What are green bonds?
Bonds are debt securities through which investors lend money to an issuer entity. In return, investors receive interest payments and benefit from tax reductions. Green bonds are a relatively new type of bond and differ from regular ones in that their proceeds are meant exclusively to finance green and environmental projects. As regular bonds, green bonds can be issued by different actors. For instance, central governments worldwide are leveraging sovereign green bonds to finance projects to modernize infrastructure and building, improve energy efficiency, and reduce emissions.
Green bonds issuers
Governments are not the only stakeholders in the green bonds market. Banks, investment funds, public and private institutions, as well as businesses have furthered the popularity of this innovative financial product. In the U.S., the largest green bond issuer is Fannie Mae (the Federal National Mortgage Association) - a government-sponsored enterprise that issued their first green bond in 2012. U.S. banks have also jumped on board, issuing billions of dollars' worth of green bonds to support their efforts towards a more sustainable and resilient financial system.