Gauging The Benefits Of Green Bonds


With the World Environment Day just around the corner, the latent environmentalists in us might just be unleashed and raise some very pertinent questions regarding the health of the planet. However, soon after the day is done and dusted, all our enthusiasm regarding the well-being of our planet subsides and eventually percolates somewhere into the deepest layers of our minds. This does not insinuate that we are not concerned about our planet; instead only means that we have other immediate and major concerns haunting our existence at that moment. However, it is probably time that we released ourselves from the spell that clouds our judgments regarding the environment and learn about things that might come handy in saving Mother Earth before she spirals towards annihilation. One of the most vital pieces of information that does not make much way into environmental debates is that of Green Bonds and the role it has to play in securing the health of the planet. Therefore, without much delay, let us delve into the details of Green Bonds.

What Are Green Bonds?

The term ‘Green Bonds’ is all-encompassing and is an amalgamation of two separate ideas juxtaposed together to make meaning. Green Bonds are monetary bonds that are kept aside to serve one very crucial task- sustainability of the environment and climate protection. The health of the environment is in shambles, and there is no denying the fact. At a time of such concerns, Green Bonds often come as a welcome relief which funds various researches and aims at creating newer and safer forms of energy. As can be inferred from the name, Green Bonds are essentially bonds, therefore, it complies with the norms that other bonds do. There is an entire body of literature on traditional bonds that can be found on various websites that furnish information on finance and investing. However, there is obviously a catch which makes Green Bonds different from other normal bonds. Green Bonds are exempted from various taxes, which make it much more lucrative and different from other bonds. A comparatively newer approach to meaningful investments and catering to environmental needs, Green Bonds, have taken on the world market by storm.

The Perks of Green Bonds:

Green Bonds are, without the slightest doubt, a great approach to handling environmental issues. It has its heart at the right place and uses the money raised by the issuer of the bond in projects like clean and green transportation, wind energy, clean coal energy and various other eco-friendly forms of energy. However, the implications of Green Bonds are not all that naïve. Green Bonds work in favor of the issuer’s reputation since society usually eulogizes the individuals who work towards the cause of the environment. If this was not reason enough, Green Bonds also opens up new avenues for issuers. There are investors all across the globe, only interested in investing in projects that could promise a salubrious future for the planet.

Issuers of Green Bonds have direct access to these investors, which enables them to reap the best out of the situation. Green Bonds are a great way to build an organization’s reputation. It creates a positive brand image for the organization and thus, ensures that the organization is always portrayed in a good light. This further ensures that more and more investors are drawn to the good name of the organization. Thus, Green Bonds sets in motion a series of positive events for the future of an organization.

What Evades the Human Eye?

So far in the sections that preceded, it has been established that Green Bonds not only benefit the planet and see to it that the money raised by the issuers are used in projects that make the world a better place to live in, but they also leave a lasting impression on the brand image of an organization. However, there is also another side to the story that evades the senses of many. These bonds, which apparently serve the environment, do not come only with benefits. Since there is no one particular standard for Green Bonds, there is quite some grey area as to the description of these bonds. For instance, some organizations and countries use the money from Green Bonds for other alternate forms of coal energy. The initiative is often known as clean coal energy. Though these alternative forms of coal might pose a lesser threat to the climate of the planet, yet the ramifications of clean coal energy are precarious, nevertheless.

The carbon emitted from these is undoubtedly harmful, and its eventual build-up has severe aftermaths. Green Bonds sponsoring the clean coal project is, therefore, entirely antithetical to the idea of being Earth’s knight in shining armor. China, who is the second issuer of Green Bonds, and who also, happens to be the largest carbon emitter, has consciously considered dropping the idea of Green Bonds sponsoring the clean coal projects. Bonds which seek to provide funds for these kinds of coal-reliant projects are being pushed towards being labeled as ‘brown,’ since the environmental impacts of using coal, matter in what form, are innumerable and do not promise a sustainable future.

The Returns On Green Bonds:

There have been significant discussions and apprehensions regarding the monetary benefits of Green Bonds. Issuers of Green Bonds are often faced with this perennial problem of Green Bonds not reaping the best monetary benefits. However, it is time that the financial myth of Green Bonds are put to rest once and for all. Green Bonds are usually charged at the same interest rate at the time of issuance, which thus, makes it no lesser in comparison to traditional bonds that are known to reap high financial returns. Also, what must be kept in mind is that Green Bonds are relatively new in the market, which, therefore, makes it quite scarce. The concept is not very old and is still developing, with new terms and standards being set. Thus, the pure economics behind this concept of Green Bonds have seemed to work in favor of them. Interested investors are aplenty, but bonds are less. Thus, the financial aspect of Green Bonds makes it quite a lucrative choice among many issuers.

Green Bonds, with all its benefits and certain flaws have become quite a favorite among many organizations around the globe. It has come a long way since its formative years and still has a long way to go before the world is brought to terms with its true potential.