether the lower interest rate was because the bonds are green or because they’re for three years instead of four, but it’s inexpensive, and the district is happy about that,” said Steven Bassett, the district’s chief financial officer. “It doesn’t hurt, that’s for sure.”
A version of this article appeared in the November 29, 2017 edition of Education Week as Bond Market Offers ‘Green’ Funding Option