The need for sustainable economies has never been more apparent. With just over 6 and a half years left on the “Climate Clock”, where humans must stop the planet from warming by more than 1.5 degrees Celsius, technologies and innovations are afoot to prevent catastrophe. And on a planet that is overwhelmingly complex economically, many of those innovations are indeed financially sustainable.
One of the more recent innovations that have become a huge asset to both financial institutions and even the planet itself are “green bonds”. These are financial instruments that finance significant environmental regeneration projects, all the while providing their owners (investors) a fixed income annuity. This annuity currently averages 9% per annum, which is a remarkable return considering the dire state of the global economy at the moment. Never has it been more beneficial to invest in environmentally regenerative projects.
What Are Green Bonds?
A green bond is in essence a loan packaged by a large financial institution and then allocated to a promising environmental company or project which is set to generate sustainable revenue once it is up and running. This company or project would not be able to get started without the loan, and the financial institution receives the loan paid back with good interest.
How financial institutions do this is by packaging the loan into smaller percentage allocations that are provided by their customers (this is where the capital comes from), and then the capital repayments and interest are paid back to those customers. The added bonus to these bonds is that there are substantial tax incentives for investors due to the regulatory structure of green energy financing.
Green Bond History
Technically, green bonds were first rolled out in 2001 in San Francisco in order to finance hefty solar installations. The project was so successful that the European Union took notice and quickly moved to issue similarly structured bonds in 2007. First issued by the European Investment Bank as a “Climate Awareness Bond”, the bond was linked to equity in wind, hydropower, geothermal power, and energy loss reduction projects. However, it wasn’t until 2008 when the term “green bond” truly took root, with the World Bank issuing a product named as such for solar installations in Sweden to the value of 2.3 billion Swedish Krona (US $210 billion).
Ecowatt And Green Bonds
Green bonds are exactly the type of investment product that Ecowatt plans to leverage in our own climate action. Our model involves key partnerships with leading institutions, and through these collaborations we can then procure considerable capital deployment in the form of Green Bonds to fund promising renewable energy projects around the globe. Green bonds offer investors a solid, reliable, low risk return model alongside a valuable ESG portfolio component.
Through these procurements, we have already begun the process of building renewable energy power plants including a solar power station in Hungary that will generate 36 MW. Our pipeline of projects sits with a future total capacity of +700 MW. This capacity will be generated through highly efficient solar, wind, hydrogen, and even geothermal, and the intention is to expand this output ten fold within the next 3 years.
Without economically sound and well regulated financial structures like green bonds, this kind of capacity would be difficult to fund, especially at the speed with which we are operating. Ecowatt has an extraordinary team of business analysts and finance executives who have extensive experience in green energy, and with their expertise at our disposal, we are able to execute on lucrative and sustainable green energy projects in an innovative way.
Green Bond investing:
San Francisco climate bonds plan:
EU’s Green Bonds announcement:
World Bank’s green bonds announcement: