Page 10 - April ISQ 2021

INVESTMENT STRATEGY QUARTERLY

GREEN BONDS
Green bonds are used as a way to
raise capital for projects that benefit
climate or the environment, such as
reforestation and clean energy.

Green Bond Principles
• Use of proceeds

• Project assessment Repayment
and selection Financing
• Management of proceeds
• Reporting $
Bonds
Capital

Issuer
States, municipalities, Repayment
enterprises, banks and Investor
investment banks Capital investment companies,
banks and enterprises, governments
and private investors

among universities and foundations than traditional asset run. Food, beverage, and other consumer goods companies
management firms. Looking at debt specifically, green bonds are taking steps to reduce single-use plastics, which some-
are a popular way to raise capital for projects with a positive times involves partnering with startups developing bio-based
climate impact, including below-the-radar projects such as chemicals. REITs and homebuilders are deploying energy-effi-
reforestation, public transit, or making the electric grid more cient technologies across their asset base. The bottom line is
resilient. that investors ought to be creative, rather than only looking at
the well-known high-flyers.
ENERGY TRANSITION HAS UNLIMITED SCOPE
Investing in energy transition does not need to be limited to KEY TAKEAWAYS:
high-beta, high-multiple stocks of solar, electric vehicle, or • Energy transition is a megatrend not just for the
hydrogen companies (which is what tends to come to mind next few years but toward the middle of the cen-
first). Certainly there are plenty of options in the clean tech tury.
sector – the aggregate market cap is approximately $1.5 trillion, • A dozen of the top-tier oil and gas producers have
the highest ever – but businesses in many other sectors are also committed to reorient their operations toward
playing a role. For example, some banks and insurers are more low-carbon energy over the next 20 to 30 years.
active than others in boosting lending to renewable energy ini- They are doing it because they view it as good
tiatives and/or cutting back on lending to fossil fuels. Alongside business.
the well-known electric vehicle (EV) pure-plays, just about
every major automaker has EV models available, and some • Sustainable (ESG) investing – and, more specifi-
have committed to becoming exclusively electric over the long cally, climate investing – is raising the importance
of energy transition for management teams, par-
ticularly at publicly-traded companies.

Sustainable (ESG) Investing considers qualitative environmental, social and corporate governance criteria, which may be subjective in nature. There are additional risks involved,
including limited diversification and the potential for increased volatility. There is no guarantee that these products or strategies will produce returns similar to traditional
investments. Because criteria exclude certain securities/products for non-financial reasons, investors may forego some market opportunities available to those who do not use
these criteria.

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